Directors’ Deals: Revolution chief takes a shot

Revolution Bars shares are down by 11 per cent year-to-date following a profit warning in January and the release of weak half-year results this month.

The bar chain declared a £100,000 loss for the 26 weeks to December 31, down from a £4mn profit for the same period in 2021. Like-for-like sales were 10 per cent lower than pre-pandemic levels. Management pointed to transport strikes, struggling consumer confidence, cost inflation, and unusually hot weather — the company’s eponymous main brand doesn’t have a lot of outside space — as drivers of the downturn.

Net debt (including lease liabilities) of £143mn at the period end was uncomfortably high following the acquisition of Peach Pubs in October. Cash fell from £19mn in 2021 to just £5mn. Management said it had £7mn of headroom on its facilities.

Peach Pubs posted a 10 per cent increase in like-for-like sales against pre-pandemic levels. New brands Founders & Co and Playhouse are “performing well”, according to the board. And the company enjoyed “record breaking” LFL pre-booked festive party sales.

Just over half of the company’s estate of around 90 venues is now focused on young adults.

The 21 new Peach Pubs, which are focused on a more affluent customer base, are theoretically less prone to cost of living pressures. This should offer some revenue diversification.

It seems chief executive Rob Pitcher sees a brighter future for the shares, despite the headwinds buffeting the business. He bought £48,000-worth on March 15 at an average price of 7p each. The shares traded at about 200p in 2017.

Peel Hunt argued that “there is the potential for a big profit recovery as the inflation rate slows and consumer confidence rebuilds”. But the house broker forecasts that the company will be lossmaking until at least 2025.

Alfa chair cashes in

People don’t like to pay for purchases up front as much as they once did. Whether it is cars, phones or kitchen appliances, there is often a demand to spread the price of purchase over weeks or years. This is a trend that has been profitable for asset finance software company Alfa Financial.

Alfa sells software to equipment manufacturers and banks that deals with many of the complications of managing loans. Last year, revenue rose 12 per cent to £93.3mn and pre-tax profit grew by 21 per cent to £28.9mn.

Once a customer is set up on Alfa’s software the incentive is to stay with the company. Alfa is also good at turning these rising sales into cash and returning it to the shareholders. Last year, it spent £22.5mn on dividends and £5.6mn on share buybacks.

Despite dividend yield of around 6 per cent, executive chair Andrew Page wants a little more cash right now. The company in which he has a 93 per cent stake decided to sell 16mn shares through a secondary bookbuild, raising gross proceeds of £22mn. Around 15mn of these shares were owned by Page, netting him £20.25mn. A smaller portion were owned by chief executive Andrew Denton. The selling entity, CHP Software and Consulting, said it wouldn’t dispose of any more shares for at least 90 days.

Alfa says 75 per cent of its revenue is recurring, but only 29 per cent comes from subscriptions. The rest is from software and service revenue from existing customers.

The rollout of its new Alfa Systems 5.7 upgrade has meant existing customers are paying more service fees for installation. There is, therefore, a risk this “recurring” service element won’t prove as resilient if customers tighten costs through the year. Broker Peel Hunt expects Alfa’s profits to slip slightly in 2023 before returning to growth in subsequent years.