REVOLUTION BARS GROUP PLC
ANNUAL REPORT AND ACCOUNTS 2018
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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 76 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 into late evening.
Read more on the At a glance Pages 2 and 3
Read Our Strategy Pages 16 and 17
Number of sites at:
Revolution
Revolución
de Cuba
At IPO
FY16
FY17
FY18
Total at 30 June 2018
– Launched FY19
– Planned for H1 FY19
Target in H1 FY19
Forecast at 31 Dec 2018
52
1
2
3
58
1
1
2
60
5
4
4
3
16
1
2
3
19
Total
57
5
6
6
74
2
3
5
79
Highlights
Revenue £m
£141.9m
.
9
1
4
1
.
5
0
3
1
.
5
9
1
1
.
8
1
1
1
.
7
8
0
1
Gross margin £m
£108.2m
.
2
8
0
1
.
4
9
9
.
0
0
9
.
6
4
8
.
5
1
8
18
17
16
15
14
18
17
16
15
14
Adjusted EBITDA*** £m
Adjusted PBT*** £m
£15.0m
£8.0m
.
0
5
1
.
1
5
1
.
6
4
1
.
4
3
1
.
2
3
1
.
4
9
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0
8
9
7
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3
8
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4
7
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18
17
16
15
14
18
17
16
15
14
*
Restated – see Note 1(b) of the consolidated financial statements for an
explanation and analysis of the prior period adjustments included in
respect of the profit for the 52 weeks ended 1 July 2017.
** Like-for-like sales are defined as total retail sales from bars that have been
trading continuously for at least 12 months.
*** Adjusted performance measures exclude exceptional items, bar opening
costs and share-based payments (see reconciliation table on page 22 of
the Financial Review).
01
01
IFC
IFC
02
04
08
12
14
16
18
20
25
28
30
32
33
34
38
54
58
59
62
63
70
71
72
73
74
96
97
98
99
Strategic report
Corporate statement
Highlights
At a glance
Chairman’s statement
Chief Executive Officer’s statement
Our markets
Our business model
Our strategy
Risks
Financial review
Corporate and social responsibility statement
Corporate governance
Introduction to governance
Board of Directors
Senior management
Viability statement
Corporate governance report
Remuneration report
Audit Committee report
Nomination Committee report
Directors’ report
Directors’ responsibility statement
Financial statements
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
IBC
Revolution Bars Group plc Annual Report and Accounts 2018
Financial performance
> Revenue of £141.9 million (2017: £130.5 million), an increase
of 8.7 per cent
> Like-for-like sales** decline of 0.6 per cent
> Adjusted*** Operating profit £8.5 million (2017 Restated*:
£9.6 million)
> Adjusted EBITDA*** £15.0 million (2017: £15.1 million),
in line with revised guidance
> Loss before tax of £3.6 million (2017 Restated*:
profit £5.2 million)
> Adjusted profit before tax*** of £8.0 million (2017 Restated*:
£9.4 million)
> Gross margin improved by 10 bps
> (Loss) per share (5.7p) (FY17 Restated*: Earnings 7.7p)
> Adjusted EPS*** of 13.0 pence (2017 Restated*: 14.6 pence)
> Final dividend of 3.3 pence per share (2017: 3.3 pence
per share)
Estate development
> Six new sites opened in the year and are trading well
> The Group invested £14.2 million in total during the period,
including £9.8 million related to new venues and £4.4 million
related to developing and maintaining the existing business
Current trading
> Like-for-like sales decline for first quarter of current year
-5.0 per cent
> Five openings confirmed in first half of FY19
02
STRATEGIC REPORT
AT A GLANCE
OUR STRONG SPIRIT MEANS...
OUR CONFIDENCE IN THE POTENTIAL
OF THE GROUP IS UNDIMINISHED
Investment case
TRADING FROM
76 BARS
(AT 2 OCTOBER 2018)
TOTAL SALES
INCREASED 8.7%
£141.9M
CONFIRMED OPENINGS
FOR FIRST HALF FY19
5 BARS
(2 ALREADY OPENED SINCE 30 JUNE 2018)
DIVIDEND
4.95 pence
(PER SHARE)
INCREASED
DIGITAL PRESENCE
1.1M
FACEBOOK FANS
77K
INSTAGRAM USERS
ACROSS REVOLUTION AND
REVOLUCIÓN DE CUBA
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 76 bars located
predominantly in town or city high
streets operating under the Revolution
and Revolución de Cuba brands. We
believe there to be significant scope
for expansion.
Revolution Bars Group plc Annual Report and Accounts 2018
03
Our brands
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.
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 property.
> Substantial training investment driving service performance.
> Constantly innovating to ensure that we offer our
customers a market-leading range of cocktails and spirits.
The success of the 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 a wide range of premium cocktails and drinks and our
lunchtime and evening food offerings.
> Roll-out of the brand in selective high street locations
throughout the UK.
VENUES
59
DRINKS
– wide range of premium cocktails and drinks
ENTERTAINMENT
– mainstream “feel good” music
FOOD
– classics and new enticing offerings
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.
Operational priorities
> Consistently providing outstanding service and unbeatable
quality to our customers.
> Providing ongoing training to our people to offer the
highest service standards.
> Roll-out of the brand in selective high street locations
throughout the UK.
VENUES
17
DRINKS
– rum-led cocktail range and Mexican and Spanish beers
ENTERTAINMENT
– live Cuban/Spanish bands
FOOD
– regular refresh and new menu offerings
Revolution Bars Group plc Annual Report and Accounts 2018
04
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
WE REMAIN CONFIDENT THAT THE
BUSINESS IS WELL POSITIONED FOR
A RETURN TO GROWTH
Summary
> The Board paid an interim dividend this year
of 1.65 pence per share (2017: 1.65 pence
per share).
> Subject to approval at the Company’s Annual
general meeting (“AGM”), we will pay a final
dividend of 3.3 pence per share (2017: 3.3
pence per share).
"
OUTSTANDING CUSTOMER
EXPERIENCE IS AT THE
HEART OF OUR STRATEGY."
Revolution Bars Group plc Annual Report and Accounts 2018
05
As the Chairman of Revolution Bars
Group plc, it is my privilege to introduce
this, our fourth annual report and
accounts for the 52 weeks ended
30 June 2018.
Our business
The Group is a leading operator of
76 premium bars with a strong presence
throughout the UK for its two high quality
retail brands: Revolution, which is focused
on young adults; and Revolución de Cuba,
which attracts a broader age range.
The Group is wet led but also offers
food, a significant growth opportunity.
Providing exceptional customer
experiences is at the heart of the
business’ strategy to drive like-for-like
sales growth through repeat visits and
word-of-mouth marketing, while attracting
new customers with targeted offers and
social media activity. In addition, the
Group seeks to expand its footprint with
new sites in good locations.
At the beginning of the period, the Group
operated from 67 venues (54 Revolution
and 13 Revolución de Cuba venues).
During the reporting period there were six
new venue openings, three of each brand,
as well as a re-opening of a bar. Therefore,
the Group traded from 74 venues at the
end of the reporting period since when
two further bars have opened, one
Revolution and one Revolución de Cuba.
Corporate activity and
management changes
The business experienced significant,
and well-documented, levels of corporate
activity in the first half followed by the
resignation of the Chief Executive Officer.
During that activity, development work
stalled while management was distracted,
and in the aftermath a number of
experienced senior managers on the
operational side of the business resigned
causing further disruption which adversely
impacted trading. In this light, delivering
record Christmas sales was an excellent
result for the business.
There is no further update on a possible
acquisition of Deltic following the
statement regarding media speculation
on 7 September 2018. The Board will
notify shareholders of any developments.
Trading conditions and
like-for-like sales**
Like-for-like sales in the first half (up to and
including week 27 to include New Year’s
Eve in both periods) were +1.9 per cent,
aided by record Christmas sales. In the
second half (excluding week 27) like-for-
like sales were -3.2 per cent.
Our Board
The Group’s CEO, Mark McQuater,
resigned from the Board on 17 October
2017. I stepped in immediately as
Executive Chairman and fulfilled that role
until Rob Pitcher took up his appointment
as the new CEO on 25 June 2018, when
I reverted to Non-executive Chairman.
We estimate that the “Beast from the East”
disrupted sales by circa £0.5 million in
early March; Easter trading was disrupted
by the failure of Conviviality, owner of the
Group’s principal supplier, Matthew Clark,
further distracting management from
implementing new initiatives; and the
hottest summer on record combined with
England’s World Cup run detracted from
the appeal of our bars, which do not have
TVs or significant outside areas. These
factors together with an unsettled
workforce and the widely documented
cost pressures faced by the whole sector
have led to 2017/18 being a disappointing
year and one from which we expect to
significantly improve upon.
Our results
Sales of £141.9 million (2017: £130.5 million)
were up +8.7 per cent, driven by new site
openings. Adjusted EBITDA*** of £15.0 million
(2017 Restated: £15.1 million) was broadly
similar to the prior period and in line with
our revised guidance. Adjusted EBITDA***
is the key measure of underlying
performance as it excludes exceptional
items, bar opening costs that are a
function of the timing of the new venue
development programme and (credits)/
charges arising from long-term incentive
plans that are more reflective of changes
in senior management than trading.
After exceptional items of £11.1 million
(2017 Restated*: £2.3 million), bar opening
costs of £2.0 million (2017: £1.4 million) and
a credit from long-term incentive plans
of £1.6 million (2017: charge £0.5 million),
the operating loss was £3.0 million
(2017 Restated*: profit £5.5 million).
Exceptional items include non-cash
charges of £7.8 million for onerous lease
provisions and asset impairments (2017
Restated*: £1.9 million). The cash element
£3.3 million (2017: £0.4 million) relates
primarily to fees and expenses following
the period’s corporate activity.
The Board adopted an extensive and
rigorous search for a new CEO and was
particularly keen to recruit an individual
with strong operational credentials,
hands-on experience of other disciplines
including marketing and human resources,
and responsibility for a significantly sized
business. Rob fits the description perfectly.
Michael Shallow, who was appointed just
prior to the Company’s listing on the
London Stock Exchange in March 2015 has
advised the Board that he intends not to
seek re-election at the forthcoming AGM
and will stand down form the Board on
that date. Jemima Bird will become senior
Non-executive director from the date
of the AGM. A search is underway for
an additional Non-executive Director.
Jemima Bird has served as our third
Non-executive independent Director
since January 2017.
Our auditor
Towards the end of 2017, the Board
conducted a tender process for the
provision of audit services to the Group.
As a result of the tender process,
PricewaterhouseCoopers LLP was
appointed as the new independent
auditor to the Group.
Our dividend
Given underlying earnings, as measured
by adjusted EBITDA***, broadly in line with
the prior period, the Board is proposing
a maintained final dividend of 3.3 pence
per share (2017: 3.3 pence). This will result
in the dividend for the period being at
4.95 pence per share, an interim dividend
of 1.65 pence per share (2017: 1.65 pence)
having been paid on 12 April 2018.
The final dividend is subject to approval
at the Company’s AGM and will be paid
on 7 December 2018.
Revolution Bars Group plc Annual Report and Accounts 2018
06
STRATEGIC REPORT
CHAIRMAN’S STATEMENT CONTINUED
Our people
The Group employs over 3,200 people
who provide the outstanding customer
experience that is at the heart of
our strategy. Those individuals are
complemented and supported by
many others who work long, hard hours
providing the necessary support for our
front-line staff. Strong cohesive teams
have been built across our business 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
In the first quarter of FY19, like-for-like**
sales are -5.0 per cent. However, with
many exciting initiatives planned or
currently being implemented, as detailed
in the CEO’s Statement, we are confident
of improvement. In addition, pre-booked
revenue for the critically important
Christmas trading period is currently up
20.3 per cent on the same time last year
(up 13.8 per cent on a like-for-like** basis),
which we expect to aid our performance.
Furthermore, we do not anticipate
a recurrence of the same external
circumstances experienced to date
in 2018.
Under Rob Pitcher, we anticipate following
the same strategy with two strong but
differing brands which we will continue
to grow. Since the period end, we have
opened Revolution Glasgow and
Revolución de Cuba Southampton with
both trading in line with expectations.
We expect to deliver five new openings
in the first half, with an additional three
sites expected to open prior to the end
of November 2018 to benefit from the
important Christmas trading period.
"
T H E S T R E N G T H O F O U R N E W V E N U E
P I P E L I N E A N D G O O D OV E R A L L
R E T U R N S O F O U R N E W S I T E S G I V E
U S C O N F I D E N C E I N T H E B R A N D S
A N D AC H I E V I N G F U R T H E R G R OW T H .
R O B P I TC H E R ’ S O P E R AT I O N A L A N D
E X E C U T I O N A L F O C U S , T H E R E C E N T LY
S T R E N G T H E N E D O P E R AT I O N S T E A M S ,
AND THE GOOD RANGE OF INITIATIVES
P L A N N E D O R B E I N G I M P L E M E N T E D
M E A N S T H AT O U R B E L I E F I N T H E
P OT E N T I A L O F T H E B U S I N E S S
I S U N D I M I N I S H E D."
The strength of our new venue pipeline
and good overall returns of our new
sites give us confidence in the brands and
achieving further growth. Rob Pitcher’s
operational and executional focus, the
recently strengthened operations
teams, and the good range of initiatives
planned or being implemented means
that our belief in the potential of the
business is undiminished.
Keith Edelman
Chairman
2 October 2018
*
Restated – see Note 1(b) of the consolidated
financial statements for an explanation and
analysis of the prior period adjustments included
in respect of the profit for the 52 weeks ended
1 July 2017.
** 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,
bar opening costs and share-based payments
(see reconciliation table on page 22 of the
Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2018
07
SOUTHAMPTON
CONVERSION OF TWO FORMER RETAIL UNITS INTO A REVOLUCIÓ N DE CUBA.
OPENED SEPTEMBER 2018. TWO-FLOOR OPERATION COVERING 5,000 SQUARE FEET
OF DRINKING AREA. INCLUDES AN EXTERNAL AREA. VENUE SITS IN THE TRADITIONAL
ENTERTAINMENT CIRCUIT.
£1.4 MILLION INVESTMENT.
Revolution Bars Group plc Annual Report and Accounts 2018
08
STRATEGIC REPORT
CHIEF EXECUTIVE OFFICER’S STATEMENT
WE CONTINUE TO INNOVATE
OUR PRODUCT IN ORDER TO
IMPROVE THE APPEAL OF OUR BRANDS
"
THERE IS SIGNIFICANT
POTENTIAL AND PROMISE
AS WELL AS A ROUTE BACK
TO THE 18 CONSECUTIVE
QUARTERS OF LIKE-FOR-
LIKE SALES GROWTH.**"
"
MY IMMEDIATE FOCUS IS
TO RESTORE SALES AND
PROFIT GROWTH TO OUR
CORE TRADING ESTATE
AS I BELIEVE THERE IS
SIGNIFICANT OPPORTUNITY
TO DELIVER THIS OVER THE
COMING MONTHS."
Revolution Bars Group plc Annual Report and Accounts 2018
09
Introduction
I joined the business six days before the end
of the financial year with the last few months
seeing significant activity while I looked into
and reviewed every aspect of the business
to properly understand the key challenges
facing the Group. I deduced that the Group
has two strong brands which can be
operated significantly better and have been
affected by the long period of uncertainty
and major operational management change.
At the end of August, we held a two-day
conference enabling me to meet the
management teams of all our sites. That,
alongside the 50 sites I have visited so far,
has confirmed that the Company’s vision
and values are alive across the Group and
our employees. The conference outlined
my plans for refocusing the business on
delivering for our customers, our teams,
and our shareholders.
There is significant potential and promise
as well as a route back to the 18 consecutive
quarters of like-for-like sales growth** that
ended in the second half.
Our new openings are impressive and
performing well and our development teams
are creative in producing venues of great
character and difference, standing them
apart from the competition.
My first report as CEO sets out my early
thoughts on our strategy and our priorities
for taking the business forward and
returning to like-for-like sales growth**.
Our strategy:
> building customer loyalty, ensuring
all visits to our venues are an
excellent experience;
> driving continued profit improvement
across our existing estate; and
> expanding the footprint to new and
profitable locations.
I believe a continuation of this strategy is
the right approach. Historically, the Group’s
brands have led their market segments, but
sustained success is delivered by focusing
on the detail of our customer proposition –
something that has waned due to
management distractions and operational
management change.
My immediate focus is to restore sales
and profit growth to our core trading estate
as I believe there is significant opportunity
to deliver this over the coming months.
Within this, the Revolution customer
proposition is the key focus area and work
is underway to review all customer touch
points to ensure that we are delivering a
premium experience. The Revolución de
Cuba customer proposition is much clearer
and is continuing to deliver well; it is
differentiated in its market place and has
a stronger focus on food, and a slightly
more mature and affluent customer profile.
Building customer loyalty
Today’s market conditions require an
even stronger focus on engaging with
our customers. Digital developments
and innovations will aid in unlocking this
potential. We will deliver this in a number
of ways:
> We appointed a new and award-winning
social media agency in Social Chain,
having recognised our digital platforms
have not kept pace with the rapid
changes in customer behaviours.
Email communication is now of limited
benefit and shifting resources to
social engagement will enable
better communications with our
target customer base.
> Feedback data has been too focused
on a single channel, Trip Advisor,
distorting our view of the customer
experience. In mid-September, we
launched Reputation.com across the
business to provide a broader view
of the Group’s online reputation by
capturing all review websites and
allowing on-site management to
respond from one dashboard. A further
benefit is that this provides local and
national benchmarking against the
top quartile of our sites, facilitating
management focus on driving the
business forward and truly delivering
for the customer.
> Our customers now expect a seamless
digital journey, and we have developed
an online table booking system
planned for roll-out across the
business pre-Christmas. This will
allow customers to book a table in any
of our bars and the system is integrated
with and complements our central
pre-booking systems.
> Food delivery represents a significant
opportunity, and we are looking to further
develop our existing relationships with
delivery partners to maximise revenue
potential. We are also looking to
develop click and collect capabilities
via our website and social channels.
> Although our cocktail masterclasses
remain as popular as ever and are
a significant source of like-for-like
growth**, that rate of growth has
slowed. The events are synonymous
with the brand and have become a
real differentiator, providing a unique
customer experience that is both
fun and premium. With some of our
competitors now offering similar
experiences we have to identify new
ways to innovate and add creativity to
this important competitive socialising
format. I am excited to see how the
team further develops this offering.
> We have invested additional resources
in our central sales teams and corporate
sales managers to provide further support
and training to locally based sales
teams. This is producing encouraging
results with committed revenue for
the vitally important Christmas trading
period 20.3 per cent ahead of last year.
> We are also working with a consultancy
to further refine the Revolution brand
proposition, ensuring we provide
customers with the best premium
bar experience on the high street.
We expect to start trials on the
recommendations in early 2019.
Revolution Bars Group plc Annual Report and Accounts 2018
10
STRATEGIC REPORT
CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED
Since the end of the reporting period,
we have opened Revolution Glasgow
(Mitchell Street) and Revolución de Cuba
in Southampton. Both are stunning
developments with great potential.
Three further openings are planned
before the end of November, meaning
the Group will trade from 79 venues.
Our pipeline of new sites remains healthy
and we have many exciting prospects
including two sites that could open in the
second half of the FY19. In the short term,
we intend to take a slightly more cautious
approach to new sites given that we
believe our immediate priority and
management focus must be to return
our existing business to growth. This may
also necessitate an increased focus on
the refurbishment of the existing estate,
particularly if our work on the customer
proposition and late night entertainment
identifies that remedial actions requiring
capital investment are required in order
to drive like-for-like growth**.
Employees and management teams
I would like to acknowledge the dedication
and commitment demonstrated by our
3,000-strong team. I have been impressed
with the calibre of our people in our sites
and the support centre and their
commitment to our brands.
The last year has presented some
extraordinary challenges that will have
tested many of our teams; however, I am
confident that their continuing hard work
and support will yield improved performance
in the near future. I would also like to thank
all of our employees for their warm welcome
when I joined the business and I am hugely
looking forward to working with them in the
coming years.
Rob Pitcher
Chief Executive Officer
2 October 2018
*
Restated – see Note 1(b) of the consolidated
financial statements for an explanation and analysis
of the prior period adjustments included in respect
of the profit for the 52 weeks ended 1 July 2017.
** 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,
bar opening costs and share-based payments
(see reconciliation table on page 22 of the
Financial Review).
Driving profit improvement from
existing sites
Given the cost headwinds our sector has
and continues to face – National Living
Wage, Apprenticeship Levy, business rates
and rent rises – this strategic pillar requires
ever increasing rigour and creativity.
Key priorities in the coming year are:
> A renewed operational focus: I intend
to be very “hands on” as this will best
leverage my experience of managing
other turnaround brands and enable
me a faster understanding of how best
to improve the quality of operational
management. As a result, the role of
Chief Operations Officer, vacated due
to resignation earlier in the year, will not
be replaced. Our Operations Directors
will now report directly to me. We have
also appointed a third Operations
Director, having operated with only two
for over six months, and employed a
Property Director following resignation
earlier in the year.
> Refreshing the food offering: Our new
food menu launched in Revolution bars
in mid-September and is the biggest
refresh of our food offer in recent years,
representing a fundamental shift in both
quality and presentation. The menu
introduces a theatrical element,
creating the fun and excitement that are
integral to our brand ethos. Responding
to customer trends, 40 per cent of the
new menu is suitable for either vegan or
vegetarian customers, an increasingly
important factor for us given our young
professional customer base. Following
the success of a weekend brunch offer
in a number of Revolución de Cuba
sites, a similar offer will be introduced
to Revolution in the coming months,
creating a brand-new trading session
for the Revolution brand.
> I believe there is a significant opportunity
to create value through the pricing
models that we currently employ, and
have instigated a review of our current
pricing across the business. This will
ensure we are optimising our margin
while delivering increased value
to our customers.
> Premiumisation and creativity of our
drinks range, particularly cocktails,
continues. We launch four new
cocktail menus each year, the latest
being the beginning of September.
We collaborate closely with the brand
owners of premium spirits who are keen
to associate their products with our
businesses and provide significant
marketing support. They help us to
innovate and allow us to see other
offerings from around the world to
aid in elevating our offering.
> Re-establish our market-leading
position for Friday and Saturday night
entertainment. We researched what the
best party nights look like and are in
the process of trialing new initiatives at
three sites. We have also appointed an
established agency to provide a more
consistent, improved and on-brand
offer for live music and DJs. The early
signs are encouraging.
> Continued cost controls: As part
of our cost reduction programme,
we implemented labour scheduling
software at the beginning of Q4 in FY18;
however, engagement at venue level
has been disappointing. In the coming
months, we will be working hard to
ensure that the benefits of the system
are fully realised. During the period,
average hourly wage rates increased by
3.7 per cent due to statutory increases
in the National Living and National
Minimum Wage. A further 1.0 per cent
increase in employer’s pension
contributions applied from 1 April.
The increase in total venue labour
costs at like-for-like** sites was limited
to 1.7 per cent due to improvements in
deployment driving labour efficiencies.
> Energy costs have been an important
focus in recent months following the
appointment of consultants. Their work
has only just commenced; however,
we are already seeing benefits through
monitoring consumption on a daily
basis and site surveys that identify
fast paybacks from carefully
focused investments in equipment
replacement, LED lighting, and
energy saving devices.
