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Revolution Bars' shares plunge after rising costs warning

Shares in cocktail bar owner Revolution Bars plunged by over 30% on Friday after the company issued a warning on spiralling costs.

The Ashton-under-Lyne-based firm, which owns over 60 Revolution and Revolucion de Cuba high street bars, said it was facing "well-publicised sector cost headwinds" that have also hit its rivals, including the impact of the living wage, the new apprenticeship levy, as well as an above-inflation increase in business rates.

"These increased costs will be more than anticipated in the current year," chief executive Mark McQuater acknowledged.

Shares were down 36% to 130p in morning trading.

Sales performance "remained positive" in the second half of the year, the company said, with like-for-like sales continuing to grow by 1.7% for the year to date.

But rising costs, coupled with the slower-than-expected profitability at its newly opened bars, are taking a toll on the business.

Revolution opened five new Cuban-themed bars in the last 12 months, and while their underlying sales performance is on track with expectations, "these bars are taking longer to mature to full profitability than originally expected".

As a result, earnings growth is expected to be flat year-on-year, Mr McQuater said.

However, he said the directors remained "confident" in the underlying strength of the business, and that there is no change to the plan to open six new bars in the next financial year.

He also flagged that the company had been spending cash on a "major refurbishment" at its bars in Blackpool and Cardiff, in an attempt to lure more customers to visit.

"All these sites will make a full profit contribution in our next financial year," he continued.

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