RBG - Revolution Bars Group

[Golden Geezer]

This is a UK operator of bars, listed on the LSE, which dropped by 40% on Friday following a profit warning.

 

This seems excessive when they simply announced that they would not be growing in 2017 ("adjusted EBITDA...expected to be broadly at the same level as last year"), due to a lack of control over costs as they focused on the roll-out of new sites.This was likely due, in my mind, to the recent change in CFO, who apparently left for valid family reasons.

 

Two broker notes on Friday forecasted a reduction of earnings of 12% and 22% respectively for the year as a result.

 

It's a debt free roll out, cash generative, dividend paying and trading at a low EBITDA multiple (adj. EBITDA was GBP15.6m last year). At a current market cap of only GBP60m - 70m and net cash flow from operating activities of GBP14m last year, it could be an attractive take-over candidate. The group was previously PE owned.

[Ballinvarosig Investors]

This is a UK operator of bars, listed on the LSE, which dropped by 40% on Friday following a profit warning.

 

This seems excessive when they simply announced that they would not be growing in 2017 ("adjusted EBITDA...expected to be broadly at the same level as last year"), due to a lack of control over costs as they focused on the roll-out of new sites.This was likely due, in my mind, to the recent change in CFO, who apparently left for valid family reasons.

 

Two broker notes on Friday forecasted a reduction of earnings of 12% and 22% respectively for the year as a result.

 

It's a debt free roll out, cash generative, dividend paying and trading at a low EBITDA multiple (adj. EBITDA was GBP15.6m last year). At a current market cap of only GBP60m - 70m and net cash flow from operating activities of GBP14m last year, it could be an attractive take-over candidate. The group was previously PE owned.

I have followed this company and I think in hindsight there was something more to the CFO resignation than the "personal reasons" excuse that was given.

 

In the last annual report, the auditors had something to say about the company's treatment of depreciation, this was when the old CFO was in place.

 

Our findings: We found the judgements made by the Directors

in their identification of bars at risk of impairment to be balanced.

For those bars identified as being at risk, we found the Group’s

cash flow forecasts to be balanced and the discount rate used

to be cautious compared with market data. Overall, we found

the resulting estimates of the recoverable amount of property,

plant and equipment to be mildly optimistic. We found the

Group’s disclosures to be proportionate in their description of the

assumptions and estimates made by the Group and the sensitivity

of the recoverable amount of property, plant and equipment

to changes in those assumptions and estimates.

 

In other words, the company was scrimping on the depreciation charges that they were taking on their assets. I think this is why the CFO resigned and suspect that from here on in, the company is going to be taking a higher (more realistic) depreciation charge, and that this is going to impact profitability going forward. This combined with the cost pressures of wage increases and softening demand in the British pub market will also hit profits and is why the share price is down 40% as opposed to 10-20%.

[Spekulatius]

CFO 's leaving are a huge red flag, much more so than CEO'S leaving. They tend to be the best informed rats, that leave a sinking ship first. Numbers, numbers...

[DooDiligence]

What's the R in EBITDAR (page 5 of the 12/2016 Interim Results FY2017) & the cover calls it the Dec 2016 Interim Results.

[winjitsu]

What's the R in EBITDAR (page 5 of the 12/2016 Interim Results FY2017) & the cover calls it the Dec 2016 Interim Results.

 

Rent

[Cigarbutt]

Not sure if your question is specific to this stock or in general.

Just in case, the R is for Rent paid to third parties.

May be helpful for comparison purposes.

Often used by retailers to report and as part of covenants with the banks.

I have seen it used too for Restructuring. Often applied by parties who tend to restructure often...

[Golden Geezer]

The group has received the (conditional) offer I was hoping for when I first posted about this opportunity:

https://www.investegate.co.uk/revolution-bars--rbg-/rns/statement-re-possible-offer/201707311622556392M/

 

The conditional offer price of 200p seems cheap to me, and the share price remains around 175p. I am holding onto my shares for the time being, in the hope of a higher offer.