> A new accounting system providing
the business with far improved
management information is being
installed. This will be vital in
highlighting further efficiency
opportunities for the business.
Expansion of our estate
Our property team is driving significant
value through high quality site selection
and property development. Innovation
and creativity are key attributes of their
work, and the team has the vision to
take unique buildings with interesting
but often challenging space, see the
potential, and deliver inspiring backdrops
for our brands which are very different
to those of our competitors. A number
of recent developments have roof top
bars and/or retractable roofs, creating
inside/outside areas.
During the reporting period, we opened
six new venues, three Revolutions
and three Revolución de Cuba sites.
Revolution Bars Group plc Annual Report and Accounts 2018
11
GL ASGOW
CONVERSION OF AN EXISTING LICENSED CLUB IN A PROMINENT LOCATION IN
CENTRAL GLASGOW INTO A REVOLUTION. CLOSE BY THERE ARE MANY CASUAL
DINING RESTAURANTS AND MAJOR WET LED OPERATORS. COVERING A TWO-FLOOR
OPERATION. SIGNIFICANT REMODELLING TO THE CURRENT LAYOUT WAS
REQUIRED CONVERTING AN EXISTING RETAIL UNIT ON THE GROUND FLOOR
TO BE PART OF THE LICENSED DEMISE.
£1.9 MILLION INVESTMENT.
Revolution Bars Group plc Annual Report and Accounts 2018
12
STRATEGIC REPORT
OUR MARKETS
OUR MARKETS
The United Kingdom has over 330,000
licensed premises with many different
styles of operation; many operate as
clubs and bars, many predominantly
as restaurants and many as hotels.
The total pub and restaurant market is estimated as being
worth £88 billion (source: MCA Eating Out Report 2017). The
market is very competitive with relatively low barriers to entry
and a multitude of brands.
Brands differentiate themselves through theming, quality
of operation and customer focus.
Markets overview
Our market is evolving at a rapid pace due to a number
of factors and is polarising between value operators and
premium operators but in all cases a clear customer
proposition and great service standards are critical
for brand credibility and customer loyalty.
OUR RESPONSE TO MARKET TRENDS
A focus on premium brands
Well invested estate
The Group’s brands seek to operate towards the top
end of the market by offering premium products with
a value-added focus through providing an extensive
range of innovative cocktails and food presented and
served with flair and style in a quality, modern, cool
and fun environment.
GIN AND SUPER
PREMIUM RUMS
ARE THE FASTEST GROWING CATEGORIES
£14. 2 MILLION CAPITAL
EXPENDITURE IN THE PERIOD:
52+
2018 openings
£7.4m
2019 openings
Existing estate
£2.4m
£4.4m
Revolution Bars Group plc Annual Report and Accounts 2018
17
+
31
+
N
13
Increasing our digital footprint
Meeting customer demand
> Digital marketing remains at the heart of the Revolution
Bars Group marketing strategy. Whilst the focus remains
on the communication strategy to our 1.1 million Facebook
fans across Revolution and Revolución de Cuba, our
Instagram following is growing at a pace and is now
up to 77k Instagram users.
> The Group has entered into a strategic partnership
with a new social media agency in the summer of
2018, Social Chain, which will provide further growth,
engagement and reach to our key markets whilst
supporting our local social media strategy.
> Launch of the new Revolución de Cuba website in
January supported a 32 per cent increase in traffic
with 1.4 million visits.
> Revolution website traffic was 3.6 million users
(up +14 per cent); however, a new website will be
launched in February 2019 to help support the booking
strategy as well as providing our customers with an
improved user journey and easier access to information
surrounding Revolution.
Our locations
As at the date of this report we operate 76 bars across
the UK under both the Revolution and Revolución de Cuba
brands. Three more bars are planned to open by the end
of November 2018. Our bars are situated in town and city
centres with some large cities hosting multiple versions
of the Revolution brand. There is, therefore, significant
scope for expansion.
POTENTIAL
FOR 150 SITES
WE BELIEVE THERE IS THE POTENTIAL
TO GROW OUR ESTATE TO 150 BARS
Revolution Bars Group plc Annual Report and Accounts 2018
14
STRATEGIC REPORT
OUR BUSINESS MODEL
OUR BUSINESS MODEL
Our business model is to maintain strong cash generation
from our existing estate of bars and to invest the surplus cash
generated through a carefully targeted roll-out of new bars for
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 opportunities. As at
the date of this report we trade 76 bars
with a further three bars scheduled to
open by the end of November 2018.
Our bars are located predominantly
in town or city centre high streets.
Our operating brands
Two distinct and differently themed
brands but with common delivery styles
> Tailored design and bespoke layouts
in buildings of style and character
> Outstanding customer service with
an emphasis on fun
> Premium quality products served in a
style that exudes flair and innovation
1
2
3
Customer focus
Revolution’s primary customer focus is
on 18–25 year olds who are looking for
a fun and party atmosphere. During the
daytime, the brand’s focus on food has
a broader appeal.
Revolución de Cuba’s focus is on a slightly
more mature and discerning customer.
The female customer is at the heart of
our propositions and therefore we strive
to ensure that our environments are
clean, well maintained, safe and properly
supervised and that our product offers
and service quality are consistent with
a premium operation.
A RECORD YEAR OF
REVOLUTION LOYALTY
CARD SALES
Skilled staff
The Group’s training and development
activity ensures we maintain a strong
pipeline of managers to lead and grow the
business. A variety of development tools,
maximising technology where appropriate
and combined with our ACE Customer
Service training programme, takes 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.
400 MEMBERS
OF STAFF
ATTENDED THE 2018
CONFERENCE
Premium products
The high value associated with our retail
brands by our core customer groups drives
significant levels of loyalty and frequency of
visit. Our Revolution bars have been trading
since 1996 and are a destination of choice
for customers who value our innovative
food and drinks menus based around
premium branded products in a fun and
entertaining environment. The success of
our Revolución de Cuba brand is driven by
the Cuban-inspired backdrop and theming
offering innovative cocktails, food and live
music to a wide range of customers. We do
not lose sight of the fact that, above all else,
most of our customers come to us for a good
night out. What we are actually selling are
good times and fun, happy experiences, the
delivery of which requires us to get all facets
of our operation and brand standards
operating consistently at a premium level.
£230K +15%
Read more on Sustainability
Page 26
Read more in our Financial
Review Pages 20–24
Revolution Bars Group plc Annual Report and Accounts 2018
OVER 120
NEW BESPOKE COCKTAILS
ACROSS BOTH BRANDS
15
5
6
Compelling marketing
The Group’s focus on a relatively young
customer demographic requires leading-
edge communication and marketing.
The Group has recently reviewed its
agency partners and has contracted
with Social Chain, which is one of the
fastest growing and most well-respected
marketing agencies in the UK, and which
happens to be led by a former Revolution
bartender. We have an exclusivity
arrangement in place with Social Chain
and are working with it to significantly
improve the quality, style and innovation
of our digital presence.
1.2M
SOCIAL MEDIA FOLLOWERS
Quality management
Our senior management team has
experienced some significant challenges
during the last year, which resulted in
changes in personnel. The team has
been strengthened substantially which
leaves it well positioned to achieve some
step changes in performance in the
coming years.
MANAGEMENT TEAM
POSITIONED FOR RETURN
TO GROWTH
Read more about our Board
Of Directors Pages 30 and 31
Read more about our Senior
Management Pages 32 and 33
4
National estate
We have a trading portfolio of 76 bars
located predominantly in town or city
centre high streets operating under the
Revolution and Revolución de Cuba
brands. We regularly review new bar
opportunities against rigorous and
proven investment criteria and believe
that there is scope for 150 of our branded
bars in the United Kingdom. The Group
continues to develop a strong pipeline
of new sites and expects to open at
least five new sites each year.
6
BARS OPENED IN FY18
Read more about our new bars
Southampton, Revolución de Cuba
Page 7
Glasgow, Revolution
Page 11
Birmingham, Revolución de Cuba
Page 17
Newcastle Revolución de Cuba
Page 23
Revolution Bars Group plc Annual Report and Accounts 2018
16
STRATEGIC REPORT
OUR STRATEGY
MAINTAIN STRONG CASH GENERATION FROM
OUR EXISTING ESTATE OF BARS AND INVEST
SURPLUS CASH THROUGH A CAREFULLY
TARGETED ROLL-OUT OF NEW BARS
CUSTOMER EXPERIENCE
PROFIT IMPROVEMENT
ESTATE EXPANSION
Strategic objective
Strategic objective
Strategic objective
Provide our customers with an exceptional
and premium drinks and food experience.
Continued profit improvement
from existing sites.
Opening new profitable sites in growth
locations.
To build customer loyalty by providing a
seamless digital customer experience.
Performance in 2018
Performance in 2018
Performance in 2018
> Pre-bookings for Christmas 20 per cent
ahead of last year
> Like-for-like pre-bookings for Christmas
+ 14 per cent
> Significant digital growth:
> Facebook fans up 15 per cent
> Website visits up 23 per cent
> Gross margin improved by 10bps
> Revenue from like-for-like venues down
£0.6 million
> Adjusted EBITDA £15.0m
(FY17: £15.1 million)
> Three new Revolución de Cuba bars
opened
> Three new Revolution bars opened
> Returns from new sites (opened more
than 12 months) since IPO running at
+28 per cent
> Growth potential for both brands:
> Revolution to 100 sites
> Revolución de Cuba to at least 50 sites
Future focus
Future focus
Future focus
> Food and drink innovation
> Late-night entertainment offer and focus
on fun and atmosphere
> Quality customer service
> Recognising email communication is a
limited benefit; we are working with a new
digital engagement partner, Social Chain
> Data-driven strategy with a broad view on
capturing more fully our online reputation
> Targeted efficiencies, focusing on key
cost lines including payroll and energy
> Better targeting of discounts to improve
gross margin
> Leverage marketing support from major
drink brand owners
> Two new bars opened already –
Revolution Glasgow (Mitchell St) and
Revolución de Cuba Southampton
> Three further openings planned before end
November 2018
> Two good prospects for second half
and strong pipeline building for
subsequent years
KPIs
The principal KPIs for the strategy outlined above are as follows:
> like-for-like sales**;
> number of units opened;
> adjusted EBITDA***; and
> gross margin.
** 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, non-recurring opening costs and share-based payments (see reconciliation table on page 22 of the
Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2018
17
BIRMINGHAM
CONVERSION OF PROMINENT LOCATION IN CENTRAL BIRMINGHAM INTO
A REVOLUCIÓ N DE CUBA. CLOSE TO CASUAL DINING RESTAURANTS AND
MAJOR WET LED OPERATORS. OPENED MARCH 2018.
THE VENUE HOUSES A SIGNIFICANT TWO-FLOOR OPERATION. SIGNIFICANT
REMODELLING OF THE BUILDING WAS REQUIRED INCLUDING CONVERTING AN
EXISTING RETAIL UNIT ON THE GROUND FLOOR AND THE OLD LAW LIBRARY
ON THE FIRST FLOOR.
CAPITAL INVESTMENT £1.4 MILLION.
Revolution Bars Group plc Annual Report and Accounts 2018
18
STRATEGIC REPORT
RISKS
PRINCIPAL RISKS AND UNCERTAINTIES
We believe that the principal risks and uncertainties
faced by the business are set-out 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.
Risk management framework
BOARD
Responsible for risk management
Audit
Committee
Remuneration
Committee
Non-executive Directors
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 significantly more
profit than others and overall 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 three mitigating actions to this risk: (i) operational
managers are focused on the maintenance of operating profit
of economically significant sites; (ii) these sites benefit from
an annual refresh to ensure decor is maintained to the highest
standards; and (iii) growing the size of the business through
new sites reduces the Group’s exposure to the fortunes of
individual sites.
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 sufficient resources to ensure the
investigation of all new site opportunities. A wide selection of
property agents has also been briefed. Public company status
and a relatively low level of third-party debt is attractive to
potential landlords, enhancing the Group’s covenant.
Consumer demand
The eating-out and drinking-out markets are dependent on the
consumer’s disposable income. Macroeconomic factors, such
as employment levels, interest rates and consumer confidence,
are 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.
The Group retains the ability to tailor its offering in response to
macroeconomic influences. Pricing, discounting, marketing and
promotional activity can all be adjusted quickly if necessary.
Furthermore, the Group’s proposition is not based solely on
selling 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.
Revolution Bars Group plc Annual Report and Accounts 2018
19
Underlying cause of risk
Response and mitigation
Discounting
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 pressure 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 solely on price. Environment,
use of premium products, innovative serves and entertainment
all combine to attract those customers looking for a good
experience and therefore willing to pay more. Discounting
risks are, at least in part, therefore mitigated.
Health and safety
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 poor execution of operating policies and procedures
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 on a five-yearly
cycle by reference to open market rents prevailing at the time
of the review. Most leases stipulate upward-only increases.
Substantial increases in market rents may arise as a result
of other events in the locality and agreements with other
operators that are beyond the control of the Group. Thus rent
reviews may impair the net profitability of the relevant site and
damage returns.
Supplier concentration
The drinks distribution market is dominated by one
significant business, Matthew Clark, which is the Group’s
principal supplier. 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 are affected,
directly or indirectly, by wage legislation. Recent years have
seen rises above inflation imposed on the business and given
the pronouncements of political parties, this looks set to
continue. Increased wage rates could impair site profitability.
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, i.e. there
is no conflict of interest. Some mitigation arises due to rent
reviews being spread out geographically and in terms of their
timing such 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.
The proposed strategy is to tolerate the risk, principally based on
the Group’s assessment that Matthew Clark is the best supplier.
Matthew Clark operates nationwide whereas other drink
wholesalers do not. Prior to 2018, it had a long history and good
service record with the Group and the Group is an important
customer. Mitigation is derived from a four-year deal (to December
2021) and through the Group’s principal commercial deals with
brand owners and not being dependent on the identity of the
distributor. The Group has in place a contingency plan, which was
tested to the full earlier this year when Matthew Clark’s parent
company entered into administration. For several weeks, the
Group was supplied by an alternative supplier. Whilst this event
was disruptive, there was no significant break in supply and the
Group does not believe its sales were adversely impacted.
Wage rate increases can be mitigated by reductions in the
number of hours worked. However, the Group’s customer
proposition is dependent on high levels of service and
therefore management is acutely aware that it should not
cut hours in a way that impacts the customer. However,
technology is being introduced to deploy staff more effectively
and to streamline back office processes that will help mitigate
wage increases. Also, to some extent small increases in selling
prices may be possible to help cover increased costs.
Revolution Bars Group plc Annual Report and Accounts 2018
20
STRATEGIC REPORT
FINANCIAL REVIEW
FINANCIAL REVIEW
Reduction in EBITDA margin
is predominantly the result of the reduction
in like-for-like** sales whilst costs have increased significantly
as a result of National Minimum Wage pay rates and higher
overheads on both rent and particularly general rates.
Summary
> Revenue for the period was £141.9 million (2017: £130.5 million),
an 8.7 per cent increase compared with the prior period.
> Revenue from like-for-like** venues decreased on the prior period
by 0.6 per cent.
> The underlying result, as measured by adjusted EBITDA***,
was £15.0 million (2017: £15.1 million), a decrease of 0.4 per cent.
> The Group incurred an operating loss of £3.0 million
(2017 Restated*: profit £5.5 million) but this was after charging
exceptional items of £11.1 million (2017 Restated*: £2.3 million).
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis
of the prior period adjustments included in respect of the profit for the 52 weeks ended 1 July 2017.
** 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, bar opening costs and share-based payments
(see reconciliation table on page 22 of the Financial Review).
Revolution Bars Group plc Annual Report and Accounts 2018
Prior period adjustments
The financial statements include three
prior period adjustments resulting in a
restatement of financial statements for
the 52 weeks ended 1 July 2017. These
adjustments relate to the methodology
applied to undertake asset impairment
reviews, the redesignation of a deferred
tax credit as a prior period adjustment
and recognition of the interest charge
associated with a movement on the
provision for onerous leases. These
adjustments are detailed in the Note 1(b)
to the financial statements. In aggregate,
the effect of the prior period restatement
is to reduce net assets at 2 July 2016
by £4.5 million. The cumulative effect of
the restatements is to reduce profit after
tax for the period ended 1 July 2017 by
£0.3 million and to reduce net assets as
at 1 July 2017 by £4.8 million.
21
Revenue £m
£141.9m
.
9
1
4
1
.
5
0
3
1
.
5
9
1
1
.
8
1
1
1
.
7
8
0
1
Gross margin £m
£108.2m
.
2
8
0
1
.
4
9
9
.
0
0
9
.
6
4
8
.
5
1
8
Adjusted EBITDA*** £m
Adjusted PBT*** £m
£15.0m
.
0
5
1
.
1
5
1
.
6
4
1
.
4
3
1
.
2
3
1
£8.0m
.
4
9
.
0
8
9
7
.
3
8
.
4
7
.
18
17
16
15
14
18
17
16
15
14
18
17
16
15
14
18
17
16
15
14
Throughout this report, the 2017
comparatives are described as “Restated”
which means they are adjusted for prior
period adjustments.
Results
Revenue for the period was £141.9 million
(2017: £130.5 million), an 8.7 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 six new sites opened in the prior period
offset by lower sales from established
sites. Revenue from like-for-like** venues
decreased on the prior period by
0.6 per cent.
The Group incurred an operating loss
of £3.0 million (2017 Restated*: profit
£5.5 million) but this was after charging
exceptional items of £11.1 million
(2017 Restated*: £2.3 million).
The underlying result, as measured by
adjusted EBITDA***, was £15.0 million
(2017: £15.1 million), a decrease of 0.4 per
cent. This reflects an adjusted EBITDA
margin of 10.6 per cent of revenue
compared with 11.6 per cent in the prior
period (Restated*). The reduction in EBITDA
margin is predominantly the result of the
reduction in like-for-like** sales whilst
costs have increased significantly as
a result of minimum wage pay rates
and higher overheads on both rent
and particularly general rates following
the first full period post the 2017
rating revaluation.
Year-on-year cost increases at venues
opened pre-July 2017 included wages
of +£0.6 million (up 1.9 per cent), rent
of +£0.4 million (up 4.1 per cent) and
general property rates of +£0.6 million
(up 14.1 per cent). These cost increases
were mitigated by improved gross margin
(+0.2 percentage points) and savings
in marketing (down £0.7 million) and
insurance (down £0.2 million).
The restatements of the key comparative measures for the 52 weeks ended 1 July 2017
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
3.7
3.6
4.1
8.2
15.1
9.5
9.3
14.2
5.5
5.2
3.8
7.7
15.1
9.6
9.4
14.6
The table below shows how adjusted EBITDA*** has changed in the constituent parts
of the estate.
Adjusted EBITDA***
Venues opened pre-July 2017
Venues opened in prior period
Venues opened in current period
Other non-like-for-like venue
Adjusted EBITDA from venues
Central support costs
Adjusted EBITDA
Number
of venues
61
6
6
1
74
2018
£m
20.7
1.3
0.8
(0.2)
22.6
(7.6)
15.0
2017
Restated *
£m
21.7
0.8
—
(0.3)
22.2
(7.1)
15.1
"
SIX VENUES OPENED IN THE CURRENT
PERIOD, ACHIEVING TOTAL REVENUE IN
THE PERIOD OF £7.0M AND ADJUSTED
EBITDA*** OF £0.8M WHICH EQUATES
TO 11.4% OF REVENUE."
Revolution Bars Group plc Annual Report and Accounts 2018
22
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Results continued
Of the six venues opened in the prior
period, four Revolución de Cuba venues
opened in the first half and two Revolutions
opened towards the end of the second
half. Five of these sites have performed
to expectation but Revolution Torquay
(opened May 2017) has fallen significantly
short particularly during outside the tourist
season and has dragged down the overall
performance of investments in the prior
financial period. A different strategy is to
be adopted for this site including lowering
the operating costs during the winter months
and a different marketing approach to
improve daytime trade. EBITDA conversion
from this group of investments was 11.6
per cent, significantly below the ultimate
target of 20 per cent. Whilst profit conversion
will continue to improve as these sites
mature a turnaround of the Torquay
performance will be crucial if this group is
to achieve target.
Six venues opened in the current period:
Revolución de Cuba in Belfast early in the
period with three Revolutions in Solihull,
Inverness and Putney opening just before
Christmas at the end of the first half; two
further Revolución de Cuba venues opened
during the second half, in Birmingham just
before Easter and in Newcastle-upon-Tyne
just two days before the period end. These
venues achieved total revenue in the period
of £7.0 million and adjusted EBITDA***
of £0.8 million which equates to 11.4 per
cent of revenue. The three Revolución de
Cuba venues are large sites and all are
trading strongly, and EBITDA conversion
is expected to improve over an extended
period consistent with earlier large
Revolución de Cuba openings. The Board
is confident that this group of sites will
Reported pre-tax (loss)/profit
Exceptional items
Bar opening costs
(Credit)/charge arising from long-term incentive plans
Adjusted pre-tax profit
Add back finance costs
Add back depreciation
Adjusted EBITDA
achieve in excess of the targeted EBITDA
conversion of 20 per cent.
Central costs represent 5.3 per cent
revenue compared to 5.4 per cent in the
prior period and equate to £103k per venue.
The Group reported a pre-tax loss for
the period of £3.6 million (2017 Restated*:
profit £5.2 million). The reported result
for the period has been significantly
impacted by exceptional items £11.1 million
(2017 Restated*: £2.3 million), bar opening
costs for new venues of £2.0 million
(2017: £1.4 million) and a credit arising
from long-term incentive plans of
£1.5 million (2017: charge £0.5 million).
The Board’s preferred profit measure
is adjusted pre-tax profit, which excludes
exceptional items, bar opening costs and
credits/charges arising from long-term
incentive plans, all of which can fluctuate
significantly from year to year and serve to
distract from the underlying performance of
the business. On this basis, adjusted
pre-tax profit was below the prior period
at £8.0 million (2017 Restated*: £9.4 million).
"
R E V E N U E F O R T H E P E R I O D WAS £ 1 4 1 . 9 M
( 2 0 1 7 : £ 1 3 0. 5 M ) , A N 8 .7 % I N C R E AS E
C O M PA R E D W I T H T H E P R I O R P E R I O D.
T H E R E V E N U E I N C R E AS E C O M P R I S E D
PA RT- P E R I O D C O N T R I B U T I O N S F R O M S I X
N E W S I T E S O P E N E D D U R I N G T H E P E R I O D
A N D T H E A N N UA L I SAT I O N O F S I X N E W
S I T E S O P E N E D I N T H E P R I O R P E R I O D
O F F S E T BY LOW E R SA L E S F R O M
E S TA B L I S H E D S I T E S ."
Revolution Bars Group plc Annual Report and Accounts 2018
2018
£m
(3.6)
11.1
2.0
(1.5)
8.0
0.5
6.5
15.0
2017
Restated *
£m
5.2
2.3
1.4
0.5
9.4
0.3
5.4
15.1
Exceptional items and bar opening
costs and accounting for long-term
incentive plans
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 £11.1 million (2017 Restated*:
£2.3 million) were associated with the
takeover and merger approaches received
from the Stonegate Pub Company Limited
and the Deltic Group Limited during the first
half of the reporting period, the resignations
of the Chief Executive Officer (“CEO”)
and Chief Operating Officer (“COO”) and
the recruitment of a replacement CEO,
additional resourcing to support the review
of accounting policies, a fixed assets
impairment charge and an increase in
the provision for onerous leases. A full
analysis of the costs associated with
each of these items together with
the items charged in the comparative
period is given in Note 3 to the financial
statements. £7.8 million of the exceptional
costs are non-cash items (2017: £1.9 million).
