Our stock of the week is tied with “Freedom Day”, the last pillar of England’s coronavirus restrictions, which finally lifted on July 19 after a month’s delay. Our Twitter followers have chosen Revolution Bars Group (RBG), which runs 64 bars across the UK, some under the Revolución de Cuba brand, which offers Latin-themed music and entertainment.
The bar, restaurant and club sectors have been among the hardest hit by the UK’s multiple lockdowns and the Government has just announced that anyone going to a nightclub in England from September will have to show evidence of having both Covid-19 jabs. Different rules in England, Wales, Scotland and Northern Ireland have made bar owners’ lives more difficult, as well as having to operate at half capacity for social distancing reasons. Many UK bar staff also joined the furlough scheme, which is ending in September. “There may be queues now forming outside popular venues, but despite a bounce back in customer demand, job uncertainty still remains relatively high in pubs and bars,” says Susannah Streeter, senior investment analyst at Hargreaves Lansdown.
The Office for National Statistics recently released a downbeat report on the future of the UK pub industry titled “Economies of Ale”, covering the period between October 2020 and May 2021. Just 23% of pubs surveyed said they were highly confident their business would survive the next three months. And 59% of companies in the industry said they wouldn’t make staff redundant in the next quarter, compared with 81% for businesses in other industries.
Share Price Crash and Recovery
Shares in Revolution Group were at around 76p before the pandemic and fell more than to 14p in March 2020 during the wider stock market sell-off. Shares rallied when the company entered into a “company voluntary arrangement” (CVA) in the autumn of 2020, a scheme that allows a firm to continue trading after reaching an agreement with its creditors. CVAs are an alternative to going into administration or liquidation.
Revolution's share price has recovered in fits and starts as lockdown lifting measures have been announced (and delayed), hitting nearly 40p when indoor venues re-opened in mid-May. The company also raised £15 million from investors in a share placing in spring this year and has transferred to trading on the Alternative Investment Market (Aim).
The latest trading update from the company at the start of this month was upbeat, with predictions for strong trading in the summer. “Following 16 months of government-imposed restrictions on our business, our customers are very keen to take advantage of our full guest experience,” said chief executive Rob Pitcher. But he acknowledged that the risk of a winter lockdown remains a threat. “We remain cautious about the coming financial year as the continuing impact of Covid-19 remains unclear and we call upon the Government to adhere to the revised Roadmap to allow clarity for all consumer facing businesses,” he added.
The company is expecting to make a loss of £12.5 million for the full year ending July 3, 2021 when it announces results at the end of the year.
Revolution Bars makes up more than 2% of the River and Mercantile UK Micro Cap investment trust (RMMC), which has a 5-star rating from Morningstar. The trust has risen 123% in share price terms over the year, as smaller companies have been in the vanguard of the UK stock market recovery.
