Join the Revolution

Revolution has an impressive track record as a private company. Since 2004, the estate has grown by 59 per cent and average sales have climbed 60 per cent. Last year, cash profits grew by more than a fifth and are tracking 15 per cent ahead in the first half of the 2015 financial year. Most of the group's estate is leasehold, which lowers opening costs, and the balance sheet is free of debt. Meanwhile, rent represent just 8 per cent of total turnover.

Given this healthy operational base, analysts reckon the group's cash flows should be sufficient to fund the addition of three new sites a year to its 59-strong estate. But chief executive Mark McQuater says from next year, this could ramp up to five. Initially, it's more likely the group will add to its Revolución de Cuba rum-bar brand, which is said to be generating cash returns of 54 per cent on average, but ultimately Mr McQuater says the group wants "an even blend" of brands in London and the regions. The business plans to be especially picky about London openings, scoping out sites in "affluent areas" where people "go out more than once a week" while steering clear of the high rents of the West End. The focus is also likely to be on opening bigger sites where returns tend to be greater.

Over the years, the group concentrated on attracting the 'premium' going-out market. This means focusing on food, cocktails, wines and spirits instead of relying on beer and wet-led sales. Mr McQuater says roughly 60 per cent of the group's customers are female, with a large spend per head. "It's because we're not beer-orientated", he says - and cocktails cost a staggering £9.50 on average. The group also makes good use of its website, which steers its 1m-strong customer database to make large party reservations. Last year, pre-booked revenue grew by 30 per cent. And Revolution's bars offer a "full night experience", according to Mr McQuater, allowing customers to eat, drink and party all under the same roof.

The group won't report an inaugural set of half-year results until September, but broker Numis appears to be using some cautious assumptions for its estimates (see table). Assuming like-for-like sales growth slows from 3.7 per cent to 2.5 per cent, gross-margin growth stalls and there's just one large opening a year, Numis still predicts a compound annual pre-tax profit growth rate of over 13 per cent for the next three years.