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 most significant element of these
costs relates to property overheads
incurred between signing the lease and
opening for trading. Whilst six venues
were opened in the reporting period,
the total charge also includes £0.6 million
in respect of the five venues opening in
the first half of the subsequent reporting
period (all by mid-November 2018).
Two of these sites have been subject
to significant delay since the leases were
signed and have contributed significantly
to these extra costs: Revolution Glasgow,
which opened towards the end of August
2018, was delayed by several months due
to issues obtaining the building warrant
and Bristol has been delayed by a licensing
issue but will open in October 2018.
NEWCASTLE
CONVERSION OF TWO OLD BARS/CLUBS INTO A REVOLUCIÓN DE CUBA
IN THE HEART OF NEWCASTLE CITY CENTRE. OPENED JULY 2018.
A FANTASTIC THREE-FLOOR OPERATION WITH A ROOFTOP TERRACE.
THIS PROPERTY IS SITUATED PROMINENTLY BETWEEN GREY STREET AND
COLLINGWOOD STREET WHICH MEANS WE CAN ATTRACT EXCELLENT DAY
AND NIGHT-TIME TRADE.
THE CAPITAL INVESTMENT TOTALLED £1.8 MILLION.
Revolution Bars Group plc Annual Report and Accounts 2018
(Loss)/earnings per share
Basic (loss)/earnings per share for the
period was (5.7) pence (2017 Restated*:
7.7 pence). Adjusting for exceptional
items, non-recurring opening costs and
(credits)/charges arising from long-term
incentive plans results in an adjusted
earnings per share for the period of
13.0 pence (2017 Restated*: 14.6 pence).
Dividend
The Board has recommended a final
dividend of 3.3 pence per share
(2017: 3.3 pence per share), which is to
be proposed at the Company’s AGM on
26 November 2018.
Mike Foster
Chief Financial Officer
2 October 2018
*
Restated – see Note 1(b) of the consolidated
financial statements for an explanation and
analysis of the prior period adjustments included
in respect of the profit for the 52 weeks ended
1 July 2017.
** 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,
bar opening costs and share-based payments
(see reconciliation table on page 22 of the
Financial Review).
24
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Exceptional items and bar opening
costs and accounting for long-term
incentive plans continued
(Credit)/charge arising from long-term
incentive plans resulted from the
resignation of the CEO and COO, both
of whom received significant share option
awards at the time of the initial public
offering (“IPO”) in March 2015. A number
of other senior managers in receipt of
significant awards at the time of the
IPO also resigned during the period.
The cumulative charges made in earlier
reporting periods in respect of these
individuals were reversed on their
resignations. This is also a non-cash item.
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, bar
opening costs that are a function of the
timing of the new venue development
program rather than the underlying trade
and charges relating to long-term
incentive schemes which tend to reflect
changes in the management team rather
than being a measure of performance.
Finance costs
Finance costs of £0.55 million (2017:
£0.3 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, the amortisation of arrangement
fees over the life of the facility and
interest on the movement in the onerous
lease provision. The Group has a
revolving credit facility of £25 million
that is committed to December 2021. The
facility provides flexibility in managing the
timing of capital investments so that good
opportunities are not foregone and also
provides headroom against unforeseen
short-term trading issues. At the end
of the period, loans of £15.5 million
(2017: £7.5 million) were outstanding
on the revolving credit facility.
Taxation
The current period shows a tax credit
of £0.7 million (2017 Restated*: charge
£1.4 million) due mainly to tax relief arising
from exceptional items and high levels of
capital investment supporting capital
allowance claims in excess of depreciation.
Corporation tax on profits in the current
period is a credit of £0.5 million (2017
Restated*: charge £0.9 million) and a net
deferred tax credit of £0.2 million arising
from timing differences (2017 Restated*:
charge £0.5 million).
Capital expenditure and returns
on invested capital
The Group invested £14.2 million (2017:
£12.9 million) in total during the period
of which £9.8 million (2017: £8.6 million)
related to new venues and £3.8 million
(2017: £3.7 million) related to developing and
maintaining the existing estate. A further
£0.6 million was spent on computers
and IT related items (2017: £0.5 million).
£2.4 million of the expenditure on new
venues related to venues that will open
in the months following the end of the
reporting period – Revolution Glasgow
(August 2018), Revolución de Cuba
Southampton (September 2018) and
Revolución de Cuba Bristol (October 2018).
The latter venue included a lease premium
that was paid earlier in 2018. The comparable
position at the end of the 2017 reporting
period was spend of £1.5 million in respect
of 2018 openings.
The six venues opened in the prior
period generated adjusted EBITDA***
in the current period of £1.3 million.
The capital development cost for these
six venues was £7.1 million producing
a return on capital of 18 per cent during
the current reporting period (adjusted
EBITDA*** divided by capital cost).
As indicated in the results section, the
performance of this group of investments
is being held back by one significantly
underperforming venue. Six venues
opened in the current period at a cost
of £8.8 million. These venues are trading
well and expected to achieve an overall
return of at least 30 per cent at maturity.
Operating cash flow and net debt
The Group generated net cash flow
from operating activities in the period
of £10.2 million, £0.6 million more than
in the prior period (2017 Restated*:
£9.6 million). This was mainly attributable to
lower corporation tax payments £0.6 million
(2017: £1.1 million). Capital investments
of £14.3 million (2017: £12.8 million),
dividends £2.5 million (2017: £2.5 million)
and interest £0.5 million (2017: £0.2 million)
resulted in a net cash outflow in the
period of £7.1 million (2017 Restated*:
£5.9 million) and opening net debt of
£4.4 million moving to a closing net debt
position of £11.5 million. Net cash outflow
for 2017 was restated due to customer
credit and debit card transactions that
have not yet cleared the bank account at
period end but relate to sales within the
reporting period which have historically
been treated as cash and cash equivalents
in the statement of financial position and
cash flow statement. These amounts are
now reported as receivables rather than
cash and cash equivalents.
Revolution Bars Group plc Annual Report and Accounts 2018
STRATEGIC REPORT
CORPORATE AND SOCIAL RESPONSIBILITY STATEMENT
25
THE GROUP’S ACTIVITIES PRIORITISE
OUR PEOPLE, RESPONSIBLE
RETAILING AND CHARITY
People
The Group employs around 3,200 people
and, through its proven growth strategy,
is committed to creating rewarding
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
On line 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.
Our talent attraction strategy ensures
that we provide a compelling reason for
experienced hospitality team members
to join the Group. During the last year
two highly experienced senior operations
managers have joined the business from
other organisations within the sector.
The balance of developing internal talent
with a strong attraction strategy for
experienced individuals from outside the
Group is helping to broaden the skills and
knowledge base of the teams.
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. Twice 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 direction
for the year to come, create a strong
network amongst peers and 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 110 days
of classroom-based management
development training courses during FY18,
providing access to full-day training courses
to over 1,500 people. This was supplemented
by e-learning programmes. The Group is
committed to equal opportunities and the
elimination of discrimination, harassment
and victimisation of employees. Of our
workforce, 44 per cent are female and
56 per cent are male.
In addition to competitive pay rates, there
is a suite of reward and incentive schemes,
investing around one 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. An employee
assistance programme is provided to all
managers to assist them with issues that
might be impacting their wellbeing.
The Group’s performance as an employer
is measured twice yearly through our internal
“Quality of Life” survey. The 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.
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 products 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.
The new food menu launched in
Revolution bars in September 2018
contains a significant number of dishes
appropriate for vegetarians, vegans and
those with other food intolerances, in
order to appeal to this increasing market
trend, which resonates with a significant
proportion of our customer base.
Revolution Bars Group plc Annual Report and Accounts 2018
26
STRATEGIC REPORT
CORPORATE AND SOCIAL RESPONSIBILITY STATEMENT CONTINUED
Charity
Early in 2018, the Group decided that, as
part of its social responsibility agenda,
it should support a nominated charity.
In direct response to feedback from a
significant number of our employees,
Shelter, the housing and homelessness
charity, was selected and the Group has
formally committed to raise £100,000
on behalf of the charity in the year. Our
employees told us that homelessness was
a matter of serious concern to them given
the frequency with which they encounter
those who are homeless on their way home
when they leave our venues late at night.
Most of the funds committed will be raised
by our employees undertaking
sponsored events.
The Group also has a programme designed
to promote other charitable activity within
its workforce. The scheme, called “You
raise it, we match it”, rewards funds raised
by staff for other charities and matches
what they have raised.
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. All new sites and
major refurbishment projects include
fitting energy-efficient lighting and other
control devices in order to minimise
energy consumption. Smart meters have
been fitted throughout our estate to allow
monitoring of consumption on a daily basis.
During the year, the Group appointed
Energise as its energy consultants to
work with the Group on all aspects of
minimising energy consumption and
the cost of energy.
Greenhouse gas emissions
We report Scope 1 and 2 emissions defined by the Greenhouse Gas Protocol as follows:
> Scope 1 (direct emissions): combustion of fuel and operation of facilities; and
> Scope 2 (indirect emissions): combustion purchased electricity, heat or steam.
Greenhouse gas emissions data
The reporting of greenhouse gas emissions is for the 52 weeks ended 30 June 2018 to
mirror our financial reporting period. Reporting follows the requirements of the
Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and
uses conversion factors published by DEFRA.
Emission type:
Scope 1: operation of facilities
Scope 1: combustion
Total Scope 1 emissions
Scope 2: Purchased Energy
Total Scope 2 emissions
Total emissions
Greenhouse gas emissions intensity ratio
Revenue (£m) – calendar year
Scope and methodology
> This includes emissions under Scope 1
and 2, except where stated, but
excludes any emissions from Scope 3.
> We exclude fugitive emissions from our
operation of facilities reported number
due to the availability of records.
> This report is based upon
location-based factors.
Anti-bribery and corruption policy
The Group has in place an anti-bribery and
corruption policy that has been approved
by the Board and communicated through
all heads of department and their teams.
The policy requires transparency and the
maintenance of an entertainment register
that is regularly reviewed by the Board.
Key suppliers have also been made aware
of the policy.
2017–18
CO2e tonnes
—
1,836
1,836
10,303
10,303
12,139
85.5 t/£m
141.9
Anti-slavery policy and human rights
The Group has in place an anti-slavery
policy that has been approved by the
Board. Suppliers are required to
acknowledge the Group’s policy and
their obligation to adhere to it as
part of any contractual arrangements.
The Group does not have a formal
human rights policy but it is committed
to conducting business with integrity
and fairness.
On behalf of the Board
Mike Foster
Company Secretary
2 October 2018
Revolution Bars Group plc Annual Report and Accounts 2018
27
CONFERENCE 2018
IN AUGUST 2018, 400 MEMBERS OF THE OPERATIONS MANAGEMENT AND
SUPPORT TEAMS WERE BROUGHT TOGETHER. THEY WERE JOINED BY SUPPLIERS
WHO WANTED TO BE A PART OF SOMETHING SPECIAL. THE PURPOSE OF
THE CONFERENCE WAS TO RECOGNISE THE SUCCESSES, INVOLVE PEOPLE
IN UNDERSTANDING THE GROUP’S AMBITION AND PLAN HOW TO GET THERE
WITH FUN ALONG THE WAY.
Revolution Bars Group plc Annual Report and Accounts 2018
28
CORPORATE GOVERNANCE
INTRODUCTION TO GOVERNANCE
THE GROUP IS COMMITTED TO HIGH
STANDARDS IN CORPORATE GOVERNANCE
Keith Edelman
Chairman
Introduction from the Chairman
This is the Company’s fourth Governance Report.
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.
Compliance with the Code
Apart from the matters described below, 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 Board is aware of the 2018 revisions to the UK Corporate
Governance Code applicable from 1 January 2019 and is already planning to ensure full compliance from that date.
Code provision
Area
Explanation
A.2.1
C.3.1
Separation of roles of
Chairman and CEO
During the period Mark McQuater left the business. During the search for his successor,
Keith Edelman, the Chairman exercised the role of “Interim Executive Chairman”.
Rob Pitcher was appointed CEO in June 2018 and from that point the roles of Chairman
and CEO were separated.
Composition of Audit
Committee
Keith Edelman serves as Chairman of the Audit Committee and during his tenure as
“Interim Executive Chairman” in the year could not be considered independent. With
the appointment of Rob Pitcher in June 2018 Keith is considered independent once again.
The Group continues to implement a
robust governance structure to ensure
compliance with the Code. The following
are some key highlights:
> The Board comprises a majority of
independent Non-executive Directors,
of which there are three including me
as Non-executive Chairman (deemed
independent on appointment), and two
Executive Directors. However, following
the resignation of the Chief Executive
Officer (“CEO”) in October 2017 and
because of the small size of the
Executive Board, I became Executive
Chairman so as to be fully involved in
the day-to-day running of the business,
including the recruitment of a
replacement CEO, until Rob Pitcher
joined the Group in June 2018.
Therefore, during the period between
17 October 2017 and 25 June 2018,
the Board did not comprise a majority
of independent Directors, having
two Executive Directors and two
Non-executive Directors, but in the
circumstances the Board judged that
my stepping up to the role of Executive
Chairman for a short-term period was
in the best interests of the Group and
its stakeholders.
> Each Non-executive Director has
a proven track record in business
at a high level and has expertise
of relevance to the Company.
> The Board and its Committee structure, as
required for a listed company, have been
implemented. The Audit Committee is
required to fully comprise Non-executive
Directors but I continued to be an active
member of the Committee during the
period when I was Executive Chairman
and therefore the Group was not in
compliance with this element of the
Code during the period 17 October 2017
to 25 June 2018, during which time the
Audit Committee met 3 times. The
Non-executive Directors have provided
critical challenge and support to the
areas of the Group which they believe
are of particular importance.
> We review regularly, and implement
as necessary, any developments in
corporate governance best practice
and seek to apply them appropriately.
Revolution Bars Group plc Annual Report and Accounts 2018
29
REVOLUTION BARS GROUP PLC BOARD
Chairman: Keith Edelman
Chief Executive Officer: Rob Pitcher
Chief Financial Officer: Mike Foster
Senior independent Non-executive Director: Michael Shallow
Independent Non-executive Director: Jemima Bird
Audit Committee
Remuneration Committee
Chairman: Michael Shallow
Keith Edelman
Jemima Bird
Chairman: Michael Shallow
Keith Edelman
Jemima Bird
Nomination Committee
Chairman: Keith Edelman
Jemima Bird
Michael Shallow
Rob Pitcher
Michael Shallow, who was appointed
just prior to the Company’s listing on the
London Stock Exchange in March 2015,
serves as senior independent Non-executive
Director and Chair of the Remuneration,
Nomination and Audit Committees.
Michael has advised the Board that he
intends not to seek re-election at the
forthcoming AGM and will stand down
from the Board on that date. Jemima Bird
will become senior Non-executive
director from the date of the AGM.
A search is underway for an additional
Non-executive Director.
Each Director was selected to bring
the range of public company, commercial
and industry skills required to drive the
Group forward. Additionally, the Board
takes appropriate advice on governance
matters from external advisers.
The remuneration policy for both
Executive and Non-executive Directors
is set out within the Remuneration Report
which starts on page 38.
The Group has the principles of transparency
and openness at the heart of its culture
and is committed to high standards
in corporate governance. The Board firmly
believes that corporate governance
structures and robust processes will help
the business to perform in a more efficient
and competitive way in the marketplace
and will lead to strong relationships with
all stakeholders.
Keith Edelman
Chairman
2 October 2018
Revolution Bars Group plc Annual Report and Accounts 2018
30
CORPORATE GOVERNANCE
BOARD OF DIRECTORS
STRONG AND EXPERIENCED LEADERSHIP
The Board currently comprises a Non-executive Chairman, two Executive Directors and two other Non-executive Directors.
Keith Edelman
Non-executive Chairman
Rob Pitcher
Chief Executive Officer
Mike Foster
Chief Financial Officer
Appointment date:
16 February 2015
Appointment date:
25 June 2018
Board Committees:
Audit; Remuneration; Nomination (Chair).
Board Committees:
Nomination.
Appointment date:
2 June 2017
Board Committees:
None.
Relevant past experience:
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. Keith’s previous
executive 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).
Relevant past experience:
Rob has over 25 years’ experience within the
hospitality sector, most recently as divisional
director restaurants at Mitchells & Butlers
responsible for the Harvester, Toby Carvery and
Stonehouse brands. Prior to joining M&B, Rob
has held senior positions at many other leading
hospitality companies including: Bramwell,
Stonegate, Town & City, Laurel, Spirit and
Scottish & Newcastle Retail.
Relevant past experience:
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 over 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.
Other appointments:
He is currently non-executive chairman of
Pennpetroenergy Plc, a non-executive director
of Headlam Plc and a non-executive director
(and chairman of the audit committee) of the
London Legacy Development Corporation.
Revolution Bars Group plc Annual Report and Accounts 2018
31
Skills directly relevant to our business
Leisure
77 per cent of our Board and senior
management have experience in
leisure businesses.
31%
77%
77+
31+
69+
69%
Marketing
31 per cent of our Board and senior
management have experience in
marketing businesses.
Operational
69 per cent of our Board and senior
management have experience in
operational businesses.
Mark McQuater, who held the position
of Chief Executive Officer at the beginning
of the period, resigned from the Board on
17 October 2017.
Michael Shallow
Independent
Non-executive Director
Appointment date:
16 February 2015
Jemima Bird
Independent
Non-executive Director
Appointment date:
19 December 2016
Board Committees:
Audit (Chair); Remuneration (Chair); Nomination.
Board Committees:
Audit; Remuneration; Nomination.
Relevant past experience:
Michael has performed 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 also 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.
Relevant past experience:
Jemima is a marketeer with more than 20 years’
experience in many of the UK’s leading high
street brands. She formed Jbird consultancy in
2013. She is currently working with the
Co-operative Group, which she rejoined in
January 2016 as customer director having
worked there previously in various branding and
marketing roles from 1996 to 2008. Between
2010 and 2015, Jemima held board positions at
Moss Bros plc, Tragus, the restaurant operator,
and Musgrave Retail Partners (Budgens and
Londis).
Michael, who was appointed just prior to the
Company’s listing on the London Stock
Exchange in March 2015 has advised the Board
that he intends not to seek re-election at the
forthcoming AGM and will stand down from the
Board on that date. Jemima Bird will become
senior Non-executive director from the date of
the AGM. A search is underway for an additional
Non-executive Director.
Revolution Bars Group plc Annual Report and Accounts 2018
31
+
z
69
+
z
23
+
z
32
CORPORATE GOVERNANCE
SENIOR MANAGEMENT
EXPERIENCE AND EXPERTISE
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.
Alex Stanhope
Group Property Director
Kate Eastwood
Sales and Marketing Director
Alex joined the business in August 2018 as Group Property
Director. Prior to this Alex was the property director at the
Deltic Group. During his career Alex has held a number of
property-related roles starting in private practice for the likes
of CBRE, with more recent client-side roles at Holland & Barrett
as group head of estates and Halfords PLC. Alex has a degree
in real estate management and is a member of the RICS.
He is responsible for managing all aspects of the Property
and Development function, from the acquisition and fit-out
of new sites to the ongoing maintenance and refurbishment
programme and all other estate matters.
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 prior to that held a number of roles at First Leisure
Corporation plc, including marketing manager and brand
manager, spending 11 years with each business.
Myles was promoted from Trading Director to Commercial
Director in January 2017. Myles is responsible for procurement,
drinks retail strategy, reward and recognition programmes and
commercial supplier agreements and relationships.
Simon Dobson
Food Director
Simon joined the business in January 2018. Simon was
previously Managing Director of Delaware North in the UK
managing the food operation for very large contracts such as
Wembley stadium, Arsenal Emirates stadium and several premier
racecourses. He has worked for over 20 years in food and
customer experience.
Clinton Ghent
Operations Director – Revolución de Cuba
Clinton joined the business in 2008 as a general manager after
beginning his career with Fat Cat Café Bars. He has been
responsible for the development and delivery of the brand and
operational elements of Revolución de Cuba since its inception
in 2011, and has overseen the opening of 16 trading sites, with
a further three in development.
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 and then to Sales
and Marketing Director in January 2018.
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 the 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.
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 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 Rank Group,
where she was part of a 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.
Andy Dyson
Operations Director – Revolution North
Andy joined the business in 1998, having graduated from Leeds
University, where he studied civil engineering (BEng (Hons)). He
has worked in a number of operational roles within the group,
including bar management and area management. Andy was
promoted to Regional Operations Manager in 2013 and to
Operations Director – Revolution North in 2018.
Mark Walter
Operations Director – Revolution South
Mark joined the business in September 2018 from Mitchells &
Butlers, where he had been operations manager for three years.
Mark has spent his career in hospitality running late-night
venues, pubs and bars. Prior to joining Mitchells & Butlers, Mark
was an area manager for Laurel and Stonegate Pub Company.
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 2018
CORPORATE GOVERNANCE
VIABILITY STATEMENT
33
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 such period aligns
with the Group’s strategic planning
process. The latest three-year plan was
formally reviewed by the Board in May
2018 and, as a consequence of feedback
and amendments to certain elements of it,
was updated in June 2018. The three-year
plan covers the period to the end of June
2021. The plan provided the basis for:
1.
2.
3.
4.
setting the detailed budget for the
52 weeks ending 29 June 2019;
understanding the likely performance
levels based on different patterns of
like-for-like sales growth, estate
expansion and cost pressures;
stress-testing compliance with quarterly
banking covenant tests; and
understanding the Group’s long-term
funding requirements.
The Group’s three-year plan is built up in
financial quarters in a robust spreadsheet
model developed for the purpose over
the last 12 months. The model uses
up-to-date trading data 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
like-for-like sales growth, returns from
expansionary capital expenditure, 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
National 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. The model also includes
financial covenant tests consistent with
the Group’s banking facilities and allows
for scenario analysis to stress-test
the banking covenants.
The Group has a £25 million revolving credit
facility committed to 31 December 2021.
The facility provides liquidity to cover
normal monthly and seasonal cash
outflows, 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. The Group has opened
six new sites in each of the last two
financial years and will open a further
five new sites in the first half of the new
financial period. A number of these new
sites have been in large cities requiring
larger than average footprints and at
higher cost. This accelerated rate of
investment together with the one-off
exceptional costs relating to corporate
activity and Executive Director changes
has seen utilisation of the facility over the
last two financial periods increase from
£0.5 million to £15.5 million with a further
increase to £19.0 million as at the date
of signing the financial statements.
The Group continues to be very cash
generative pre-expansionary capital
expenditure, has ample headroom on
its facility to cover working capital and
seasonal cash flow needs and can
potentially cover a significant reduction
in trading performance relative to recent
levels. The acceleration of capital
investment has coincided with a number
of events that have adversely impacted
trading performance and therefore the
Board has recently agreed with its bank
some revisions to facility covenants that
will provide a greater level of tolerance
over existing test levels. The Board is also
mindful that controlling the rate of capital
investment is a principal driver of the
Group’s debt levels and, as such, given
current trade trends intends, temporarily, to
adopt a more cautious approach to the rate
of expansion whilst the new Chief Executive
Officer focuses on consolidating and
improving underlying trading performance
of the business.
