Final Results

RNS Number : 1978Y

City Pub Group PLC (The)

11 May 2021

 

The City Pub Group PLC

(the "City Pub Group", the "Company" or the "Group")

FINAL RESULTS FOR THE YEAR ENDED 27 DECEMBER 2020

The City Pub Group is pleased to announce its audited results for the 52 weeks ended 27 December 2020. The Group currently operates a predominately freehold estate of 45 wet-led pubs and a further four development sites in London, Southern England and Wales.

Enhancements made during lockdown

· Significant investment in our pubs to optimise them for outdoor trading and take advantage of the strong pent-up demand and expected boom in staycations

· Streamlining of operations across the estate to improve the customer experience and enhance margins

· Improved City Club app which now has over 100,000 active members

· Board strengthened by the appointment of Toby Smith as COO and Emma Fox as independent NED

· Acquisition of a 49% stake in the iconic Kensington Park Hotel and increased shareholding in Mosaic Pub and Dining Group to 24%

Results impacted by lengthy closure periods

· Revenue of £25.8 million (FY19: £60.0 million)

· Adjusted EBITDA* of £(0.8) million (FY19: £9.1 million)

· Adjusted profit / (loss) before tax** of £(5.1) million (FY19: £5.3 million)

* Pre-IFRS16 Adjusted earnings before exceptional items, share option charge, interest, taxation, depreciation and amortisation.
** Pre-IFRS16 Adjusted profit / (loss) before tax is the profit / (loss) before tax, share option charge and exceptional items.

Outlook

· Encouraging trading since outdoor reopening, with the 24 pubs currently open and trading at 77% of 2019 levels, demonstrating the high levels of pent-up demand

· On track to open 45 sites on 17 May with significant number of bookings taken

· Strong liquidity and asset backed balance sheet, putting the Group in an excellent position to grow the estate once conditions normalise

· Platform in place to expand the estate to over 100 sites

Clive Watson, Executive Chairman of The City Pub Group, said:

"The business has been significantly improved over the past year placing us in an excellent position to take advantage of the pent-up demand as the country reopens.

The early signs since we have been allowed to trade outdoors have been very heartening and it has been great to bring back our immensely talented staff and to see our customers enjoying our pubs once again.

We are a streamlined, well-invested business with a first-rate customer offer. Our pub estate is unique in terms of quality and, with the step change in the business, we have an ideal platform to grow successfully in the future.

11 May 2021

Enquiries:

City Pub Group   Clive Watson, Executive Chairman Tarquin Williams, CFO	Today: via Instinctif
Instinctif Partners    Matthew Smallwood Jack Devoy	[phone]
Liberum (Nomad & Broker )    Chris Clarke Edward Thomas	[phone]

For further information on City Pub Group pubs visit www.citypubcompany.com

Chairman's Statement

Since my last statement in September 2020, the business has continued to face significant challenges caused by COVID-19. Our pub estate was effectively closed for trade from November 2020 until mid-April 2021 because of the second and third Government-imposed national lockdowns. I believe your Directors have dealt with this extraordinary and unique situation in a very professional and commercial fashion.

During the course of the lockdown, much management time was spent focussing on minimising cost, systems improvement, optimising marketing activities, building the now very popular City Club app and, critically, preparing the trading estate for reopening. Equally as important has been the work to maintain good levels of staff morale, some of whom have found the pandemic difficult from a well-being perspective.

Trading Estate

The Group currently operates 45 trading sites and a further 4 development sites.

Despite the pandemic, we have not stood still: we have undertaken extensive refurbishment at The Hoste Burnham Market on the ground floor trading areas and refurbished a further ten bedrooms. Additionally, we are in the process of securing planning permission for extra outside seating space. The £300k capital spent has significantly upgraded The Hoste, one of our premier trading pubs, particularly as we approach a summer of staycations. We also carried out works at Inn on the Beach (Hayling Island), Brighton Beach Club and Georgian Townhouse (Norwich) expanding and improving the outside trading areas. Across the estate, we have now added more than 600 outside covers allowing for outside trading under Government restrictions in the short term, and moreover for the long-term as we look to take advantage the forecast trend of increased domestic holidays. The Group also benefits from 191 bedrooms. The make-up of our estate, combined with the work undertaken during the lockdown periods places us in a very strong position to capitalise on opportunities as restrictions ease.

As regards our development sites, we intend to start work on the Turks Head in Exeter imminently, with a view to opening the site in early Autumn. We are committed to commence works on the Tivoli in Cambridge, The Nest in Bath and our new hotel/restaurant/pub in Mumbles, Swansea, and these projects will start during the course of the summer.

