7:59 cut – RBG, QUIZ, BKS

Revolution Bars (RBG) – H1 Update

The company today issues a trading update including the Christmas / New Year period. While the headlines are bombastic, the most relevant figure is that like-for-like sales for the second half are +1.2% despite significant spending on refurbishments. Not only is this likely to be barely sufficient to cover increases in staffing costs from the ever-increasing minimum wage, but it also underlines just how necessary ongoing capex is, and the irrelevance of EBITDA figures from an equity holder’s perspective.

Especially in a period where their competitors have reported improved figures I continue to see no evidence of improving fundamentals in the business.

They go on to announce that they are not only taking an immediate cash hit of (edit: circa £3.5m) to buy themselves out of five leases, but also a taking a massive IFRS16 liability hit by extending lease terms of a further four venues to 25 years. While I like to think that I’ll personally still be going to nightclubs in 25 years time, an outside observer might well call this wishful thinking, and looking at the habits of the younger generation I’m not sure who’s going to replace me.

Image result for zombie

I suspect (although further analysis would be required to confirm) that they have no immediate cash issue, but that instead they will be forced to progressively cut back capex necrotising themselves into zombie company operating tired venues until collapse in 4-5 years time.

Quiz (QUIZ) – Trading Update

They start front and centre by describing themselves as an “omni-channel” fashion brand, as if a bricks-and-mortar retailer branching out into online sales indicates some kind of inspired business genius. The reality in today’s clothing market is that you’re either on-line only, multichannel, or Primark.

Watchers will have observed that strong brands have done well over Christmas and weak ones have done badly and there’s not getting away from the fact Quiz fall into the latter category. Not only is revenue down 9.3% over Christmas, but own-website online sales are up a measly 5.9% from a base so low they are effectively a new startup. Much larger and more mature online operations like Next (not to mention Boohoo) are growing much faster.

With third party web sales down 14.8% and concessions down 7.0% it is a wonder how the overall figure isn’t worse. Until, that is, you read the footnote the explains that the former is excluded and implies an additional unquantified deficit from (presumably high margin) international franchise sales.

On the positive side they have burnt less than £2m cash, maintained margins and have found themselves with slightly fewer unsold Christmas party dresses than last year.

They end the main section with a mild profits warning (“broadly inline”).

Their cash pile gives them another year to reinvent themselves, but there is no evidence of success so far.

Beeks (BKS) – Datacentre Expansion

While this should serve as yet another reminder that Beek’s business is relatively capital intensive, the fact that datacentre capacity has increased by 45% in 9 months should be taken positively.

One of the fears that investors (should) have is of over- or inappropriate investment ahead of events (cf. IQE, Accrol), but the fact that new locations continue to be “backed by initial client deployments” should be of considerable comfort. And while Beeks and Cenkos did not make the best team of results forecasters, I do believe CEO Gordon McArthur has demonstrated a conservative approach to operating the business and making investments.

All investors will be hoping for more realistic forecasting under new broker Canaccord and larger ones may welcome an opportunity to increase their investments soon.


I would have covered Games Workshop and Boku yesterday, but I spent much of the early morning trying to work out was going on with the latter until all was made horribly clear by the brokers note. Mark and I will however be covering GAW and BOKU in today’s @SmallCapsLive.

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