As detailed on pages 18 and 19, 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 2018
34
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT
Board composition
1
2
Executive Directors
Independent Non-executive Directors40+
Non-executive Directors
2
that will help achieve this long-term
success and deliver shareholder value.
The Board oversees those matters that it
regards as critical to the success of the
Group including strategy, financial policy,
maintaining a sound system of internal
control, senior appointments and
corporate governance. The Board’s main
responsibilities are included in a schedule
of matters reserved for the Board, as set
out below:
> agreeing the Group’s strategy
and objectives;
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.
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 a company of its size,
other than in terms of Board composition
during the period between 17 October 2017
and 24 June 2018 when Keith Edelman,
who started and ended the financial
reporting period as Non-executive
Chairman, became Executive Chairman
following the resignation of the Group’s
Chief Executive Officer (“CEO”).
Compliance with the Code:
Board composition
Michael Shallow served as “senior”
independent Director throughout the
reporting period to lead meetings of
Non-executive Directors, 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.
> changing the structure and capital
of the Group;
Michael Shallow has also been and
is available to shareholders up to
26 November 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. Michael has
advised the Board that he intends not to
seek re-election at the forthcoming AGM
and will stand down from the Board on
that date. Jemima Bird will become senior
Non-executive director from the date of
the AGM. A search is underway for an
additional Non-executive Director.
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 30 June 2018 and Chairman. The
Chairman has confirmed to shareholders
in the Notice of AGM that he and the
Board believe that the performance of
each Director, both Executive and
Non-executive, and the Board
Committees continues to be effective and
demonstrates commitment to the relevant
responsibilities.
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 and it agrees the
strategic direction and governance structure
> approving the annual budget;
> approving the annual report
and accounts, and interim
financial 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;
> approving significant expenditure
commitments and material transactions
and contracts;
> ensuring a satisfactory dialogue with
the Group’s shareholders;
> appointing and removing Directors
and other members of the senior
management team;
> determining the remuneration policy
and adjustments to the remuneration for
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
Revolution Bars Group plc Annual Report and Accounts 2018
40
+
20
+
I
35
> considering and continually updating
a rolling agenda of items that includes
any current issues or matters as
they arise.
The Board has an ongoing process
for identifying, evaluating and managing
the principal risks facing the Company,
including those that would threaten its
business model, future performance,
solvency or liquidity. This process has
been in place for the year under review
and up to the date of approval of the
annual report and accounts although
during the year the Board decided that
the establishment of a Risk Committee
would enhance the quality and
robustness of its risk management
process. The principal risks are regularly
reviewed by the Board. A description of
these risks together with an assessment
of how they are being managed or
mitigated, is included on pages 18 and 19.
Last year’s report noted that the Group’s
risk management and internal control
systems had not operated to the high
standard expected and that it would
remain a significant focus for the Board
in the immediate future. Steps were taken
at the time that were largely reactive in
order to provide appropriate resources
to deal with the most immediate issues
regarding financial reporting and
forecasting and to deal with two
approaches regarding possible offers
for the Group, one of which was
subsequently put to a shareholder
vote and rejected.
Since that time and, as a result of the
Board’s review of the effectiveness of the
Group’s risk management and internal
control systems, a number of initiatives
have been undertaken including:
> the recruitment of additional qualified
and more relevant skilled resource
in finance and the recruitment of
a qualified corporate secretary
to provide more support around
corporate governance matters;
> provision of training for financial staff
that rewards examination success
encourages formal qualification;
> implementation of a new finance
system that provides significantly
improved accountability throughout
the business;
> implementation of a labour rota
system that provides much greater
control over local forecasting and
labour resources; and
> establishment of a Risk Committee
under the chair of the Chief Financial
Officer that meets quarterly to formally
identify, review and propose actions to
improve the management of key risks
across all areas of the business and to
hold individuals to account. A key focus
of the Risk Committee relates to health
and safety and minimising exposure
to cash losses but its remit extends to
the identification and management of
any risk faced or potentially faced by
the business.
It is pleasing to note that contingency
arrangements in relation to one of the
principal risks relating to supplier
concentration had to be invoked as a
result of the financial failure in March 2018
of Conviviality, the parent company of the
Group’s principal supplier Matthew Clark.
This was a major issue for many Matthew
Clark customers but we were able to
activate alternative supply arrangements,
as planned, such that whilst this was
a significant management distraction,
there was negligible impact to our
customer offer.
As noted above, the Board has delegated
certain responsibilities to Committees
to assist it with discharging its duties
regarding key risks. The Committees play
an essential role in supporting the Board
to implement its strategy and provide
focused oversight of key aspects of the
business. Minutes and action points
arising from Committee meetings are
always circulated to and reviewed at
Board meetings. 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 has complied fully with these
recommendations throughout the
reporting period, notwithstanding.
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. However,
following the resignation of the CEO on
17 October 2017 and given the turmoil in
the business created by the two approaches
to acquire or merge with the business and
the aftermath of the shareholder vote
to reject an offer, the Board agreed that
shareholder interests would be best
served in the short term by Keith Edelman
temporarily relinquishing his role as
Non-executive Chairman and becoming
Executive Chairman. This decision recognised
the need for strong leadership of the Group
and also the critical and time-consuming
activity of recruiting the right individual
to succeed as the Group’s new CEO.
Keith Edelman fulfilled the role of
Executive Chairman from 17 October 2017
to 24 June 2018. Keith Edelman was
Non-executive Chairman at both the
beginning and end of the reporting period
under review. Keith Edelman 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 Rob Pitcher, 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.
Revolution Bars Group plc Annual Report and Accounts 2018
36
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE REPORT CONTINUED
Chairman and Chief
Executive Officer continued
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.
Board meetings
The Board’s intention is to meet at
least eight times per year for structured
Board meetings covering all aspects
of the business. During the 52 weeks to
30 June 2018 the Board met 15 times, of
which nine were full structured meetings
and the balance were mostly necessitated
by the approaches received regarding
possible offers for the Group.
The attendance record of each of the Directors at meetings of the Board and the
Committees of the Board is set out below:
Board
Audit
Remuneration
Nomination
Total number of meetings
Keith Edelman
Mark McQuater1
Mike Foster
Michael Shallow
Jemima Bird
15
15
8
15
15
15
5
5
—
5
5
5
4
4
—
2
4
4
1
1
—
1
1
1
1. Mark McQuater resigned from the Board on 17 October 2017 and remains on garden leave until
16 October 2018.
Agendas and papers for each Board
meeting are sent out in advance. The
papers include business reports and
updates from the Chief Executive Officer
and the Chief Financial Officer. Members
of the Group’s senior management team
are also invited to present at Board meetings
on a regular basis, 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
AGM to be held on Monday 26 November
2018. 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 30 June 2018. 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.
The changes made to the composition
of the Board during the year, including
the short-term change in role for the
Chairman, moving from a Non-executive
office to an Executive office, were
a result of such a meeting of the
Non-executive Directors.
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.
Revolution Bars Group plc Annual Report and Accounts 2018
37
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 26 November 2018.
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 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 38 to 53.
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 30 June 2018.
Mike Foster
Chief Financial Officer
and Company Secretary
2 October 2018
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.
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.
Revolution Bars Group plc Annual Report and Accounts 2018
38
CORPORATE GOVERNANCE
REMUNERATION REPORT
FOR THE 52 WEEKS ENDED 30 JUNE 2018
PROMOTING A STRONG AND
SUSTAINABLE PERFORMANCE CULTURE
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.
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 30 June 2018
Whilst the Group continued to make good
progress on the opening of new venues
to expand its footprint, the severe weather
conditions in March and the extended
spell of high temperatures throughout
May and June 2018 adversely impacted
like-for-like sales in the second half of
the year. The challenges in the Finance
function, which were well documented
in last year’s annual report, and the
approaches made to the Group by two
potential offerors culminating in a formal
offer from Stonegate Pub Company
Limited, and following the rejection of
that offer the immediate resignation of
the Chief Executive Officer (“CEO”), were
disruptive events that clearly impacted
management focus and business results.
Consequently, performance under
adjusted EBITDA and adjusted profit
before tax bonus targets was below the
threshold level and as such no bonuses
are payable to any of the Executive
Directors or senior management team.
Given the underperformance of the
business, the Committee decided that it
was not appropriate to undertake salary
reviews in July 2018 for the Executive
Directors or the majority of the senior
management team, although certain
individuals’ salaries were reviewed during
the course of the year to increase
alignment with benchmark rates for their
roles, particularly where this included
expanded responsibilities.
The first tranche of awards granted on
IPO was due to vest based on performance
to 30 June 2018. On his resignation, the
majority of Mark McQuater’s outstanding
LTIP awards lapsed in full, although a
minority of the first tranche, amounting
to 29,159 shares, vested during the
period. The vesting calculation was
performed by Mercers and reflected the
performance conditions and full time pro
rating. No other Executive Directors held
any LTIP awards that were eligible to vest
during the year.
Changes to the Board during the year
As stated above, Mark McQuater resigned
from the Board effective 17 October 2017.
Mark was placed on garden leave from
that date and, under the terms of his
service contract, will continue to receive
salary, benefits and pension payments
over his 12-month notice period.
Rob Pitcher was appointed as his
successor and joined the Board as CEO
on 25 June 2018. His salary was set on
appointment at £350,000, taking into
account his experience, the market rate
for this role at similar companies and the
salary of his predecessor. Benefits and
pension contributions are provided in line
with the remuneration policy as described
on the following pages. Rob Pitcher is
eligible for a maximum annual bonus of
100 per cent of salary and a long-term
incentive award of 300 per cent of salary
that will be allocated in two parts, the first
part equivalent to 200 per cent salary
shortly after the preliminary announcement
of the 2018 results and the second part
equivalent to 100 per cent salary shortly
after the preliminary announcement of
the 2019 results.
In order to ensure a smooth transition,
and to minimise disruption to the day-to-
day operations of the business, during
the period between the resignation of
Mark McQuater and appointment of
Rob Pitcher, Keith Edelman took up the
position of Executive Chairman. The
Committee approved supplementary
remuneration to account for the additional
responsibilities and time commitment,
increasing his annual fee to £330,750
over the period in question. His fee
reverted to its previous level of £90,000
on resumption of his former role.
Revised remuneration policy
and its application in the 2019
financial year
As described on the following pages,
we are submitting a revised remuneration
policy for approval at the 2018 AGM. The
Committee reviewed the policy during
the year and concluded that it remains
appropriate and fit for purpose, and as
such no material changes to the policy
are proposed.
Executive Directors will continue to
receive salary, benefits and pension
payments as defined in the policy. Both
will be eligible for a bonus payment of
Revolution Bars Group plc Annual Report and Accounts 2018
39
> the remuneration package for Rob Pitcher
who joined as the Group’s new CEO on
25 June 2018; and
> awards under the Long Term Incentive
Plan (“LTIP”) to Mike Foster and new
members of the senior management
team as well as small top-ups to other
members of the senior management
team to ensure comparability between
team members.
Mercer was engaged on 1 July 2017
to provide advice to the Committee
in relation to the vesting of LTIP awards
in connection with the proposed offer
for the Group and Aon was engaged
to provide support on the accounting
calculations in respect of LTIP awards
and other matters
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 2018 AGM.
Michael Shallow
Chairman of the Remuneration Committee
2 October 2018
up to 100 per cent of salary, contingent
on the satisfaction of stretching EBITDA,
PBT and personal performance targets
as in prior years.
The CEO will receive an LTIP award
in the coming year with a face value of
200 per cent of salary. This award will
vest after a three-year performance period,
based on EPS and TSR performance
targets. A further award with a face value
of 100 per cent of salary is to be issued
after the preliminary announcement in
2019. Awards made in 2018 and thereafter
will also be subject to appropriate recovery
and withholding provisions, in line with
best practice.
Committee activities
The Committee met four times during the
year. As well as the routine matters set
aside for the Committee, as set out under
Directors’ remuneration policy on page 40,
its primary business was to consider
and agree:
> whether outstanding awards under the
Long Term Incentive Plan would vest
contingent upon the Board recommended
offer for the Group from Stonegate;
> the terms of the severance package
offered to Mark McQuater who resigned
from the business on 17 October 2017
following shareholders’ vote to reject
Stonegate’s offer for the business;
> an adjustment to the remuneration
for Keith Edelman who temporarily
relinquished his role as Non-executive
Chairman to become Executive
Chairman until a replacement CEO
was able to commence employment;
Revolution Bars Group plc Annual Report and Accounts 2018
40
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
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 shortly after the Group’s listing on the
London Stock Exchange. As set out at that time, the policy was expected to continue to apply for a minimum of three years until
30 June 2018.
We are, therefore, submitting the remuneration policy as presented on the following pages for approval through a binding vote at the
2018 AGM. The Committee is satisfied that the policy continues to provide an appropriate framework for Executive remuneration and
as such no material changes are proposed. This revised policy, if approved, is intended to apply from 1 July 2018 for a period of three
financial years. As in previous years, the Annual Report on Remuneration will be put to an advisory vote at the 2018 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.
Remuneration for Executive Directors
The main component parts of the remuneration policy for Directors, as approved by shareholders, 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 taking into account
performance, experience,
responsibilities, relevant market
information and the level of
workforce pay increases.
Executive Directors’ current
salaries are set out in the Annual
Report on Remuneration.
Annual increases will usually be
commensurate with those of the
wider workforce.
A broad-based assessment
of individual and Company
performance is considered
as part of any salary review.
Further increases may be considered
if there are significant changes in
responsibility or scope of the role,
sustained increase in the size of the
business, or if there are significant
movements in market rates.
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.
Contribution to a personal
pension arrangement or cash
in lieu of pension by way of a
salary supplement.
Not applicable.
Set at market-competitive levels
for Executive Directors. The
maximum contribution will be
up to 15 per cent of salary.
Only basic annual salary is
pensionable.
Revolution Bars Group plc Annual Report and Accounts 2018
41
Element
Operation
Opportunity
Performance metrics
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.
Benefits
To provide
benefits that assist
Directors in the
performance of
their roles and are
designed to be
competitive and
cost effective.
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 per cent of salary for the
Executive Directors.
Bonus is paid wholly in cash.
Recovery provisions allowing the
Company to claw back bonus
payments under certain
circumstances. The recovery
period in respect of each bonus
will be three years from the date
the bonus is paid.
The Remuneration Committee
retains discretion to withhold or
reduce a bonus even if the
objectives have been met.
Performance Share Plan (“PSP”)
Nominal cost options (“NCO”) are
share awards which vest, subject
to performance, after three years.
PSP awards are subject to
recovery and withholding
provisions allowing the Company
to withhold invested awards or
reclaim vested awards under
certain circumstances.
Normal awards of up to
200 per cent of salary.
Awards of up to 300 per cent
of salary may be made 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 2017/18 annual
bonus and those proposed for
2018/19 are described in the
Annual Report on
Remuneration starting
on page 38.
NCO awards will be granted
subject to a combination of
financial measures (including
but not limited to relative TSR
and 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’s
strategy at that time.
The performance measures
used for previous awards, and
proposed for the coming year,
are described in the Annual
Report on Remuneration.
Revolution Bars Group plc Annual Report and Accounts 2018
42
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
Remuneration for Executive Directors continued
Policy table continued
Element
Operation
Opportunity
Performance metrics
Company Share Option Plan (“CSOP”)
For Executive Directors,
performance conditions will be
linked to those used under the
corresponding PSP award.
Aggregate value of any PSP
and CSOP award granted will not
normally exceed normal awards of
200 per cent of salary (300 per
cent of salary in exceptional
circumstances), with PSP grant
levels in the same year taken into
consideration and
reduced accordingly.
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.
CSOP awards are subject
to recovery and withholding
provisions allowing the Company
to withhold invested awards or
reclaim vested awards under
certain circumstances.
Executive share ownership
To align Executive
Directors’ and
shareholders’
interests.
All Executive Directors are expected
to hold an investment of at least
100 per cent of base salary in the
Company, using 50 per cent of net
awards under the Company’s PSP to
achieve the shareholdings, if required.
100 per cent 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
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.
Not applicable.
The Non-executive Chairman’s fee
and Non-executive Director 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.
In exceptional circumstances, if
there is a temporary yet material
increase in the time commitment for
Non-executive Directors, the Board
may opt to pay additional fees to
recognise the additional workload.
Revolution Bars Group plc Annual Report and Accounts 2018
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
plan conditions are unable to fulfil their
original intended purpose and if the
change would not be materially less
difficult to satisfy than as originally set.
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.
43
have been regarded as a frustrating
action under the Takeover Code.
Accordingly, no service agreement was
entered into at the time of his appointment
due to restricted terms being applied
relative to the approved Directors’
remuneration policy. There continues to be
no service agreement in place and therefore
certain elements of the remuneration policy
continue to be disapplied.
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 Rob Pitcher’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
be deemed to vest on the originally
prescribed 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.
Executive Directors’ service
agreements including policy on
contracts of service
Rob Pitcher
On 25 June 2018, Rob Pitcher
(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 £350,000. His appointment (as Revolution
Director) is subject to annual re-election
by shareholders at the 2018 AGM.
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, Rob Pitcher is entitled to
an annual car allowance of £15,000 per
annum, private health insurance for
himself, his spouse and his family, life
assurance and a pension contribution
of 15 per cent of basic salary.
The service agreement is terminable by
Rob Pitcher or Revolution on not less than
12 months’ prior written notice. Revolution
can, however, terminate Rob Pitcher’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
Mike Foster (Revolution’s Chief Financial
Officer and Company Secretary)
continues to perform his duties on the
basis of an appointment letter which
was approved by the Revolution Board
on 29 May 2017 under the terms of which
he is entitled to receive an annual base
salary of £200,000 and 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.
At the time of Mike Foster’s appointment,
the Group had been approached about
a potential offer for the business and,
therefore, permission for the appointment
had to be sought and was granted from
the Takeover Panel as it could potentially
Revolution Bars Group plc Annual Report and Accounts 2018
44
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
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 operate.
The majority of employees participate in an annual bonus or incentive scheme, although the limits and performance metrics vary
according to seniority and location of the role. Participation in the PSP and the CSOP is targeted at senior management and other
key staff such as area managers who are more able to influence overall trading performance.
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, so as to achieve the appropriate 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 2018
45
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 if the Committee regarded it to be an
exceptional circumstance and subject to the Company not being in a closed period. In accordance with the rules of the scheme,
awards are normally made within 42 days of an announcement of the Group’s results.
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 2018
46
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
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 arrangements depending on the
achievement of threshold, target and maximum performance of annual bonus and long-term incentives for 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.
CHIEF EXECUTIVE OFFICER
PERFORMANCE
CHIEF FINANCIAL OFFICER
PERFORMANCE
)
0
0
0
£
’
(
n
o
i
t
a
r
e
n
u
m
e
R
2,000
1,200
1,000
800
600
400
200
0
£1,138
31%
32%
£816
21%
27%
£421
100%
52%
37%
Minimum
Target
Maximum
)
0
0
0
£
’
(
n
o
i
t
a
r
e
n
u
m
e
R
2,000
1,200
1,000
800
600
400
200
0
£405
16%
30%
54%
£218
100%
£551
24%
30%
40%
Minimum
Target
Maximum
Fixed pay
Annual bonus
Long-term incentives
Assumptions:
1. Base salary as at 1 July 2018.
2. Annualised benefits based on terms as at 1 July 2018.
3.
4.
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.
For the CEO and for the 2018/19 financial year only a PSP award of 300 per cent of salary has been included, which is in line
with the Company’s offer letter and which will be awarded shortly after the Company’s preliminary results announcement –
initially equivalent to 200 per cent of salary with a further 100 per cent to be issued after the preliminary announcement in 2019.
50 per cent of the face value is assumed at the target level. The total value of the award is spread over the three-year
vesting period.
5.
For the CFO, maximum performance includes the initial PSP grant of 200 per cent of salary, with 50 per cent of face value
assumed at the target level. The total value of the award is spread over the three-year vesting period.
Revolution Bars Group plc Annual Report and Accounts 2018
47
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 2018
consistent with the decision not to review
the salaries of the senior management
team. Current salaries are summarised
as follows:
> Rob Pitcher, Chief Executive Officer,
£350,000 per annum
(2017: Mark McQuater £375,000); and
> Mike Foster, Chief Financial Officer,
£200,000 per annum (2017: £200,000).
Performance-related bonus
The maximum bonus potential for the
Chief Executive Officer and the Chief
Financial Officer for the 52 weeks ending
29 June 2019 is 100 per cent of basic
salary earned in the reporting period.
Executive Directors’ bonuses are 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 the number and trading
performance of new openings, customer
feedback, product quality and staff
engagement. An underpin relating to
financial performance applies to the
annual bonus award, which gives
discretion to the Remuneration Committee
to reduce the award if deemed necessary.
For the 52 weeks ending 29 June 2019,
the financial performance metrics 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 is
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”).
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.
During the 52 weeks ended 30 June 2018,
the Committee met formally on four
occasions, with all members attending
each meeting.
The key activities of the Committee
during the 52 weeks ended 30 June 2018
have been:
> approval of the bonus outcome and
pay-out in respect of the financial
reporting period for the 52 weeks
ended 1 July 2017, confirming that
the calculation had been made in
accordance with the agreed mechanism;
> 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 that would have
applied had such offer been approved
by shareholders;
> to agree an appropriate bonus payment
for Mike Foster in recognition of
implementing improved financial controls
and reporting and the considerable
workload associated with dealing with
the approaches to the Company in
respect of an offer for the Company.
Such bonus was contingent on
completion of the takeover of the
Company and therefore was not paid;
> to determine the remuneration to
be paid to Keith Edelman during the
period over which he undertook the
role of Executive Chairman following
the resignation of Mark McQuater as
Chief Executive Officer;
> to approve awards under the LTIP
scheme for Mike Foster and other
senior managers;
> determination of the financial terms
of the termination arrangements for
Mark McQuater and Jimmy Del Giudice;
> review of salary arrangements
for certain members of senior
management; and
> to agree the salary and other benefit
arrangements for Rob Pitcher prior to
his appointment as Chief Executive
Officer on 25 June 2018.
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. Keith Edelman acted
as Executive Chairman between
17 October 2017 and 24 June 2018,
during which period the Group was
without a Chief Executive Officer.
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.
The Committee retains independent
remuneration consultants, Mercer,
to advise on aspects of Executive
remuneration. Mercer is a member of the
Remuneration Consultants Group and is
signatory to its code of conduct. Mercer
has no connection with Revolution Bars
Group plc other than in the provision of
advice on Executive remuneration. The
terms of engagement with Mercer are
available from the Company Secretary
on request. The fees payable to Mercer
during the 52 weeks ended 30 June 2018
were £8,400 (2017: £8,924 paid to Aon).
During the year, the Company also used
Macfarlanes LLP to provide advice on
termination arrangements relating to
Mark McQuater and Jimmy Del Giudice
and the appointment of Rob Pitcher.
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
29 June 2019 (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,
Revolution Bars Group plc Annual Report and Accounts 2018
48
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
Implementation of the remuneration policy in the 52 weeks ending 29 June 2019 (unaudited) continued
Long-term incentive awards continued
In the coming period, the Committee plans to award Rob Pitcher options under the PSP and CSOP equivalent to three times salary,
as agreed under the terms of his appointment. The Committee also expects to award options to senior managers who join the Group
and to existing senior managers to replace options that were granted under the 2015 IPO that have lapsed.
Policy on Executive share ownership
The remuneration policy requires Executive Directors to invest in the Company to a level of at least 100 per cent of annual salary
over time, save that under such policy Executive Directors 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 52.
