Revolution Bars has launched a company voluntary arrangement that could see it close six of its 50 bars.
The bar owner’s parent group, AIM-listed Revolution Bars Group, said the move will allow its Revolution Bars Ltd subsidiary to “recover quickly, return to cash generation and be appropriately structured” in the wake of the Covid-19 pandemic, and should boost cash flows by £2m annually
The groupwhich operates the Revolution and Revolucion de Cuba brands, said cutting its estate will reduce its rental cost base, improving its profitability and long-term return on capital.
Since a UK lockdown was first introduced in March, the company has cut management salaries, used government support schemes and secured fresh debt and equity funding lines.
It has also negotiated rent deferrals with landlords, and said two-thirds of its landlords had agreed to “a sharing of the rental burden”, including lease extensions or the removal of break options in exchange for rent relief.
The group said, while comparable venue sales have remained ‘buoyant’, they have reduced to 49.4 per cent in the last five weeks due to the 10pm curfew and local lockdowns.
Revolution first announced it was considering cutting its estate last month, as the long-term impact of the latest Covid-19 restriction meant it “must consider all necessary options” to ensure the business is viable.
A review of the RBL portfolio found 13 sites that were either “significantly underperforming” due to location and local conditions, “significantly overrented”, not expected to generate future profitable returns, or a combination of the three factors.
The group said “The board now anticipates that the important Christmas trading period will be severely compromised and any return to near normal levels will not be possible before next spring at the very earliest,”
“When trading conditions return to more normalised levels it will be crucial for the group to be able to recover quickly, return to cash generation and be appropriately structured for the long-term. Accordingly, the board believes that it is in the best interests of all stakeholder groups for it to now propose a restructuring of certain of the group’s property interests through a CVA of one of its subsidiary entities.”
The group said RBL expects to obtain considerably improved rental terms on a further seven bars and, where better rental terms are being sought, landlords will have the option to terminate the lease at various junctures over the next two years.