The Group's estate of predominately freehold high-quality managed pubs is virtually unique in the pub sector. Our managed pubs have high levels of weekly sales, many pubs have great outside trading areas and the number of rooms across the estate has increased significantly over the last few years. On a normalised trading basis, the directors' valuation of the Group's portfolio is approximately £150m.

Acquisitions

As we emerge from the pandemic, there will be opportunities that arise and we are assessing investment opportunities on a very selective basis. We recently announced that we have acquired a 49% stake in an EIS-backed business, Barts Pub Ltd, which owns the iconic Kensington Park Hotel (KPH), based in Ladbroke Grove. The Group will run this pub under a management contract initially and has also secured an option to acquire the freehold of KPH to ensure that this asset comes into our ownership soon. KPH benefits from ground and first floor bars, as well as 7 boutique hotel rooms, and further opportunities to develop unutilised space on the top floor into 4 further bedrooms. KPH typifies the type of acquisition the Group is looking for - a high quality property in densely populated, affluent, residential area.

Last year the Group invested in £1.2m in Mosaic Pub and Dining Tranche 1 of companies resulting in the Group taking a 14% equity stake in a fundraising which was priced at 40p per share. In March 2021, the Group increased its stake to 24% stake at a price of 60p per share. The pub portfolio is high quality, with 7 of the 9 pubs being freehold and the majority having outside trading areas close to prime residential neighbourhoods. The City Pub Group and Mosaic Pub and Dining negotiate major trading deals for liquor products together and the Group's equity stake in Mosaic will strengthen this relationship going forward.

Disposals

The Group has identified four leases we intend to hand back or dispose of in an outright manner, but currently has no intention to make further disposals, apart from ancillary areas in certain pubs which can be sold for alternative use, primarily residential accommodation, a continuation of our stated strategy. In December 2020, the Group disposed of some cottages near to The Hoste in Burnham Market, for proceeds of £820k. Once COVID-19 is behind us, we will look for further disposal opportunities of this type.

Financial Highlights

Summary for the 52 weeks ended 27 December 2020:

• Revenue down 57% to £25.8 million (2019: £60.0 million)

• Adjusted EBITDA* of £(0.8) million (2019: £9.1 million)

• Adjusted profit/(loss) before tax** of £(5.1) million (2019: £5.3 million)

• Reported profit/(loss) of £(6.5) million (2019: £1.3 million)

Key Metrics
	Post IFRS 16	Pre IFRS 16
	52 weeks to	52 weeks to	52 weeks to	Change
	27.12.20	27.12.20	29.12.19	Pre IFRS 16
	£m	£m	£m	%
Revenue	25.8	25.8	60.0	-57%
Adjusted EBITDA	1.2	(0.8)	9.1	N/A
Adjusted Profit/(loss) before tax	(5.4)	(5.1)	5.3	N/A

* Pre-IFRS16 Adjusted earnings before exceptional items, share option charge, interest, taxation, depreciation and amortisation.
** Pre-IFRS16 Adjusted profit / (loss) before tax is the profit / (loss) before tax, share option charge and exceptional items .

Included within these results is an impairment charge of £933k for some of our leasehold properties. These valuations are distorted by the impact of COVID-19, however as the Group starts trading again, it will focus on generating high levels of turnover per pub, on higher operating margins due to the streamlining and operational progress made and, on new investments, higher return on capital. It is worth noting that except for those assets which have been subject to the impairment review, values are recorded at historic cost and in many cases the current pub market value significantly exceeds this.

Bank Facilities

In March 2021, the Group agreed to a £5m, 3-year, CLBILS loan in addition to its existing £35m RCF with Barclays, of which £25m is currently drawn. Barclays have agreed to waive the RCF's existing financial covenants through to June 2022. They have been replaced with the Minimum Liquidity Test in the sum of £8m plus an additional Minimum EBITDA Test to be tested on a monthly basis, after which date the financial covenant tests as currently documented will recommence.

The Group has a strong liquidity position with £15m of unutilised facilities as a result of the equity fundraising in March 2020 and tight cash control. This is sufficient liquidity not only to ride out the COVID-19 storm but also to begin to explore selective acquisitions. The Board would like to put on record its thanks to Barclays plc for all its assistance, particularly since the outbreak of COVID-19, in helping the Group to strengthen its financial position and be well placed to emerge strongly from the crisis.