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 30 June 2018 are given below.
Directors’ remuneration for the 52 weeks ended 30 June 2018 (audited)
Executive Directors
Rob Pitcher2
Mike Foster
Mark McQuater3
Chris Chambers4
Sean Curran5
Non-executive Directors
Keith Edelman6
Michael Shallow
Jemima Bird
Aggregate emoluments
2018
2018
2017
2018
2017
2018
2017
2017
2018
2017
2018
2017
2018
2017
2018
2017
Fees/
salary
£’000
7
200
15
368
368
21
218
206
255
90
40
40
30
16
921
953
Taxable
benefits 1
£’000
Pension
£’000
Bonuses
£’000
Long-term
incentives
£’000
Single figure
of total
remuneration
£’000
—
17
1
40
41
1
17
23
—
—
—
—
—
—
58
82
1
—
—
64
64
3
33
31
—
—
—
—
—
—
68
128
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
44
—
—
—
—
—
—
—
—
—
—
44
—
8
217
16
516
473
25
268
260
255
90
40
40
30
16
1,091
1,163
1 Taxable benefits comprise medical insurance policies and car allowances.
2 Rob Pitcher was appointed to the Board on 25 June 2018; his remuneration figures above reflect the period from the date of appointment only.
3 Mark McQuater stepped down from the Board on 17 October 2017. His remuneration for 2018 includes contractual payments due during his notice period
of £334,000 up to the end of the reporting period.
4 Chris Chambers, who stepped down from the Board on 6 May 2017, received a final payment in lieu of notice in the 2018 reporting period.
5 Sean Curran stepped down from the Board on 31 August 2016 but under agreed severance arrangements was paid until 10 May 2017.
6 Keith Edelman assumed the role of Executive Chairman on 17 October 2017, before resuming his role as Non-executive Chairman on 24 June 2018.
Of the figure presented above, £227,000 relates to the period over which he was the Executive Chairman.
Revolution Bars Group plc Annual Report and Accounts 2018
49
Basic annual salary
Executive Directors’ salaries as at 1 July 2018 are as follows:
> Rob Pitcher, Chief Executive Officer, £350,000 per annum.
> Mike Foster, Chief Financial Officer, £200,000 per annum.
Performance-related bonus
For the 52 weeks ended 30 June 2018, 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. The performance-related bonus
did not apply to the Executive Chairman during the period in office.
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 £320,000 would be allocated to be shared by all
participants. Up to an additional £630,000 would be allocated to the pool for performance between threshold target and budget,
with up to a further £100,000 of EBITDA (or PBT) allocated to the pool for performance above budget.
EBITDA performance
Actual adjusted EBITDA performance for the 52 weeks ended 30 June 2018 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 30 June 2018 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
16,188
10,050
Stretch
18,375
11,408
Annual bonus
Performance
outcome
Weighting
Outcome
(% of max bonus)
15,008
7,976
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
Chief Financial Officer
Total bonus: % salary payable
0% of 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 performance during the year and is consistent with the treatment
of other senior managers.
Pension arrangements
The Company contributed to defined contribution schemes or made cash payment equivalents for Executive Directors at the
following percentages of basic salary:
Rob Pitcher
Mark McQuater
Keith Edelman
Mike Foster
15.0 per cent
17.5 per cent
0.0 per cent
0.0 per cent
Revolution Bars Group plc Annual Report and Accounts 2018
50
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
Non-executive Directors’ fees and incentives continued
Performance Share Plan (“PSP”) – awards granted in FY18 (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
Mike Foster
Performance share
0.1
240,000 200% of salary
£240,000
25%
30.06.20
1 Face value was determined based on the share price of 162.4 pence at the date of the grant of the awards.
This award is subject to stretching performance conditions, which are tested over a three-year performance period between 1 July 2017
and 30 June 2020, and will vest in 2020 to the extent these conditions are satisfied.
Part A – EPS targets
The vesting of Part A of the award will be dependent on the Group’s EPS performance over the three-year performance period.
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
Extent of vesting of Part A
25%
Between a minimum of 7% per annum and 13% per annum
Pro-rata between 25% and 100%
At least 13% per annum
100%
Part B – TSR targets
The vesting of Part B of the award will be dependent on the Group’s TSR over the performance period, measured relative to the TSR
of the constituents of a bespoke 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 would mean it were ranked at least median within the comparator
group; thereafter the following vesting schedule will apply:
The Company’s TSR performance versus the TSR of the comparator group
Median
Between median and upper quartile
Upper quartile (or better)
Extent of vesting of Part B
25%
Pro-rata between 25% and 100%
100%
The base point from which TSR is measured for the comparator group is a three-month average prior to the start of the performance
period, and the end point for both the Company share price and the comparator group will be an average over the last three months
of the performance period.
In calculating the annual charges arising from the incentive, expected volatility has been estimated by considering historical average
share price volatility for both the Company and other similar companies. Staff attrition has been assessed based on historical
retention rates.
Revolution Bars Group plc Annual Report and Accounts 2018
51
Outstanding Executive share awards
Executive Director
Scheme
Grant date
Mike Foster
Exercise
price (p)
No. of
shares at
1 July 2017
Granted
during
the year
Number
Vested
during
the year
Number
Lapsed
during
the year
Number
No. of
shares at
30 June 2018
Vesting date
PSP
14.11.17
CSOP
14.11.17
0.1
1.62
— 240,000
—
—
18,518
258,518
—
—
—
—
—
—
240,000 30 Nov 2020
18,518 30 Nov 2020
258,518
Mark McQuater1
PSP – IPO LTIP
tranche 1
PSP – IPO LTIP
tranche 2
PSP – IPO LTIP
tranche 3
19.03.15
19.03.15
19.03.15
0.1
0.1
0.1
700,000
350,000
350,000
CSOP
19.03.15
191
15,706
1,415,706
—
—
—
—
—
29,159
670,841
—
350,000
—
350,000
—
15,706
29,159
1,386,547
—
—
—
—
—
n/a
n/a
n/a
n/a
1 Mark McQuater resigned on 17 October 2017.
Directors’ share-based incentives
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. The initial awards made at IPO do not count for the purposes of this limit and,
following the lapse of such awards made to Mark McQuater on his resignation, no initial awards are held by Directors of the
Company. As at 30 June 2018, 475,000 IPO awards held by other senior managers remain outstanding, equivalent to 24 per cent
of the Ordinary Shares in issue (2017: 91 per cent).
Payments made for loss of office and payments to past Directors (audited)
Mark McQuater resigned from the Board on 17 October 2017. He remains on garden leave until 16 October 2018 during which time he
receives his normal pay and benefits. No bonus payments were made to Mark McQuater during the reporting period but 29,159 options
under the Performance Share Plan became exercisable as part of the contract termination arrangements and were duly exercised
during the reporting period. All other share awards under the long-term incentive plan have lapsed. The number of options that
became exercisable was determined independently by the Committee’s adviser, Mercer, and was pro-rated both for performance
and time served up to the date of resignation.
Revolution Bars Group plc Annual Report and Accounts 2018
52
CORPORATE GOVERNANCE
REMUNERATION REPORT CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
Directors’ interests and shareholding guidelines (audited)
The following table shows Directors’ interests in the Company:
Director
Rob Pitcher
Mike Foster
Keith Edelman
Michael Shallow
Jemima Bird
Beneficially owned
at 30 June 2018
Number
—
—
30,500
12,750
12,750
Outstanding
LTIP awards
Number
—
258,518
—
—
—
Outstanding share
awards under
all employee
share plans
Number
Total interest
in shares
Number
Shareholding as a %
of base salary at
30 June 2018
—
—
—
—
—
—
258,518
30,500
12,750
12,750
0%
0%
n/a
n/a
n/a
Executive Directors with service contracts are expected to hold an investment of at least 100 per cent of base salary in Company
shares. 50 per cent of any awards which vest under the Company’s LTIPs (net of any taxes due) must be retained until the requirement
has been met. The table above shows Directors’ interests in shares and the percentage of the guideline currently met as at 30 June 2018.
The shareholding counting 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 shareholding or its
current market value. 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
(excluding investment trusts). 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 30 June 2018. The graph shows performance of a hypothetical £100 invested at IPO and its performance over that period.
Total shareholder return
Source: FactSet
250
200
150
100
50
0
)
d
e
s
a
b
e
R
(
)
£
(
e
u
a
V
l
Revolution Bars Group plc
FTSE Fledgling (excluding investment trusts)
March 2015
June 2015
July 2016
July 2017
June 2018
This graph shows the value, by 30 June 2018, of £100 invested in Revolution Bars Group plc on 12 March 2015, compared with the
value of £100 invested in the FTSE Fledgling (excluding investment trusts) Index.
The other points plotted are the values at intervening financial year-ends.
Revolution Bars Group plc Annual Report and Accounts 2018
53
The table below details the CEO’s remuneration over the same period as presented in the TSR graph:
Single figure of remuneration (£’000)
Rob Pitcher1
Mark McQuater2
LTIP vesting (% of maximum)
Bonus (% of maximum)
2018
8
516
—
—
2017
—
473
—
—
2016
2015
—
570
—
22%
—
449
—
12%
1 Rob Pitcher was appointed to the Board as CEO on 25 June 2018.
2 Mark McQuater resigned from the Board on 17 October 2017 and remains on garden leave until 16 October 2018.
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. For this purpose, given that
there was no Chief Executive Officer in place for the majority of the year, the percentage change shown reflects the difference in
the packages between the start and end of the reporting period.
CEO %
Employee %
Salary
Taxable benefits
Annual bonus
Relative importance of spend on pay (unaudited)
Staff costs
Distributions to shareholders
(6.7)
(33.6)
—
2017
£m
40.0
2.5
3.2
nil
nil
%
6
—
2018
£m
42.3
2.5
Shareholder voting on the Directors’ Remuneration Report at the 2017 AGM (unaudited)
At the AGM on 30 November 2017, the Directors’ Remuneration Report and Annual Report on Remuneration received the following
votes from shareholders:
Directors’ Remuneration Report
% of votes cast 51.9
Votes for
Votes against
Votes withheld
25,902,544
99.8
52,105
0.2
—
—
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 AGM and was expected to continue to apply until 30 June 2018. Therefore, a vote was not held on the
Directors’ remuneration policy at the 2017 AGM. There are no plans to materially change the policy, but given the expiry of the
three-year period for which approval was originally given, shareholders will be asked to vote on the policy at the 2018 AGM.
Approval
This report was approved by the Remuneration Committee and signed on its behalf by:
Michael Shallow
Chairman of the Remuneration Committee
2 October 2018
Revolution Bars Group plc Annual Report and Accounts 2018
54
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT
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
30 June 2018.
I am, therefore, suitably experienced
to perform the role of Audit Committee
Chairman and have a good understanding
of the sector in which the Group operates.
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. For
the period between 17 October 2017 and
24 June 2018, Keith Edelman served as
Executive Chairman during which period
he continued to be a member of the
Committee and, therefore the Company
was not in compliance with the Code
during this period. Given that the
Committee comprises only three
members and that the majority were
independent Non-executive Directors
during this period and given the issues
under review by the Committee during
this period, I as Committee Chairman was
satisfied that this was in the best interests
of the Company and its shareholders.
I have previously held senior finance
positions in large leisure sector companies
including finance director of Greene King
plc and have been a non-executive director
and audit committee chairman at Britvic plc,
Spice plc (now EnServe Group Limited)
and Domino’s Pizza Group plc.
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 meets at least twice
a year at the appropriate times in the
reporting and audit cycle and also at least
twice per annum ensures that there is
meeting time 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, 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 the external auditor which they
consider to be of significant audit risk.
Following completion of the Group’s audit
for the 52 weeks ended 30 June 2017
and the other associated formalities, the
Committee reflected on the difficulties
that the Group had experienced on its
financial reporting (as reported in last
year’s Committee report) which had given
rise to a significant number of prior year
adjustments. The Committee decided that
a change of auditor was appropriate and
accordingly a tender process was
undertaken by the Committee resulting
in the resignation of KPMG LLP and
appointment of PricewaterhouseCoopers
LLP (“PwC”) as the Group’s external
auditor on 29 January 2018. The
Committee is satisfied that, since the date
of appointment, PwC has undertaken its
responsibilities as the Group’s external
auditor to a high standard and therefore
the Committee will be recommending that
PwC be formally appointed as auditor at
the 2018 annual general meeting (“AGM”).
The PwC audit partner responsible for the
Group is Randal Casson.
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;
> management accounting processes
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 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.
Revolution Bars Group plc Annual Report and Accounts 2018
55
I look forward to meeting with
shareholders at the AGM to answer
any questions on the work of the
Audit Committee.
Assessing effectiveness
of external audit process
Whilst the Committee does not rely
solely on the work of the external auditor,
it regards the breadth and quality of the
work performed by the external auditor
as contributing significantly to several of
the Committee’s objectives, particularly
regarding assurance relating to the
accuracy and reliability of its external
reporting and for reviewing objectively
the Group’s systems and internal controls.
For that reason, planning meetings are
held with the external auditor to review
its proposed work programmes and any
recommendations made by the external
auditor is reviewed in depth as are its
findings from its review of the half-year
and year-end accounts. The Committee
meets to discuss the performance of the
external auditor and to consider priorities
for future work. This review process led
to the decision to change the external
auditor earlier in the year.
In order for the auditor to be fully
effective, it must be independent of the
Company and the Committee intends to
ensure that no other work is performed by
the external auditor so that its independence
is not compromised. 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 comes into effect for the Group
in the financial year ending 30 June 2020.
During the year the value of non-audit
services provided by the external auditor
amounted to 0.15 million (2017: £0.02 million).
The non-audit services relate to work
performed by PwC prior to its appointment
as external auditor. This non-audit
work was referred to in last year’s
Audit Committee Report and related to
an investigation into and a report to the
Committee on the Group’s accounting for
supplier rebates and short-life assets.
This work was substantially completed
prior to the completion of KPMG LLP’s
audit of the results for the 52 weeks
ended 30 June 2017 and subsequently
a related smaller piece of work was
undertaken by PwC to finalise the
investigation. This work was completed
before PwC was invited to participate in
the tender process for the appointment as
the Group’s external auditor and both the
Committee and PwC carefully considered
whether there was any conflict of interest
and were satisfied that there was not.
The Committee does not intend that PwC
will be engaged to perform any other
non-audit services other than to review
the Group’s interim reporting, which it
considers to be both incidental to the
role as auditor and helpful to performing
its role as auditor.
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 appointment of
PwC as external auditor during the year,
there are no plans to undertake a tender
in the foreseeable future.
Role and responsibilities
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;
> 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;
> 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;
> assessing and advising the Board on
the internal financial, operational and
compliance controls; and
> approving the appointment and
recommending the re-appointment
of the external auditor;
> its terms of engagement and fees;
> the scope of its work and reviewing
the results of that work;
> reviewing and monitoring its
independence; and
> reviewing its effectiveness.
Revolution Bars Group plc Annual Report and Accounts 2018
56
CORPORATE GOVERNANCE
AUDIT COMMITTEE REPORT CONTINUED
> 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; and
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.
During the period the Committee met
formally on two occasions with all members
attending. The key activities of the
Committee during the period have been:
> reviewing compliance with and
explaining any exceptions from the
UK Corporate Governance Code.
Internal audit
The Group does not have an internal audit
function and to date has considered 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.
To strengthen and complement this
function a Risk Committee has been
established chaired by the Chief Financial
Officer and comprising certain members
of the Senior Management team. The
purpose of the Committee is:
> to identify, mitigate and prevent risk
as far as possible;
> to protect the financial, physical and
reputational image of the business;
> to fulfil the Company’s legal
obligations; and
> to ensure visibility and transparency
over controls.
> to ensure any critical issues arising
from the audits carried out by the
external consultants are rectified in
a timely function;
> to monitor health and safety issues in
venues including certification compliance,
review of risk assessments, food safety
issues and review of insurance matters;
> to ensure the Company adheres to the
licensing objectives to protect all
premises licences; and
> to advise on changes in relevant
legislation and policies.
The Group also employs four full-time
stock-takers who are checking stocks and
various other generally related compliance
matters such as cash counts on a
risk-assessed basis. Each site’s stock is
counted on average between eight and
ten times per annum. Stock-take results
are reviewed by both operational and
finance staff immediately when 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; poor scores relating
to these matters and brand standards will
reduce their bonus earnings potential.
Meetings and attendance
During the 52 weeks ended 30 June 2018,
the Audit Committee met formally on five
occasions, with all members attending the
meetings. At two of the meetings, the
Audit Committee had access to the external
auditor without management present.
Work performed by the Committee during
the year has included:
> engaging PwC to undertake a review
of the Group’s historical accounting for
supplier rebates and short life assets
and receiving and reviewing PwC’s
interim findings and commissioning
a related smaller piece of work to
satisfy further the Committee’s further
questions in relation to these matters;
> work associated with the
accounting review and application
of accounting policies;
> resignation of KPMG LLP and undertaking
a tender for audit services culminating
in the appointment of PwC as the
Group’s auditor;
> reviewing the independence and
objectivity of PwC as external auditor,
together with its effectiveness,
following its initial audit and
recommending its appointment to
shareholders at the AGM;
> receiving the external auditor’s reports
to the Committee in respect of the
interim audit review;
> reviewing and approving the external
audit plan for the 52 weeks ended
30 June 2018;
> reviewing the market update in
June 2018;
> reviewing the annual report and
accounts for 2018 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 2018, which included internal
verification processes and content
approval procedures;
Revolution Bars Group plc Annual Report and Accounts 2018
57
Significant accounting matters
During the year, the Company received
a “Request for information” from the
Financial Reporting Council, in respect
of certain matters, principally deferred
taxation credits and share-based payment
disclosure, in the Group’s annual report
and accounts to 1 July 2017. As a result of
the subsequent internal review, the Group
has restated its Financial Statements in
respect of a deferred taxation credit. The
full nature of this restatement is reported in
Note 1b to the Financial Statements. The
Group has also improved its share-based
payment disclosures, as reported in Note
19 to the Financial Statements. The FRC
enquiry in respect of these matters was
closed on 26 July 2018.
When reviewing the Company’s 2017
Annual Report and Accounts, the FRC has
made clear to us the limitations of its
review as follows:
> its review is based on the 2017 Annual
Report and Accounts only and does not
benefit from a detailed knowledge of
the Group’s business or an
understanding of the underlying
transactions entered into;
> communications from the FRC provide
no assurance that the Company’s 2017
Annual Report and Accounts are correct
in all material respects and are made on
the basis that the FRC (and its officers,
employees and agents) accepts no
liability for reliance on them by the
Company or any third party, including
but not limited to investors and
shareholders; and
> the FRC’s role is not to verify
information provided but to consider
compliance with reporting requirements.
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.
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 2018:
> 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.
Due to improved controls implemented
during the year and regular monthly
reviews undertaken by senior finance
management, the requirement for
judgements to be applied has been
reduced dramatically. Where relevant,
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. As a
result of its reviews, the Committee has
applied accelerated depreciation rates
on certain leasehold improvements.
> 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
a prior period adjustment in respect
of impairment calculations: The
Committee became aware during the
period that impairment calculations
undertaken previously had not fully
allocated head office costs to sites
and this error of principle resulted
in certain sites becoming impaired.
The Committee was consulted
and reviewed these calculations.
> Exceptional items: exceptional items
on a pre-tax basis of £11.1 million
(2017: £2.3 million) represent a material
item in the profit and loss account. The
charge comprises fees associated with
the resignations of the Chief Executive
Officer and the Chief Operating Officer,
fees associated with the accounting
review, professional fees associated
with the unsolicited approaches to
the Company from Stonegate Pub
Company Limited and the Deltic Group,
which culminated in a formal offer being
put to a shareholder resolution at an
extraordinary general meeting, an
increase in the provision for onerous
leases, and a fixed assets impairment
charge (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 PwC that detailed key audit
findings in relation to the above
accounting matters.
Michael Shallow
Chairman of the Audit Committee
2 October 2018
Revolution Bars Group plc Annual Report and Accounts 2018
58
CORPORATE GOVERNANCE
NOMINATION COMMITTEE REPORT
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
to 30 June 2018.
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.
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
and Jemima Bird, who are independent
Non-executive Directors, and the Chief
Executive Officer (Mark McQuater up
to 17 October 2017 and Rob Pitcher
from 25 June 2018). Accordingly, the
Committee complies with the Code
recommendation. By invitation, the
meetings of the Committee may be
attended by the Chief Financial Officer,
although this did not occur during the
year under review.
Meetings and attendance
During the 52 weeks ended 30 June 2018,
the Nomination Committee met formally on
one occasion 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.
The biographical details of the Directors
are set out on pages 30 and 31. Following
performance evaluations conducted
during the year, the Committee is satisfied
that the Directors who served during the
52 weeks ended 30 June 2018 performed
effectively and demonstrated a commitment
to their roles. Annual performance
reviews will continue going forward.
Diversity
We pride ourselves on being a diverse
and inclusive business. All employees
are welcomed and treated with respect,
regardless of their background. We remain
committed to offering equal opportunities for
colleagues to develop, progress and grow.
The Committee supports the
recommendations outlined in the Hampton-
Alexander Review “FTSE Women Leaders”
and is aware of the need to increase the
number of women on the Board, and in other
senior management positions, 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 and throughout the
senior management team. The Committee
also recognises that diversity encompasses
not only gender but also background,
ethnicity and disability. The Committee
believes that all 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 of the relevant team.
Jemima Bird is the only woman on the
Company’s Board in 2018 and two of the
eight members of the senior management
team are women (25 per cent). Across our
business of over 3,200 employees, female
employees represented approximately 44
per cent of the workforce as at 30 June 2018
(1 July 2017: 42 per cent). The Group is
committed to continuing to develop the
potential of its female employees through
its training programmes and its corporate
development pipeline.
Gender pay gap
In accordance with statutory requirements,
the Group published its gender pay
reporting by the due date. To find out
more and to understand what we are
doing to support gender equality, please
read our report on our corporate website.
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
2 October 2018
Revolution Bars Group plc Annual Report and Accounts 2018
CORPORATE GOVERNANCE
DIRECTORS’ REPORT
59
Introduction
The Directors present their annual
report and the audited consolidated
financial statements of the Company
and Group for the 52 weeks ended
30 June 2018. 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 27
which sets out a review of the business
of the Group during the 52 weeks
ended 30 June 2018 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, 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 28 to 62; and
> related party transactions as set out
in Note 23 to the consolidated
financial statements.
This Directors’ Report together with the
Strategic Report set out on pages 1 to 27
represents the “Management Report”
for the purpose of compliance with the
DTR 4.1.5R.
Results and dividend
The Group’s results for the year are shown
in the statement of comprehensive income
on page 70. The Directors intend, subject
to sufficient distributable reserves being
available, to pay a final dividend in respect
of the 52 weeks ended 30 June 2018 of
3.3 pence per share (2017: 3.3 pence per
share). The Group paid an interim dividend
of 1.65 pence per share during the period
(2017: 1.65 pence per share), taking the total
dividend in relation to the 52 weeks ended
30 June 2018 to 4.95 pence per share
(2017: 4.95 pence per share). Payment
of the dividend is subject to shareholder
approval at the AGM.
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 AGM 2018. As at 30 June 2018,
the issued share capital of the Company
was 50,029,159 Ordinary Shares of
£0.001 each. Details of the share capital
as at 30 June 2018 are shown in Note 18
to the consolidated financial statements.
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 of these can
be found on page 51. As at the financial
period end on 30 June 2018 and up to the
date of this report, no awards have been
granted to the Company’s new Chief
Executive Officer, Rob Pitcher. Awards
of 258,518 shares have been granted
to Mike Foster, Chief Financial Officer.
During the reporting period, 29,159
options were exercised, 2,316,882
awards lapsed and further awards
of 845,247 have been granted.
Revolution Bars Group plc Annual Report and Accounts 2018
60
CORPORATE GOVERNANCE
DIRECTORS’ REPORT CONTINUED
Substantial shareholdings
As at 25 June 2018 and 28 September 2018, 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:
As at 25 June 2018
As at 28 Sept 2018
Name of holder
Artemis Investment Management
Sanford DeLand Asset Management
Legal & General Investment Management
AXA Framlington Investment Managers
Credit Suisse as principal
GLG Partners CfD
River and Mercantile Asset Management
Chelverton Asset Management
Hargreaves Lansdown, stockbrokers (EO)
Deltic Group
Directors
The Directors of the Company and their
biographies are set out on pages 30 and 31.
Their interests in the Ordinary Shares of
the Company are shown in the Directors’
Remuneration Report on page 52.
Mark McQuater stepped down from the
Board on 17 October 2017 and Rob Pitcher
was appointed as an Executive Director
on 25 June 2018. Keith Edelman, who was
a Director throughout the reporting period,
served as Non-executive Chairman
from the beginning of the period until
17 October 2017, after which he served as
Executive Chairman until the date of Rob
Pitcher’s appointment, when he resumed
the role of Non-executive Chairman.
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.
Total holding
of shares
9,432,753
5,185,000
4,588,000
2,979,877
2,455,209
2,455,209
3,172,259
2,100,000
1,690,413
1,500,000
% of total
voting rights
18.85
10.36
9.17
5.96
4.91
4.91
6.34
4.20
3.38
3.00
Total holding
of shares
10,397,163
6,185,000
4,588,000
2,979,877
2,455,209
2,455,209
2,322,259
2,250,000
1,737,980
1,500,000
% of total
voting rights
20.78
12.36
9.17
5.96
4.91
4.91
4.64
4.50
3.47
3.00
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.
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 23 to the
consolidated financial statements. There
were no material transactions with related
parties during the 52 weeks ended
30 June 2018.
Revolution Bars Group plc Annual Report and Accounts 2018
61
Going concern
The Group has a £25 million revolving
credit facility committed to 31 December
2021. The facility provides liquidity to
cover normal monthly and seasonal cash
outflows, 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. The Group
has opened six new sites in each of the
last two financial years and will open a
further five new sites in the first half of the
new financial period. A number of these
new sites have been in large cities
requiring larger than average footprints
and at higher cost. This accelerated rate
of investment together with the one-off
exceptional costs relating to corporate
activity and executive director changes
has seen utilisation of the facility over the
last two financial periods increase from
£0.5 million to £15.5 million with a further
increase to £19.0 million as at the date of
signing the financial statements.
The Group continues to be very cash
generative pre-expansionary capital
expenditure, has ample headroom
on its facility to cover working capital
and seasonal cash flow needs and can
potentially cover a significant reduction
in trading performance relative to recent
levels. The acceleration of capital
investment has coincided with a number
of events that have adversely impacted
trading performance and therefore the
Board has recently agreed with its bank
some revisions to facility covenants that
will provide a greater level of tolerance
over existing test levels. The Directors
have reviewed the Group’s trading
forecast, which demonstrate that the
Group has adequate financial resources
to continue in operational existence for at
least 12 months from the date of approval
of the financial statements and to remain
compliant with the terms of the revolving
credit facility and the financial covenants
(tested quarterly) attached to it. 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
26 November 2018. 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 20
on page 92. The Group’s risk
management policies and procedures and
principal risks and mitigations can be
found on pages 18 and 19.
Independent auditors and
disclosure of information to auditor
The Directors who held office at the
date of approval of this Directors’ report
confirm that, so far as they are each
aware, there is no relevant audit
information of which the Company’s
auditors is unaware, and each Director
has taken all the steps that he ought to
have taken as Director to make himself
aware of any relevant audit information
and to establish that the Company’s
auditors is aware of that information.
PricewaterhouseCoopers LLP (“PwC”) has
expressed its willingness to be appointed as
auditor of the Company. In accordance with
section 489 of the Companies Act 2006,
a resolution for the appointment of PwC
as independent auditor of the Company is
to be proposed at the forthcoming AGM.
By order of the Board
Mike Foster
Company Secretary
2 October 2018
Revolution Bars Group plc Annual Report and Accounts 2018
62
CORPORATE GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL STATEMENTS
> the Group financial statements, which
have been prepared in accordance
with IFRSs as adopted by the European
Union, give a true and fair view of the
assets, liabilities, financial position
and loss of the Group; and
> the Strategic Report includes a fair
review of the development and
performance of the business and the
position of the Group and Company,
together with a description of the
principal risks and uncertainties that
it faces.
Rob Pitcher
Chief Executive Officer
Mike Foster
Chief Financial Officer
2 October 2018
The Directors are responsible for
preparing the annual report and the
Group and Parent Company financial
statements in accordance with applicable
law and regulations.
The Directors are also responsible for
safeguarding the assets of the Group
and Company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
Company law requires the Directors to
prepare financial statements for each
financial 52-week period. Under that law
the Directors have prepared the Group
financial statements in accordance
with International Financial Reporting
Standards (“IFRSs”) as adopted by
the European Union and Company
financial statements in accordance
with International Financial Reporting
Standards (“IFRSs”) as adopted by the
European Union. 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 Company and
of the profit or loss of the Group and
Company for that period. In preparing
the financial statements, the Directors
are required to:
> select suitable accounting policies and
then apply them consistently;
> state whether applicable IFRSs as
adopted by the European Union have
been followed for the Group financial
statements and IFRSs as adopted by
the European Union have been
followed for the Company financial
statements, subject to any material
departures disclosed and explained
in the financial statements;
> make judgements and accounting
estimates that are reasonable and
prudent; and
> prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and
company and enable them to ensure that
the financial statements and the Directors’
Remuneration Report comply with the
Companies Act 2006 and, as regards the
Group financial statements, Article 4 of
the IAS Regulation.
The Directors are responsible for
the maintenance and integrity of the
Company’s website. Legislation in
the United Kingdom governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that 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 and
Company’s position and performance,
business model and strategy.
Each of the Directors, whose names
and functions are listed in Corporate
Governance Report, confirm that,
to the best of their knowledge:
> the Company financial statements, which
have been prepared in accordance with
IFRSs as adopted by the European
Union, give a true and fair view of the
assets, liabilities, financial position and
profit of the Company;
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF REVOLUTION BARS GROUP PLC
63
Report on the audit of the financial statements
Opinion
In our opinion, Revolution Bars Group plc’s Group financial statements and Company financial statements (the “financial statements”):
> give a true and fair view of the state of the Group’s and of the Company’s affairs as at 30 June 2018 and of the Group’s loss and
the Group’s and the Company’s cash flows for the 52 week period (the “period”) then ended;
> have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the Company’s financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
> 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.
We have audited the financial statements, included within the Annual Report and Accounts 2018 (the “Annual Report”), which comprise:
the Consolidated and Company statements of financial position as at 30 June 2018; the Consolidated statement of profit and loss and
other comprehensive income, the Consolidated and Company statements of cash flow, and the Consolidated and Company statements
of changes in equity for the 52 week period then ended; and the notes to the financial statements, which include a description of
the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the Company.
Other than those disclosed in note 4 to the financial statements, we have provided no non-audit services to the Group or the
Company in the period from 2 July 2017 to 30 June 2018.
Our audit approach
Overview
> Overall Group materiality: £376,000, based on 5% of profit before tax and exceptional items.
Materiality
> Overall Company materiality: £298,350, based on 1% of total assets.
> Full scope audit of four trading entities within the Group, which together comprise 100%
of revenue and profit before tax and exceptional items.
Audit
scope
> We carried out a full scope audit in relation to the Company.
> Going concern (Group and parent).
> Recoverability of property, plant and equipment and onerous lease provisioning (Group).
Key audit
matters
> Recognition of supplier rebates (Group).
> Prior year restatements (Group).
Revolution Bars Group plc Annual Report and Accounts 2018
64
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF REVOLUTION BARS GROUP PLC
Our audit approach continued
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates,
and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed
audit procedures at Group and significant component level to respond to the risk, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery or intentional misrepresentations, or through collusion. We focused on laws and regulations that could give rise
to a material misstatement in the Group and Company financial statements, including, but not limited to, the Companies Act 2006,
the Listing Rules, and UK tax legislation. Our tests included, but were not limited to, review of the financial statement disclosures to
underlying supporting documentation and enquiries of management. There are inherent limitations in the audit procedures described
above and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial
statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the risk
of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the
directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, 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. These matters, and any comments we make on the results
of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by
our audit.
Key audit matter
How our audit addressed the key audit matter
Going concern
Refer to note 1 of the Notes to the Consolidated
Financial Information.
The Group and Company financial statements
have been prepared on the going concern basis. The
Directors believe that the Group and Company will have
the cash resources they require to service and settle their
liabilities for the period extending beyond 12 months
from the date of approval of the financial statements.
Whilst the Group has historically generated positive
adjusted EBITDA, and is in a net asset position, the
Group has suffered a decline in trading in recent months.
Furthermore, the Group made a significant loss during
the current year, and has renegotiated its banking
facilities which has included a revision to financial
covenants. The going concern status of the parent
Company is intrinsically linked to the success of
the Group.
Group and parent
Our testing focused on the key judgements and assumptions
as follows:
> We evaluated and assessed the process by which the
Group’s future cash flow forecasts were prepared, including
comparing them to the Board approved budgets, and found
them to be consistent;
> We obtained details of the terms of the Group’s financing
facility and the covenants in place in relation to this facility,
and determined that the Group cash flow forecasts show
compliance with all covenant conditions for at least 12 months
from the date of the approval of financial statements;
> We assessed the reasonableness of the key assumptions
in the going concern model, such as like for like sales, new
bar openings, rent and rates, payroll costs and controllable
venue costs, which included comparing assumptions to
historical results;
> We considered historical forecasting accuracy, and whether the
downside sensitivities applied were appropriately robust; and
> We reviewed results post year end and confirmed that
significant variations from management’s initial expectations
were no more adverse than the sensitivity analysis performed.
Revolution Bars Group plc Annual Report and Accounts 2018
65
Our audit approach continued
Key audit matters continued
Key audit matter
How our audit addressed the key audit matter
Recoverability of property, plant and
equipment and onerous lease provisioning
Refer to page 57 of the Audit Committee Report and note 1
of the Notes to the Consolidated Financial Information.
The property, plant and equipment balance of £60,195k
has been tested for impairment during the year. Testing
has been performed at a cash generating unit level,
which has been assessed as an individual bar.
The impairment tests performed, which are based on a
value in use calculation, identified a prior year impairment
charge required of £7,008k which has been recognised
as at 2 July 2016. In addition, a further impairment
charge, of £860k, was identified and recognised
as an exceptional item during the year.
The Directors have also considered whether an
onerous lease provision is required for any bars, where
the forecast bar contribution is lower than future rental
costs. The assessment has been made using the same
value in use calculation as that used for impairment
testing of property, plant and equipment, and has
resulted in a provision of £6,987k being recognised
as an exceptional item in the current financial year.
We focused on this area as the assessment
of impairment of property, plant and equipment
and onerous lease provisioning requires the use of
estimates in the value in use calculation, including
future forecast cash flows, a discount rate and long
term growth rate, and the classification of items as
exceptional also requires the use of judgement.
Group
Recognition of supplier rebates
Refer to page 57 of the Audit Committee Report and note 1
of the Notes to the Consolidated Financial Information.
The Group receives rebates from certain key suppliers.
The terms of the rebates vary by supplier but largely relate
to listing or marketing fees, or volume based rebates on
purchases made throughout the financial year, with the
value being determined by the level of spend. Amounts
recognised as a reduction from costs in the consolidated
statement of profit and loss and other comprehensive
income, and amounts recognised as a receivable
in the consolidated statement of financial position,
are material to the financial statements.
We focused on this area because the amount
of supplier rebates income in respect of the year is
determined by the terms for each supplier, which are
negotiated separately and, as a result, differ from one
another. This means that the calculation of the rebates
recognised in the Consolidated statement of profit and
loss and other comprehensive income, and as a receivable
at the year end, is inherently more prone to error. We also
focused on the existence and accuracy of the supplier
rebate income and the valuation of year end receivable
due to the risk of potential overstatement given the
manual nature of the process.
Group
To assess the impairment and onerous lease provision assessment
performed by the Directors’, which were both based on the
same value in use model, we performed the following:
> We evaluated and assessed the process by which the
Group’s future cash flow forecasts were prepared, including
comparing them to the Board approved budgets, and found
them to be consistent;
> assessed the reasonableness of the Board approved budget,
including assessing the revenue and costs included in those
budgets based on our understanding of the Group. We found
the assumptions underpinning the budgets to be consistent
with our understanding;
> tested the Directors’ historical budgeting accuracy by evaluating
whether previous budgets had been achieved. Where budgets
had not been achieved we understood the reasons why;
> tested the Directors’ key assumptions for long-term growth rates
outside the budget period, by comparing them to, and finding
them broadly in line with, forecast inflation rates in the UK;
> considered the discount rate by forming our own independent
expectation of what we would consider to be an appropriate
range, and found that the rate used was within that range;
> assessed the split of the impairment charge identified
between the amount recognised as a prior year restatement
(£7,008,000) and the amount recognised during the 52 weeks
ended 30 June 2018 (£860,000), and concurred that the split
was appropriate; and
> considered whether the charge recognised in respect of
onerous leases should be recognised as an exceptional item,
and given the magnitude of the charge concurred that the
presentation was appropriate.
To test supplier rebates, we:
> recalculated, for a sample of suppliers, the rebate income
recognised within the consolidated statement of profit
and loss and other comprehensive income in the year, and
receivable for at the Balance Sheet date, which included
confirming inputs into the calculation, finding them to be
materially consistent with the related agreement;
> compared purchases recorded in the year, and the
contractual rebate arrangements agreed with each supplier,
to the Directors’ calculation of the rebate income, finding
it to not be materially different;
> compared the receivable recognised at the prior year end
to the amounts paid in the 52 weeks ended 30 June 2018
in respect of those receivables, with no material
differences identified;
> tested whether any rebate arrangements had been incorrectly
recognised as income in the year and receivables held at
30 June 2018, and did not identify any material errors; and
> agreed amounts paid by supplier post 30 June 2018 to
source documentation to check they had been accounted
for in the right accounting period, and found no instances
of amounts recorded in the wrong period.
Revolution Bars Group plc Annual Report and Accounts 2018
66
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF REVOLUTION BARS GROUP PLC
Our audit approach continued
Key audit matters continued
Key audit matter
How our audit addressed the key audit matter
Prior year restatements
Refer to page 57 of the Audit Committee Report and note 1
of the Notes to the Consolidated Financial Information.
Prior period errors have been identified in relation to
impairment of property, plant and equipment, onerous
lease provisioning, customer credit and debit card
transactions, deferred tax and exceptional items.
The net impact of the restatement to correct the errors
is a reduction in net assets of £4,475k as at 2 July 2016,
a reduction in net assets of £4,757k as at 1 July 2017 and
a reduction in profit after tax of £282k for the 52 weeks
ended 1 July 2017.
We focused on this area because of the material impact on
the net assets of the Group and judgements are involved
in determining the amount of the identified error.
Group
To test the prior year restatements, we:
> agreed each prior year restatement to supporting
documentation and underlying accounting records, which
supported the value of the error. Each prior year restatement
was considered individually including which accounting
period the restatement relates to;
> assessed the appropriateness of the impairment of PPE
being recognised as a restatement at 2 July 2016 and the
resulting impact on the consolidated statement of profit and
loss and other comprehensive income for the 52 weeks
ended 1 July 2017, as described in the Key Audit Matter
in relation to the recoverability of property, plant and
equipment and onerous lease provisioning, and
concurred with the treatment;
> identified that the interest element of the onerous lease
charge recognised in the Consolidated statement of profit
and loss and other comprehensive income for the 52 weeks
ended 1 July 2017 should be reclassified to interest;
> evaluated whether customer credit and debit card transactions
that had not cleared the bank should be reclassified from cash
to trade and other receivables as at 2 July 2016 and 1 July 2017
and concurred with the Directors that this reclassification
was appropriate;
> assessed whether it was appropriate to restate the tax credit
in the Consolidated statement of profit and loss and other
comprehensive income for the 52 weeks ended 1 July 2017.
On the basis that £1,734k recognised related to a prior period
error, we concurred with the restatement which resulted in
an adjustment to the deferred tax position as at 2 July 2016;
> evaluated the appropriateness of removing the share based
payment charge from exceptional items. On the basis that
this is a recurring item we agreed with this restatement; and
> tested the disclosures in respect of prior year restatement
and concluded they were adequate and in line with the
requirements of IAS 8.
Based on the above, we found the accounting entries to correct
the prior period errors to be materially correct.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry
in which they operate.
The Group consists of nine legal entities, all of which are managed by one central finance team. Four legal entities (Revolution Bars Group plc,
Revolución de Cuba Limited, Revolution Bars Limited and Inventive Service Company Limited) within the Group were determined to be full
scope components. These provided coverage of 100% of revenue, profit before tax and exceptional items of the Group. No component
auditors were involved in the audit.
Revolution Bars Group plc Annual Report and Accounts 2018
67
Our audit approach continued
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Company financial statements
Overall materiality
£376,000.
How we determined it
5% of profit before tax and exceptional
items.
£298,350.
1% of total assets.
Rationale for benchmark applied
Profit before tax and exceptional items
was selected as this provides us with a
consistent year-on-year basis for determining
materiality and, we believe, is a metric used
by Shareholders when assessing
Group performance.
Total assets is considered to be appropriate
as it is not a profit oriented Company. The
Company holds investments in subsidiaries
and therefore total assets is deemed a
generally accepted auditing benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was between £357,000 and £263,200. Certain components were audited
to a local statutory audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £18,000
(Group audit) and £15,000 (Company audit) as well as misstatements below those amounts that, in our view, warranted reporting
for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw
attention to in respect of the Directors’ statement in the financial statements
about whether the Directors considered it appropriate to adopt the going
concern basis of accounting in preparing the financial statements and the
Directors’ identification of any material uncertainties to the Group’s and the
Company’s ability to continue as a going concern over a period of at least
12 months from the date of approval of the financial statements.
We have nothing material to add or to
draw attention to. However, because not all
future events or conditions can be predicted,
this statement is not a guarantee as to the
Group’s and Company’s ability to continue
as a going concern.
We are required to report if the Directors’ statement relating to going concern
in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report,
any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Revolution Bars Group plc Annual Report and Accounts 2018
68
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF REVOLUTION BARS GROUP PLC
Reporting on other information continued
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06),
ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters
as described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and
Directors’ Report for the period ended 30 June 2018 is consistent with the financial statements and has been prepared
in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course
of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group
We have nothing material to add or draw attention to regarding:
> The Directors’ confirmation on page 33 of the annual report 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 or liquidity.
> The disclosures in the annual report that describe those risks and explain how they are being managed or mitigated.
> The directors’ explanation on page 33 of the annual report as to how they have assessed the prospects of the Group,
over what period they have done so and why they consider 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.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust assessment
of the principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially
less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statements;
checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and
considering whether the statements are consistent with the knowledge and understanding of the Group and Company and
their environment obtained in the course of the audit. (Listing Rules)
Other Code provisions
We have nothing to report in respect of our responsibility to report when:
> The statement given by the Directors, on page 62, that they consider the annual report taken as a whole to be fair, balanced
and understandable, and provides the information necessary for the members to assess the Group’s and Company’s position
and performance, business model and strategy is materially inconsistent with our knowledge of the Group and Company
obtained in the course of performing our audit.
> The section of the Annual Report on page 55 describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
> The Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure
from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006. (CA06)
Revolution Bars Group plc Annual Report and Accounts 2018
69
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the annual report and the financial statements,
the Directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for
being satisfied that they give a true and fair view. The Directors are also 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.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the 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
the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
> we have not received all the information and explanations we require for our audit; or
> adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
> certain disclosures of directors’ remuneration specified by law are not made; or
> the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the Directors on 22 January 2018 to audit
the financial statements for the year ended 30 June 2018 and subsequent financial periods. This is therefore our first year
of uninterrupted engagement.
Randal Casson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditor
Manchester
2 October 2018
Revolution Bars Group plc Annual Report and Accounts 2018
70
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE 52 WEEKS ENDED 30 JUNE 2018
Revenue
Cost of sales
Gross profit
Operating expenses:
– operating expenses, excluding exceptional items
– exceptional items
Total operating expenses
Operating (loss)/profit
Finance expense
(Loss)/profit before taxation
Tax credit/(charge)
(Loss)/profit and total comprehensive (expense)/income for the period
(Loss)/earnings per share:
– basic and diluted (pence)
Dividend declared per share (pence)
Non-GAAP measure
Revenue
Operating (loss)/profit
Exceptional items
(Charge)/credit arising from long-term incentive plans
Bar opening costs
Adjusted operating profit
Finance expense
Adjusted profit before tax
Depreciation
Finance expense
Adjusted EBITDA
Note
2
3
3
4
7
8
9
3
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated *
£’000
141,939
(33,751)
108,188
(100,120)
(11,087)
(111,207)
(3,019)
(555)
(3,574)
730
(2,844)
(5.7)
4.95
130,467
(31,075)
99,392
(91,624)
(2,288)
(93,912)
5,480
(290)
5,190
(1,361)
3,829
7.7
4.95
141,939
130,467
(3,019)
11,087
(1,566)
2,029
8,531
(555)
7,976
6,477
555
5,480
2,288
483
1,393
9,644
(290)
9,354
5,422
290
15,008
15,066
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2018
71
Note
30 June
2018
£’000
1 July
2017
Restated *
£’000
2 July
2016
Restated *
£’000
10
11
12
13
14
15
16
17
15
18
60,195
53,353
45,898
3,892
11,474
265
4,025
19,656
79,851
3,320
10,554
—
3,050
16,924
70,277
2,961
9,230
—
1,843
14,034
59,932
(22,891)
(1,065)
—
(20,517)
(21,525)
(302)
(843)
(383)
(1,034)
(23,956)
(21,662)
(22,942)
(15,500)
(690)
(8,912)
(2,433)
(27,535)
(51,491)
28,360
50
11,645
16,665
28,360
(7,500)
(925)
(3,441)
(1,504)
(13,370)
(35,032)
35,245
50
11,645
23,550
35,245
(500)
(448)
(1,697)
(937)
(3,582)
(26,524)
33,408
50
11,645
21,713
33,408
Assets
Non-current assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Tax receivable
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Tax payable
Non-current liabilities
Interest-bearing loans and borrowings
Deferred tax liability
Provisions
Rent-free creditor
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 2 October 2018.
Mike Foster
Director
Registered number: 08838504
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
72
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 30 JUNE 2018
At 3 July 2016 – as reported
Impact of restatements*
At 3 July 2016 – restated*
Total comprehensive income for the period – restated*
Credits arising from long-term incentive plans
Dividends paid
At 1 July 2017 – restated*
Total comprehensive expense for the period
Charges arising from long-term incentive plans
Dividends paid
At 30 June 2018
Share
capital
£’000
50
—
50
—
—
—
50
—
—
—
50
Reserves
Merger
reserve
£’000
11,645
—
11,645
—
—
—
11,645
—
—
—
Retained
earnings
£’000
26,188
(4,475)
21,713
3,829
483
(2,475)
23,550
(2,844)
(1,566)
(2,475)
Total
equity
£’000
37,883
(4,475)
33,408
3,829
483
(2,475)
35,245
(2,844)
(1,566)
(2,475)
11,645
16,665
28,360
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE 52 WEEKS ENDED 30 JUNE 2018
Cash flow from operating activities
(Loss)/profit before tax from operations
Adjustments for:
Net finance expense
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Tax (credit)/charge
(Charges)/credits arising from long-term incentive plans
19
Operating cash flows before movement in working capital
Increase in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Increase 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 generated from financing activities
Net increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
73
52 weeks ended
30 June 2018
£’000
Note
52 weeks ended
1 July 2017
Restated*
£’000
(3,574)
5,190
555
6,477
860
(48)
(1,566)
2,704
(572)
(920)
3,323
6,234
10,769
(565)
10,204
290
5,422
—
—
483
11,385
(359)
(1,324)
(644)
1,663
10,721
(1,075)
9,646
10
(14,276)
(14,276)
(12,779)
(12,779)
(2,475)
(478)
8,000
5,047
975
3,050
4,025
(2,475)
(185)
7,000
4,340
1,207
1,843
3,050
13
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
74
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE 52 WEEKS ENDED 30 JUNE 2018
1. General information
Corporate information
The consolidated financial statements of Revolution Bars Group plc for the 52 weeks ended 30 June 2018 were authorised for issue
by the Board of Directors on 2 October 2018. Revolution Bars Group plc is a public limited company incorporated and domiciled in
the UK under the Companies Act 2006. The Company is limited by shares 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 30 June 2018 (prior period
52 weeks ended 1 July 2017), 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 period ended 30 June 2018 is a
52-week period; the period ended 1 July 2017 was a 52-week period. The consolidated financial statements have been prepared
under the historical cost convention in accordance with those parts of the Companies Act 2006 applicable to companies reporting under
IFRS. References to 2018 relate to the 52-week period ended 30 June 2018 and references to 2017 relate to the 52-week period ended
1 July 2017 unless otherwise stated. The consolidated financial statements are presented in Pounds Sterling with values rounded
to the nearest hundred thousand, except where otherwise indicated. These policies have been applied consistently unless
otherwise stated.
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 period are discussed below.
Going concern
The Group has a £25 million revolving credit facility committed to 31 December 2021. The facility provides liquidity to cover normal
monthly and seasonal cash outflows, 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. The Group has opened six new sites in each of the last two financial years and
will open a further five new sites in the first half of the new financial period. A number of these new sites have been in large cities
requiring larger than average footprints and at higher cost. This accelerated rate of investment together with the one-off exceptional
costs relating to corporate activity and Executive Director changes has seen utilisation of the facility over the last two financial periods
increase from £0.5 million to £15.5 million with a further increase to £19.0 million as at the date of signing the financial statements.
The Group continues to be very cash generative pre-expansionary capital expenditure, has ample headroom on its facility to cover
working capital and seasonal cash flow needs and can potentially cover a significant reduction in trading performance relative to
recent levels. The acceleration of capital investment has coincided with a number of events that have adversely impacted trading
performance and therefore the Board has recently agreed with its bank some revisions to facility covenants that will provide a
greater level of tolerance over existing test levels. The Directors have reviewed the Group’s trading forecast, which demonstrates
that the Group has adequate financial resources to continue in operational existence for at least 12 months from the date of approval
of the financial statements and to remain compliant with the terms of the revolving credit facility and the financial covenants (tested
quarterly) attached to it. For this reason the Directors continue to adopt the going concern basis in preparing the consolidated
financial information.
(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. Receivables also include credit card sales which have not yet
cleared the bank at the reporting date.
Revolution Bars Group plc Annual Report and Accounts 2018
75
1. General information continued
(a) Accounting policies continued
Non-derivative financial instruments continued
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 – Lower of 25 years or the remaining term of the leasehold agreement on a straight
line basis for new bars and lower of 10 years or the remaining term of the leasehold
agreement for refurbishments to existing bars
IT equipment and office furniture
– 3 years to 4 years on a straight line basis
Fixtures and fittings in licensed premises
– 5 years on a straight line basis
Freehold land is not depreciated.
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.
Impairment of tangible fixed assets
At each statement of financial position date, the Group reviews the carrying amounts of its tangible 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 has 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.
Revolution Bars Group plc Annual Report and Accounts 2018
76
1. General information continued
(a) Accounting policies continued
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 consolidated statement of profit and loss and other comprehensive income
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 for 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.
When valuations of leasehold properties (based on future estimated income streams) give rise to a deficit as a result of onerous
lease conditions they are recognised as provisions. These provisions are measured at the present value of the expenditure expected
to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the obligation. The key assumptions used in the discounted cash flow calculations are the discount and inflation
rates and the market rents, vacant periods and future trading income of the properties.
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.
Revenue from discount cards used is recognised as discounts against the revenue when customers redeem the cards.
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 consolidated statement of profit and loss and other comprehensive
income on a straight line basis over the term of the lease. Lease incentives received are recognised in the consolidated statement
of profit and loss and other comprehensive income as an integral part of the total lease expense.
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 consolidated statement of profit and loss and other comprehensive
income on an accruals basis, using the effective interest method.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018 77
1. General information continued
(a) Accounting policies continued
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of profit
and loss and other comprehensive income 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 periods.
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 market-based performance conditions and by use of a Black Scholes model for all others.
Exceptional items
Items that are unusual or infrequent in nature and material in size are disclosed separately in the consolidated statement of profit and
loss and other comprehensive income. 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, contract termination costs and costs associated with
one-off projects. Charges related to share-based payment arrangements are not treated as exceptional items, but are excluded from
adjusted EBITDA calculations.
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 excluded from adjusted EBITDA calculations. 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.
Revolution Bars Group plc Annual Report and Accounts 2018
78
1. General information continued
(b) Prior period restatements
As previously reported, a number of prior period adjustments were reflected in the accounts for the 52 weeks ended 1 July 2017
following a review of the Group’s accounting policies and practices. Those adjustments were fully explained and the resulting
corrections made to prior periods were detailed in those accounts. As a result of circumstances, as detailed below, the following
prior period adjustments have been reflected in these financial statements.
Asset impairments
The Executive Chairman’s Statement accompanying this report references the Board’s decision to change the Group’s auditor and
to undertake a tender process that required prospective auditors to undertake their own review of the Group’s accounting policies
and practices. This identified that the Group’s methodology for identifying and providing for asset impairments should be improved.
Historically, it had not been the Group’s practice to fully allocate head office costs to trading venues as part of its impairment test
calculations. As this methodology had been consistently applied for a number of periods, a prior period adjustment has been made.
This adjustment benefits the earnings of future periods as a result of reducing depreciation charges and does not affect cash flow.
Its effect is to reduce net assets as at 2 July 2016 by £6.2 million and to increase profit after tax for the 52 weeks ended 1 July 2017
by £1.5 million.
Deferred tax
As a result of an internal review following an enquiry from the Financial Reporting Council regarding a material deferred tax credit
reported in the accounts for the period ended 1 July 2017, the Directors have now determined that this item should have been treated
as a prior period adjustment. This item relates to temporary timing differences on fixed assets as at 2 July 2016 that were originally
calculated using a closing tax written down value of £14.1 million whereas the capital allowances summary submitted with the 2016
tax computations subsequently showed a tax written down value of £24.3 million. The income statement credit arising from this
reduction in deferred tax liability has now been recognised in the period ended 2 July 2016. The effect is a decrease of the deferred tax
liability as at 2 July 2016, and a consequential increase to profit after tax of £1.7 million in the period ended 2 July 2016. This deferred
tax credit was originally reported as a credit to profit in the period ended 1 July 2017 and as such the impact of the restatement is to
reduce the profit for the period ended 1 July 2017 by £1.7 million. There is no impact on net assets as at 1 July 2017.
Onerous lease provision
When the movement on the onerous lease provision was reported in the 52 weeks ended 1 July 2017, the interest charge associated
with the movement on the provision was not separately disclosed in the income statement or the cash flow statement. An adjustment
has been made to correct this disclosure with no effect on profit or net assets for the 52 weeks ended 1 July 2017.
Cash and cash equivalents
Customer credit and debit card transactions that have not yet cleared the bank account at period end but relate to sales within the
reporting period have historically been treated as cash and cash equivalents in the statement of financial position and the cash flow
statement. These amounts are now reported as receivables rather than cash and cash equivalents and accordingly an adjustment
of £1.3 million has been made to the relevant balances at 1 July 2017 (2 July 2016: £0.9 million). This change in disclosure has no
effect on profit or net assets for the 52 weeks ended 1 July 2017.
Directors’ remuneration
The disclosure of Directors’ remuneration for the 52 weeks ended 1 July 2017 was found to have been misstated by £0.1 million and
has been corrected in Note 6. There was no effect on profit due to this error.
Summary
The Directors have taken the appropriate steps to ensure that the accounts are drawn up in accordance with the relevant accounting
standards. The disclosures in these accounts describe the nature and impact of the most recent corrections and how these have
been reflected in the accounts for the 52 weeks ended 30 June 2018. Throughout this report, the 2017 comparatives are described as
“Restated” which means they are adjusted for prior period adjustments, compared to those originally reported in the 2016 and 2017
financial statements.
In aggregate, the effect of all of the prior period restatements is to reduce net assets at 2 July 2016 by £4.5 million. The cumulative
effect of the restatements to the 2017 financial statements is to reduce profit after tax for the period ended 1 July 2017 by £0.3 million,
and to reduce net assets as at 1 July 2017 by £4.8 million.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018 79
1. General information continued
(b) Prior year restatements continued
Summary continued
A summary of the combined impact of the prior period adjustments on the consolidated statement of profit and loss and other
comprehensive income and the consolidated statement of cash flow for the 52 weeks ended 1 July 2017 and on the consolidated
statements of financial position as at 1 July 2017 and 2 July 2016 arising from the restatement are as follows:
Consolidated statement of profit and loss and other comprehensive income for the 52 weeks ended 1 July 2017
1 July 2017
As published
£’000
Impairments 1
£’000
Onerous lease
provisions
£’000
Deferred tax
£’000
Share-based
payments
£’000
1 July 2017
Restated
£’000
Operating profit before exceptionals
Exceptional charge
Operating profit after exceptionals
Finance expense
Profit before tax
Tax
Profit after tax
Adjusted EBITDA
8,088
(4,352)
3,736
(185)
3,551
560
4,111
15,066
163
1,476
1,639
—
1,639
(187)
1,452
—
—
105
105
(105)
—
—
—
—
—
—
—
—
(1,734)
(1,734)
—
(483)
483
—
—
—
—
—
1
Impairments include the effect of the restatement on the depreciation charge (£163k) as a result of assets being written down in prior periods.
Consolidated statement of financial position as at 1 July 2017
1 July 2017
As published
£’000
Impairments 1
£’000
Debit and
credit cards
£’000
Deferred tax
£’000
Property, plant and equipment
58,722
(5,369)
Inventories
Trade and other receivables
Cash and cash equivalents
Current assets
Trade and other payables
Tax payable
Current liabilities
Deferred tax liabilities
Interest-bearing loans and borrowings
Provisions
Other liabilities
Non-current liabilities
Net assets
3,320
9,268
4,336
16,924
(20,819)
(843)
(21,662)
(1,537)
(7,500)
(3,441)
(1,504)
(13,982)
40,002
—
—
—
—
—
—
—
612
—
—
—
612
(4,757)
—
—
1,286
(1,286)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,768
(2,288)
5,480
(290)
5,190
(1,361)
3,829
15,066
1 July 2017
Restated
£’000
53,353
3,320
10,554
3,050
16,924
(20,819)
(843)
(21,662)
(925)
(7,500)
(3,441)
(1,504)
(13,370)
35,245
1
Impairments include the effect of the restatement on the depreciation charge (£163k) as a result of assets being written down in prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
80
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
Impairments 1
£’000
Debit and
credit cards
£’000
Deferred tax
£’000
Property, plant and equipment
52,906
(7,008)
Inventories
Trade and other receivables
Cash and cash equivalents
Current assets
Trade and other payables
Tax payable
Current liabilities
Deferred tax liabilities
Interest-bearing loans and borrowings
Provisions
Other liabilities
Non-current liabilities
Net assets
2,961
8,303
2,770
14,034
(21,908)
(1,034)
(22,942)
(2,981)
(500)
(1,697)
(937)
(6,115)
37,883
—
—
—
—
—
—
—
799
—
—
—
799
(6,209)
—
—
927
(927)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,734
—
—
—
1,734
1,734
1
Impairments include the effect of restatement on depreciation charge (£163k) as a result of assets being written down in prior periods.
Consolidated statement of cash flow for the 52 weeks ended 1 July 2017
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at beginning of period
Net cash and cash equivalents at end of period
1 July 2017
As published
£’000
10,005
(12,779)
4,340
1,566
2,770
4,336
Debit and
credit cards
£’000
(359)
—
—
(359)
(927)
(1,286)
2 July 2016
Restated
£’000
45,898
2,961
9,230
1,843
14,034
(21,908)
(1,034)
(22,942)
(448)
(500)
(1,697)
(937)
(3,582)
33,408
1 July 2017
Restated
£’000
9,646
(12,779)
4,340
1,207
1,843
3,050
The impact on diluted and basic EPS for the period ended 1 July 2017 was a reduction of 0.5 pence per share to 7.7 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 period are set out below.
The Directors consider the principal judgements made in the financial statements to be:
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, bar opening costs and share based payments;
> adjusted profit before tax before exceptional, bar opening costs and share based payments;
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018 81
1. General information continued
(c) Critical judgements and key sources of estimation and uncertainty continued
Exceptional items and bar opening costs: adjusted profitability measures continued
> adjusted earnings before interest, tax, depreciation and amortisation before exceptional, bar opening costs (“adjusted EBITDA”)
and share based payments; and
> adjusted basic earnings per share (before exceptional items, bar opening costs and share based payments).
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 consolidated statement of profit and loss and other comprehensive income provides a reconciliation of the adjusted
profitability measures, excluding exceptional and non-underlying items to the equivalent unadjusted IFRS measures.
Exceptional items, bar opening costs and share based payments are further detailed in Note 3 to the financial statements.
Share based payments are detailed in Note 19.
Items that are considered to be exceptional or bar opening costs and that are therefore separately identified in order to aid
comparability, include the following:
> costs incurred in association with merger and acquisition activity, such legal and professional fees such as stamp duty;
> costs incurred in respect of changes to executive management;
> external costs of an accounting review;
> impairment charges in respect of tangible assets as a result of underperformance of sites; 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
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.
Capitalisation of employment costs
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.
The Directors consider the principal judgements made in the financial statements to be:
Provision for onerous leases (Note 15)
> 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 15.
Recoverable amount of property, plant and equipment (Note 10)
> Assets that are subject to depreciation 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.
> 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 10.
> 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.
Revolution Bars Group plc Annual Report and Accounts 2018
82
1. General information continued
(d) New accounting standards
There have been no significant changes to accounting under IFRS which have affected the Group’s results. The following IFRS have
been issued but are not yet effective:
> IFRS 16 “Leases” was issued on 13 January 2016 and is effective for accounting periods beginning on or after 1 January 2019.
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 consolidated statement of profit and loss and other comprehensive income, 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 Group will implement this standard for the 52 weeks ended 27 June 2020. It is anticipated that the transition to IFRS 16 will
have a material impact on the value of lease assets and liabilities recognised in the consolidated balance sheet. The Group is
in the process of assessing the potential impact of this standard on the financial statements. Until the impact assessment is
complete, it is not practical to provide a reasonable estimate of the financial effect of IFRS 16.
> 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 covers three distinct areas: the classification
and measurement of financial assets and liabilities; the impairment of financial assets; and new hedging requirements designed
to give increased flexibility in relation to hedge effectiveness. IFRS 9 requires a new impairment model with impairment provisions
based on expected credit losses rather than incurred credit losses under IAS 39. The Group does not believe the new requirement
consideration of forward looking would have an impact on the Group financial position.
> IFRS 15 “Revenue from Contracts with Customers” is effective after 1 January 2018. It introduces a new revenue recognition model
that recognises revenue either at a point in time or over time. The model features a contract-based five-step analysis of transactions
to determine whether, how much and when revenue is recognised and is based on the principle that revenue is recognised when
control of a good or service transfers to a customer. The Group recognises revenue at the point of sale to the customer, and as
such believes that the new standard will not have a material impact on the Group.
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; and
> amendments to IAS 7 – Disclosure initiative “Changes in liabilities arising from financing activities”.
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’s internal management reporting is focused predominantly on revenue and adjusted EBITDA, as these are the principal
drivers of the Group’s business and its allocation of resources. The CODM receives information on each trading venue and each of
which is considered to be an operating segment. All operating segments have the same characteristics and, in accordance with IFRS 8,
are aggregated to form an “Ongoing business” 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 drink and food with a small amount of admission income.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018 2. Segmental information continued
Revenue
Cost of sales
Gross profit
Operating expenses:
– operating expenses excluding exceptional items
– exceptional items
Total operating expenses
Operating (loss)/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
Total exceptional items
83
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated *
£’000
141,939
(33,751)
108,188
(100,120)
(11,087)
(111,207)
(3,019)
130,467
(31,075)
99,392
(91,624)
(2,288)
(93,912)
5,480
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated *
£’000
14,256
96,951
111,207
1,707
585
948
860
6,987
11,087
12,697
81,215
93,912
—
239
190
—
1,859
2,288
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. Exceptional charges in the period amounted to £11.1 million (2017 Restated*:
£2.3 million) and comprised the following:
Professional fees for aborted merger and acquisition activities comprise legal and corporate advisory fees, and registrar and
virtual data room services provided in respect of the Board recommended offer from Stonegate Pub Company Limited and the
merger proposals from the Deltic Group Limited.
Other exceptional fees relate to work undertaken in connection with accounting reviews and restatements during the period.
The costs associated with termination of Directors’ contracts relate to compensation payments and legal costs associated with the
resignations of the Chief Executive Officer (“CEO”) and Chief Operating Officer and also fees and expenses relating to the recruitment
of the replacement CEO. The comparative figure relates to the contract termination of Chris Chambers, Chief Financial Officer.
As a result of the annual impairment testing of property, plant and equipment, the net book value of assets at four of the Group’s bars
was written down either partially or in full.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
84
3. Operating expenses continued
Following a more robust analysis of the performance of the Group’s bars, seven leases were identified as requiring an onerous lease
provision based on projected trading contributions and rental commitments. The adjustment will reduce rental charges in future periods;
it has no impact on the Group’s cash flows. In the comparative period, an onerous lease provision in respect of two properties was
substantially reinstated following the discontinuation of negotiations relating to the potential sub-let of these properties.
Bar opening costs
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
£’000
2,029
1,393
Bar opening costs relate to costs incurred in getting new sites fully operational and primarily include costs incurred before the opening
date preparing for the launch. The most substantial part of the costs is for rent and rates incurred between the start of the lease and
opening. In the 52 weeks ended 30 June 2018, six new bars were opened. Costs incurred in the period also include those bars
opening in the first half of Financial Year 2019.
4. Group operating (loss)/profit
Group operating (loss)/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
– forensic audit
– interim review
– audit-related services
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated *
£’000
6,477
860
10,975
482
150
35
—
120
30
—
5,422
—
10,053
504
85
20
1
—
20
23
The forensic audit charges relate to work performed by PwC prior to its appointment as external auditor. This non-audit work was
referred to in last year’s Audit Committee Report and related to an investigation into the Group’s accounting for supplier rebates
and short-life assets. This work was completed before PwC was invited to participate in the tender process for the appointment
as the Group’s auditor and only after it had confirmed that this work had not created a conflict of interest.
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
52 weeks ended
30 June 2018
Number
52 weeks ended
1 July 2017
Number
89
2,934
3,023
82
2,661
2,743
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
£’000
40,722
2,863
(1,566)
303
36,608
2,622
483
296
42,322
40,009
In the 52 weeks ended 30 June 2018, £0.6 million (2017: £0.5 million) of wages and salary costs were capitalised as property, plant
and equipment in the consolidated statement of financial position.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018
6. Directors’ remuneration
Aggregate emoluments
Pension contributions to money purchase schemes1
Emoluments in respect of the highest paid Director
85
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated 2
£’000
1,023
68
1,091
1,191
131
1,322
Aggregate emoluments including pension contributions to money purchase schemes
516
473
1
Includes salary enhancements made in lieu of pension contributions due to pension caps.
2 Aggregate emoluments were found to be misstated in the 52 weeks ended 1 July 2017.
Two Directors (2017: two) were enrolled in the defined contribution pension scheme in the period.
Additionally, £259k of long term incentive share options were awarded to a director in the period.
7. Finance expenses
Interest payable on bank loans and overdrafts
Interest on onerous lease provisions
Interest payable
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 (loss)/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
(Loss)/profit before taxation
(Loss)/profit at standard rate of UK corporation tax (2018: 19%; 2017: 19.75%)
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
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated *
£’000
478
77
555
185
105
290
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated *
£’000
—
(495)
(235)
—
(730)
(3,574)
(679)
563
(812)
198
(730)
884
—
285
192
1,361
5,190
1,025
591
(132)
(123)
1,361
At 30 July 2018, the Group has carried forward tax losses of £3.6 million which are available to offset against future losses, upon
which no deferred tax has been booked. There are no unprovided temporary differences or unused tax credits.
The UK rate of corporation tax, currently 19 per cent, will reduce to 17 per cent on 1 April 2020 under provisions contained in the
Finance Act 2016. The Group has recognised deferred tax in relation to UK companies at either 19 per cent or 17 per cent depending
on the period in which the deferred tax asset or liability is expected to reverse.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
86
9. (Loss)/earnings per share
The calculation of (loss)/earnings per Ordinary Share is based on the results for the period, as set out below.
(Loss)/profit for the period (£’000)
Weighted average number of shares – basic and diluted (‘000)
Basic and diluted (loss)/earnings per Ordinary Share (pence)
52 weeks ended
30 June 2018
52 weeks ended
1 July 2017
Restated *
(2,844)
50,029
(5.7)
3,829
50,000
7.7
Loss 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
(Loss)/profit on ordinary activities before taxation
Exceptional items, share-based payments and bar opening costs
Adjusted profit on ordinary activities before taxation
Taxation on ordinary activities
Taxation on exceptional items and bar opening costs
Adjusted profit of ordinary activities after taxation
Basic and diluted number of shares (‘000)
Adjusted basic and diluted EPS (pence per share)
10. Property, plant and equipment
Group
Cost
At 2 July 2016
Additions
At 1 July 2017
Additions
At 30 June 2018
Depreciation
At 2 July 2016 – restated*
Provided in the period – restated*
Impairment charges – restated*
At 1 July 2017 – restated*
Provided in the period
Impairment charges
At 30 June 2018
Net book value
At 30 June 2018
At 1 July 2017 – restated*
At 2 July 2016 – restated*
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
Restated *
£’000
(3,574)
11,550
7,976
730
(2,200)
6,506
50,029
13.0
5,190
4,164
9,354
(1,361)
(699)
7,294
50,000
14.6
Total
£’000
106,459
12,877
119,336
14,179
133,515
(60,561)
(5,422)
—
(65,983)
(6,477)
(860)
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
(1,216)
—
—
55,392
9,381
64,773
9,946
74,719
(21,044)
(2,259)
—
(1,216)
(23,303)
—
—
(3,479)
(676)
43,326
2,925
46,251
3,511
49,762
(33,490)
(2,513)
—
(36,003)
(2,292)
(184)
6,315
571
6,886
722
7,608
(4,811)
(650)
—
(5,461)
(706)
—
(1,216)
(27,458)
(38,479)
(6,167)
(73,320)
210
210
210
47,261
41,470
34,348
11,283
10,248
9,836
1,441
1,425
1,504
60,195
53,353
45,898
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018
87
10. Property, plant and equipment continued
Depreciation and impairment of property, plant and equipment are recognised in operating expenses in the consolidated statement
of profit and loss and other comprehensive income.
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 CGUs are predominantly based on value in use, which is calculated from the cash flows expected to be generated
to the end of the lease term discounted at the Group’s weighted average cost of capital.
In the 52 weeks ended 30 June 2018, the Group impaired the assets of four 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 an impairment loss
is recognised, the asset’s adjusted carrying value is depreciated over its remaining useful economic life.
Following the restatements to the 2 July 2016 statement of financial position described in Note 1(b) to the financial statements,
in the 52 weeks ended 1 July 2017 no CGUs were impaired.
At the end of each reporting period, a filter test, based on annual run rate of EBITDA, is used to identify whether any asset is
potentially impaired. The test compares a multiple of run rate EBITDA, adjusted for central overheads, to the carrying value of the
asset. This multiple is based on the shorter of the remaining lease term or eight years.
If the filter test indicates a potential impairment, a more detailed value in use review is performed. These value in use calculations use
cash flows based on Board-approved forecasts covering a three-year period. These forecasts combine management’s understanding
of historical performance and knowledge of local market environments and competitive conditions to give realistic views for future
performance. Cash flows beyond this three-year period are extrapolated using a long-term growth rate to the end of the lease term.
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 (2017: 2.0 per cent).
> Pre-tax discount rate: 11.7 per cent (2017: 11.7 per cent).
The long-term growth rate has been determined with reference to forecast ten-year bond yields from the Bank of England, 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 £0.25 million.
11. 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.
12. Trade and other receivables
Amounts falling due within one year
Trade and other receivables
Accrued rebate income
Prepayments
30 June 2018
£’000
3,892
1 July 2017
£’000
3,320
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
£’000
33,751
31,075
30 June 2018
£’000
1 July 2017
Restated *
£’000
2,610
630
8,234
11,474
1,755
895
7,904
10,554
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
88
12. Trade and other receivables continued
The ageing of trade receivables at the balance sheet date was:
Not past due
Past due 0–30 days
Past due 31–60 days
More than 60 days
30 June 2018
£’000
1,977
113
468
52
2,610
1 July 2017
£’000
1,373
174
33
175
1,755
The Directors are not aware of any factors affecting the recoverability of outstanding balances as at 30 June 2018.
All receivables are GBP denominated. The Group does not have a provision for bad and doubtful debts (2017: £nil).
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. £7.6 million comprises prepayments relating to property rent and rates (2017: £6.9 million).
As referred to in Note 1(b) to the financial statements, uncleared credit and debit card takings have previously been reported in
cash and cash equivalents but are now reported in receivables and accordingly the comparative has been restated.
13. Cash and cash equivalents
Cash and cash equivalents
30 June 2018
£’000
4,025
1 July 2017
Restated *
£’000
3,050
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.
As referred to in Note 1(b) to the financial statements, uncleared credit and debit card takings have previously been reported in cash
and cash equivalents but are now reported in receivables and accordingly the comparative has been restated.
14. Trade and other payables
Trade payables
Other payables
Accruals
Other taxes and social security costs
30 June 2018
£’000
13,636
68
6,254
2,933
22,891
1 July 2017
Restated *
£’000
10,935
58
5,794
3,730
20,517
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.
15. Onerous lease provision
Opening balance
Provisions used in period
Provisions made in period
Interest charged in period
Current
Non-current
30 June 2018
£’000
3,743
(830)
6,987
77
9,977
1,065
8,912
9,977
1 July 2017
£’000
2,080
(301)
1,859
105
3,743
302
3,441
3,743
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018
89
15. Onerous lease provision continued
The onerous lease provision is expected to be payable over the remaining lease terms.
The calculation is most sensitive to changes in the assumptions used to forecast trading cash flows, and a risk-free discount rate
of 1.3%. Management considers that it is reasonably possible that the risk-free discount rate could change by +/-0.5 per cent which
would result in a change in the corresponding liability of -/+£140,000. Similarly, a 0.1 per cent reduction in the long-term growth rate
assumption would increase the provision recorded by £0.1 million.
16. Interest-bearing loans and borrowings
Revolving credit facility
30 June 2018
£’000
15,500
1 July 2017
£’000
7,500
In June 2017, 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 and an unlimited guarantee.
The facility is secured over the assets of Revolution Bars Group plc, Revolucion de Cuba Limited, Revolution Bars Limited and
Inventive Service Company Limited.
The amount drawn at 30 June 2018 was £15.5 million (2017: £7.5 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 20.
17. 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 2 July 2016 – restated*
Charge to income – restated*
At 1 July 2017 – restated*
(Charge)/credit to income
At 30 June 2018
Deferred tax assets
Deferred tax liabilities
Total
18. Share capital
Allotted, called up and fully paid
50,029,159 £0.001 Ordinary Shares (2017: 50,000,000 £0.001 Ordinary Shares)
Share-based
payments
£’000
Accelerated capital
allowances
£’000
202
(25)
177
(158)
19
(650)
(452)
(1,102)
393
(709)
30 June 2018
£’000
19
(709)
(690)
Total
£’000
(448)
(477)
(925)
235
(690)
1 July 2017
Restated *
£’000
177
(1,102)
(925)
30 June 2018
£’000
1 July 2017
£’000
50
50
50
50
19. Share-based payments (equity settled)
The Group currently operates an employee share incentive scheme, namely The Revolution Bars Group Share Plan. Awards under
the scheme comprise:
> a nominal cost option (“NCO”) granted to acquire Ordinary Shares in the Company at an option price of 0.1 pence per share; and
> a linked, tax-favoured Company share option plan (“CSOP”) granted under Part II of The Revolution Bars Group Share Plan to
acquire a number of Ordinary Shares in the Company. The option price is set as the market value at the time of the award.
The two options are linked and the NCO can only be exercised if the related approved option is exercised (or waived). When the
awards are exercised, the CSOP options will be exercised first (where a gain is available). Following this the number of shares
received by an employee through the exercise of the NCO will be reduced by such number of shares as have a value equal to the
gain on the CSOP shares.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
90
19. Share-based payments (equity settled) continued
The Group’s Plan is an equity-settled share option scheme approved by HMRC. It was established in 2015. Awards are subject
to performance conditions and require holders to remain employed through the vesting period.
The total credit for the period relating to employee share-based payment plans was £1.6 million (2017: expense £0.5 million), all
of which related to equity-settled share-based payment transactions. The credit during the period principally related to the reversal
of prior year charges related to awards granted to senior management who left during the financial period.
The table below summarises the amounts recognised in the consolidated statement of profit and loss and other comprehensive
income during the period:
IPO LTIP award
– Tranche 1
– Tranche 2
– Tranche 3
2016 LTIP award
– Tranche 1
– Tranche 2
– Tranche 3
2017 LTIP award
2018 LTIP award
In the 52 weeks ended 30 June 2018, conditional awards of Ordinary Shares were granted as follows:
14 November 2017
12 April 2018
Total
52 weeks
ended 30 June
2018
£’000
52 weeks
ended
1 July 2017
£’000
(849)
(411)
(267)
(1,527)
(1)
—
—
(1)
(80)
42
265
41
67
373
34
9
7
50
60
—
(1,566)
483
Nominal cost
option (“NCO”)
Company share
option plan (“CSOP”)
548,472
370,000
918,472
164,604
20,689
185,293
Awards under the CSOP are linked to the grant of NCO awards and any value received from the CSOP award reduces the value
receivable from the NCO award.
The following table illustrates the number and weighted average exercise price ("WAEP") of, and movements in, share options
granted under the schemes:
NCO
CSOP
Total
2018
Number of
shares
2018
WAEP
p
2017
Number of
shares
2017
WAEP
p
2018
Number of
shares
2018
WAEP
p
2017
Number of
shares
2017
WAEP
p
2018
Number of
shares
2018
WAEP
p
2017
Number of
shares
Outstanding at the
beginning of the year
2,661,413
0.1 3,158,913
Lapsed during the year
(2,200,633)
0.1 (1,190,000)
0.1
0.1
247,767
1.92
286,406
(116,249)
1.92
(56,139)
1.92
1.91
2,909,180
0.26 3,445,319
(2,316,882)
0.19 (1,246,139)
Exercised
(29,159)
0.1
—
—
(29,159)
0.10
—
2017
WAEP
p
0.25
0.18
Outstanding at the end
of the year
1,350,093
0.1 2,661,413
0.1
316,811
1.76
247,767
1.92
1,666,904
0.42 2,909,180
0.26
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 86).
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018 91
19. Share-based payments (equity settled) continued
The performance conditions are tested over the performance periods as set out below:
> the IPO LTIP award tranche 1 has been 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 potentially vested in 2018. 37,920 of these awards vested during the period on the termination of contracts
of the Chief Executive Officer and another Senior Executive. No other awards from tranche 1 have vested and accordingly 274,571
options outstanding as at 30 June 2018 will lapse during the reporting period to 29 June 2019; 201,765 options under tranches 2
and 3 remain outstanding at 30 June 2018 and are tested over the periods from 1 July 2016 to 30 June 2019 and from 1 July 2017 to
30 June 2020 respectively and will vest in equal volumes on the date of announcement of results for the reporting periods ended
June 2019 and June 2020. At 30 June 2018, 403,530 of these awards remained outstanding;
> the 2016 LTIP award will be tested in three tranches over three year periods from 1 July 2015 to 30 June 2018 (50 per cent), 1 July 2016
to 30 June 2019 (25 per cent) and 1 July 2017 to 30 June 2020 (25 per cent) and, to the extent that performance conditions have
been satisfied, will vest on the later of the announcement of results for each of these reporting periods or the date of the third
anniversary of the grant of the award. At 30 June 2018, 108,242 of these awards remained outstanding;
> the 2017 LTIP award will be tested over the period from 1 July 2016 to 30 June 2019 and, to the extent that performance conditions
have been satisfied, will vest on 19 November 2019, being the third anniversary of the date of the grant of the awards. At 30 June
2018, 110,000 of these awards remained outstanding; and
> the 2018 LTIP award will be tested over the period from 1 July 2017 to 30 June 2020 and, to the extent that performance conditions
have been satisfied, will vest on either 14 November 2020 or 12 April 2021, being the third anniversary of the date of the grant of
the awards. At 30 June 2018, 1,045,132 of these awards remained outstanding.
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
Extent of vesting of Part A
25%
Between a minimum of 7% per annum and 13% per annum
Pro-rata between 25% and 100%
At least 13% per annum
100%
For the IPO LTIP award, EPS performance will be tested using a pro-forma EPS figure for the period ended 27 June 2015 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
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) has been used as the base point from which TSR is measured for the Company.
For subsequent awards, the offer price is to be based on a three-month average prior to the start of the performance period. For all
awards, the end point offer price is to be based on the average for 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 2018
92
19. Share-based payments (equity settled) continued
Part B – TSR targets continued
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
periods ended 30 June 2018 and 1 July 2017:
2018 4
award
2017 3
award
2016 LTIP2
IPO LTIP1
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
NCO: fair value at
grant date – EPS
CSOP: fair value at
grant date – EPS
NCO: fair value at
grant date – TSR
CSOP: fair value at
grant date – TSR
NCO: exercise price (p)
CSOP: exercise price (p)
Share price (p)
140
48
87
42
0.1
162
153
187
42
113
40
0.1
179
183
188
30
112
27
0.1
194
194
193
33
159
31
0.1
194
194
182
40
130
35
0.1
194
194
188
41
108
38
0.1
200
200
Expected volatility (%)
57.67
31.00
30.61
30.61
19.59
28.91
193
182
50
113
43
0.1
200
200
28.9
57
119
48
0.1
200
200
20.81
Expected life of options
(years)
Weighted average
remaining life
Expected dividend yield (%)
Risk-free rate (%)
1 Granted on 18 March 2015.
2 Granted on 2 November 2015.
3 Granted on 9 November 2016.
3
2
3.24
0.95
5.29
4.29
4.29
4.29
3.29
3.29
3.29
3
2.63
1.05
2
2.64
0.86
2.36
2.64
1.15
2
2.64
0.30
1
2.64
0.65
1.36
2.64
1.00
1
2.64
0.23
4 Granted on 14 November 2017 and 12 April 2018.
20. 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.
The Group limits its exposure to credit risk from trade receivables by establishing a maximum payment period of three months
for corporate customers.
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. Trade and other
receivables do not contain any impaired assets.
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 30 June 2018.
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018 93
20. Financial instruments continued
Credit risk continued
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.
The Group’s financial assets are as follows:
Trade and other receivables
Cash and cash equivalents
The ageing of trade receivables at the balance sheet date was:
Not past due
Past due 0–30 days
Past due 31–60 days
More than 60 days
30 June 2018
£’000
2,610
4,025
6,635
30 June 2018
£’000
1,977
113
468
52
2,610
1 July 2017
Restated *
£’000
1,755
3,050
4,805
1 July 2017
£’000
1,373
174
33
175
1,755
The Directors are not aware of any factors affecting the recoverability of outstanding balances as at 30 June 2018.
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 approach to managing liquidity is to ensure, as far as possible, that it will have sufficient
liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses
or risk damage to the Group’s reputation.
The Group aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash outflows on financial
liabilities over the next 90 days. The Group also monitors the level of expected cash inflows on trade and other trade receivables
with expected cash outflows on trade and other payables.
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 £15.5 million was drawn at 30 June 2018.
The Group’s financial liabilities are as follows:
Trade payables
Other payables
Revolving credit facility
The maturity analysis of the financial liabilities is as follows:
As at 30 June 2018
Trade and other payables
Revolving credit facility
As at 1 July 2017
Trade and other payables
Revolving credit facility
30 June 2018
£’000
13,636
68
15,500
29,204
>5 years
£’000
—
—
>5 years
£’000
—
—
1 July 2017
£’000
10,935
58
7,500
18,493
Total
£’000
13,704
15,500
Total
£’000
10,993
7,500
<1 year
£’000
13,704
1–5 years
£’000
—
—
15,500
<1 year
£’000
10,993
—
1–5 years
£’000
—
7,500
These liabilities are short term in nature. The liabilities are on an undiscounted basis and not considered materially different.
*
Restated – see Note 1(b) of the consolidated financial statements for an explanation and analysis of the prior period adjustments made in respect of the profit for the 52 weeks ended 1 July 2017
and in respect of other prior periods.
Revolution Bars Group plc Annual Report and Accounts 2018
94
20. Financial instruments continued
Market risk
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 30 June 2018, the Group’s interest-bearing financial assets consisted solely of cash and cash equivalents (see Note 13). The Group
has interest-bearing financial liabilities as at 30 June 2018, comprising a revolving credit facility of £15.5 million (2017: £7.5 million).
The Group does not enter into derivatives or hedging transactions.
The main risk arising from the Group’s financial instruments is interest rate risk. The Group does not have any exposure to foreign
currency risk as all the Group’s revenue and costs are in Pound Sterling.
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 Group’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 Group ensures that it has sufficient cash on demand to meet its expected operational expenses, including the servicing
of any financial obligations. This excludes the potential impact of extreme circumstances which cannot be reasonably predicted.
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. When monitoring capital
risk, the Group considers its gearing ratio.
21. 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 lease payments due:
– in less than one year
– in two to five years
– in over five years
Other assets
Within one year
In two to five years
30 June 2018
£’000
1 July 2017
£’000
10,877
46,586
133,421
9,487
37,948
97,145
190,884
144,580
214
127
341
234
212
446
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 £1.3 million (2017: £1.2 million).
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION CONTINUEDFOR THE 52 WEEKS ENDED 30 JUNE 2018
95
21. Operating leases continued
The total lease payments recognised in the consolidated statement of profit and loss and other comprehensive income in the 52 weeks
ended 30 June 2018 were £11.1 million (52 weeks ended 1 July 2017: £10.6 million). The consolidated statement of profit and loss and
other comprehensive income includes the charge for rent-free periods for both reporting periods. During the year the Group received
£0.1 million (2017: £0.1 million) rental income under a sub-lease.
There were no capital commitments at 30 June 2018 (1 July 2017: £nil).
22. Dividends
Amounts recognised as distributions to equity holders in the period:
Final dividend for the 52 weeks ended 1 July 2017 of 3.30p (2016: 3.30p)
Interim dividend for the 52 weeks ended 30 June 2018 of 1.65p (2017: 1.65p)
Proposed final dividend for the 52 weeks ended 30 June 2018 of 3.30p (2017: 3.30p) per share
30 June 2018
£’000
1 July 2017
£’000
1,650
825
2,475
1,650
1,650
825
2,475
1,650
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting (“AGM”) on 26 November 2018
and has not yet been included as a liability in these financial statements.
23. Related party transactions
(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
30 June 2018
£’000
52 weeks ended
1 July 2017
£’000
1,990
609
81
2,680
1,760
423
159
2,342
1
Includes salary enhancements made in lieu of pension contributions due to pension caps.
The key management of the Company is considered to be the Directors of the Company and Senior Management as detailed on
pages 30 to 33, details of their compensation are provided in the Remuneration Report. The Company did not enter into any form
of loan arrangement with any Director during any of the periods presented.
Following the prior year restatements referred to in Note 1 (b) to the financial statements, the dividends paid by Inventive Service
Company Limited to Inventive GuaranteeCo. Limited (both subsidiaries of the Group) in both the year ended 28 June 2015 and
30 June 2016 became unlawful due to insufficient reserves in Inventive Services Company Limited to fund the distribution. In the
current financial year Inventive Service Company Limited had sufficient distributable reserves to declare a dividend. The Board will
consider the matter as part of the next AGM of these Companies.
24. Subsequent events
On 28 September 2018 the Group’s revolving credit facility was reviewed in light of the trading results in the second half of the
financial year and in the post-year-end period. The facility was reconfirmed at £25 million and for the period to December 2021.
The financial covenants associated with the facility were revised to reflect recent trading results. An additional fee of £62,500 was
incurred in relation to this, which will be charged to the profit and loss account over the period from October 2018 to December 2021.
There were no other changes to the terms of the facility, including interest margin.
Revolution Bars Group plc Annual Report and Accounts 2018
96
FINANCIAL STATEMENTS
COMPANY STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2018
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
Note
30 June 2018
£’000
1 July 2017
£’000
5
6
7
29,650
29,650
185
29,835
29,835
50
11,645
18,140
29,835
1,751
31,401
31,401
50
11,645
19,706
31,401
The Company made a profit after tax of £2.5 million in the 52 weeks ended 30 June 2018 (2017: £2.5 million) relating entirely to the
dividends received from a subsidiary of the Company in the period.
Signed on behalf of the Board on 2 October 2018.
Mike Foster
Director
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEKS ENDED 30 JUNE 2018
At 3 July 2016
Total comprehensive income for the period
Credit arising from long-term incentive plans
Dividend paid
At 1 July 2017
Total comprehensive income for the period
Charge arising from long-term incentive plans
Dividend paid
At 30 June 2018
Share capital
£’000
50
—
—
—
50
—
—
—
50
Reserves
Merger
reserve
£’000
11,645
—
—
—
11,645
—
—
—
11,645
Retained
earnings
£’000
19,223
2,475
483
(2,475)
19,706
2,475
(1,566)
(2,475)
18,140
97
Total
equity
£’000
30,918
2,475
483
(2,475)
31,401
2,475
(1,566)
(2,475)
29,835
Revolution Bars Group plc Annual Report and Accounts 2018
98
FINANCIAL STATEMENTS
COMPANY STATEMENT OF CASH FLOW
FOR THE 52 WEEKS ENDED 30 JUNE 2018
Cash flow from operating activities
Profit before tax
Adjustments for:
Dividends paid
Decrease/(increase) in trade and other receivables
(Credit)/charge 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
52 weeks ended
30 June 2018
£’000
52 weeks ended
1 July 2017
£’000
2,475
2,475
(2,475)
1,566
(1,566)
—
2,475
2,475
(2,475)
(2,475)
—
—
—
(2,475)
(483)
483
—
2,475
2,475
(2,475)
(2,475)
—
—
—
Revolution Bars Group plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL INFORMATION
FOR THE 52 WEEKS ENDED 30 JUNE 2018
99
1. 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 30 June 2018 (prior period
52 weeks ended 1 July 2017) 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 (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 market-based performance conditions and by use of a Black Scholes model for all others.
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.
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 AGM.
Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the consolidated statement of profit
and loss and other comprehensive income 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 periods.
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.
Revolution Bars Group plc Annual Report and Accounts 2018
100
FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL INFORMATION CONTINUED
FOR THE 52 WEEKS ENDED 30 JUNE 2018
2. 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 period was £2,475,000 (2017: £2,475,000).
3. Auditor’s remuneration
Auditor’s remuneration in respect of the Company audit was £500 (2017: £500).
4. 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 38 to 58. 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 other than issues of share-based payments as described in Note 1 to the Company financial
statements.
5. 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
30 June 2018
£’000
29,650
—
1 July 2017
£’000
29,650
—
29,650
29,650
As at 30 June 2018 and 1 July 2017, the Company owned 100 per cent of the Ordinary Share capital of the following UK companies:
Status
Company name
Country of incorporation
Class of shares
Holding
Inventive GuaranteeCo 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 2
100%
100%
100%
100%
100%
100%
100%
Trading 3
Trading 3
Trading 3
Dormant 3
Dormant 3
Dormant 3
Dormant 3
1 The registered address of each company is 21 Old Street, Ashton-under-Lyne, Tameside OL6 6LA.
2 Direct holding.
3 Indirect holding.
6. Trade and other receivables
Amounts owed from subsidiary undertakings
Amounts owed from subsidiary undertakings are unsecured, interest free and repayable on demand.
7. Share capital
Allotted, called up and fully paid
50,029,159 £0.001 Ordinary Shares (2017: 50,000,000 £0.001 Ordinary Shares)
30 June 2018
£’000
1 July 2017
£’000
185
185
1,751
1,751
30 June 2018
£’000
1 July 2017
£’000
50
50
50
50
Revolution Bars Group plc Annual Report and Accounts 2018
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
Link Asset Services
71 Victoria Street
London
SW1H 0XA
Financial PR
Instinctif Partners
65 Gresham St
London
EC2V 7NQ
Independent auditor
PricewaterhouseCoopers LLP
1 Hardman Square
Spinningfields
Manchester
M3 3EB
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
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WWW.REVOLUTIONBARSGROUP.COM
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Revolution Bars Group plc
21 Old Street
Ashton-under-Lyne
Tameside
OL6 6LA