Retail and Operational Improvements

In the last 12 months, the Group has implemented the following improvements:

1)  streamlined supply chain to improve operating margins;

2)  reduced complexity of menus resulting in lower labour costs in the kitchen;

3)  improved the City Club app (over 100,000 active members) where customers can now book, order and pay via the app, helping to reduce FOH labour costs;

4)  conducted numerous renegotiations on key central contracts, reducing variable costs across the pub estate and at head office;

5)  utility costs have been more effectively managed and behavioural changes made to reduce carbon emissions and costs;

6)  marketing and bookings have been centralised to improved pre-booked business; and

7)  Head office / Regional posts have been made redundant to speed up decision making and reduce costs.

These changes have helped to significantly reduce our cost base and have also lessened the complexity in the operation of our pubs. The Group wants to quickly return to being a dynamic, entrepreneurial, operation-focused business where it can improve the optimisation of existing capacity, as well as increase capacity by new acquisitions.

COVID-19 gave the Group a one-off opportunity to reset the way the business was operated and re-calibrate our ambitions to ensure that we are poised to deliver further growth and build upon what we have achieved since our IPO in November 2017.

Strengthening the Board

At the beginning of 2020, the Board agreed to strengthen the Group's senior management team and to dispense with its dual City Pub Company East & City Pub Company West operating structure. In November 2020, we appointed Toby Smith to the board in a new role as Chief Operating Officer. Toby has extensive experience in the pub market having held senior positions at Stonegate Pub Company and Novus Leisure. Toby has already implemented changes to improve the operational management of the business and I am confident that his experience and style of management will successfully reopen our estate, but also help accelerate the growth of the Group.

We also strengthened the independence and diversity of the Board by appointing Emma Fox in March 2021. Emma is Chief Executive Officer of Berry Bros. & Rudd Ltd, and has extensive knowledge of the pub industry, having previously been a Non-Executive Director of Punch Taverns. Emma will not only help strengthen the Board from a Corporate Governance perspective, but she will also bring her knowledge in marketing and technology to the Group as it commits more resources to these increasingly important areas.

ESG

As we emerge from the pandemic, the Environmental, Social and Governance (ESG) agenda has become increasingly important for all businesses. In response, we have established an ESG committee, which will be chaired by Emma Fox our recently appointed NED. We have launched a significant and thorough review to ensure that we emerge as a more responsible business, primed to play a positive role in the industry's recovery. We are taking our responsibilities seriously and want to get it right as we understand that those that succeed in this area will have competitive advantage.

Dividends

The Board has decided to utilise short-term positive cash flow generated to either invest in new opportunities or reduce its bank borrowings. However, when there is a return to normal trading conditions and the balance sheet is even stronger the Board will consider the resumption of dividend payments. The Board's recognises that many companies in the pub sector have received state aid during the COVID pandemic and the Board will only contemplate payment of dividends when it no longer receives state aid.

AGM

The AGM this year will be at Aragon House, Parson Green, and will be held at 12pm on Monday 28 June 2021.

Outlook

Trading has been disrupted dramatically by the pandemic but the Board believes that due to last year's fundraising, the continued support of its banks, strengthening of the senior management team, and changes made at an operational level, the business is in even better shape than pre Covid-19 to take advantage of pent up demand.

Naturally, our immediate focus is ensuring our pubs trade well and profitably in the forthcoming months and making sure that we are delivering the right service and product to our customers.

Many of the changes we have made in the past year at an operational level, whether improved cost control or reduced complexity, will enable the business to be proactive in providing a first-rate customer offer in these fast-changing times.

We believe we are one of the best employers in the hospitality industry - many of our employees have share options - and we want to grow a great nucleus of retail and head office staff so that we can expand the estate as soon as possible.

Current trading in the 24 pubs that we have re-opened since 12 April has been extremely encouraging, with trading at 77% of 2019 levels, (excluding any benefits from VAT reductions on food and letting rooms) and, with pubs being allowed to have customers indoors, we are confident that we will get back to 2019 levels over the course of the summer, especially due to the sporting programme which includes the European 2021 football finals, the British and Irish Lions Tour of South Africa and return of tennis at Wimbledon.

I look forward to when we can provide firm opening dates for our development sites and when we can get back to delivering the vision we set out at the time of the IPO in November 2017. I believe we have the platform now to grow this business to be more than 100 pubs. The time it takes for us to reach this goal will, to a certain extent, depend on when certainty and normal trading conditions resume. The entire management team and I are very ambitious and are focussed on taking the opportunities which will arise from the anticipated shake-out across the pub industry.

This has been an extraordinary year and I and the Board particularly acknowledge the contribution of our staff, suppliers, shareholders, advisors and bankers. I cannot emphasise enough how grateful we to these key stakeholders who, as well as assisting us through unparalleled times, will also help us achieve our ambitions over the course of the next few years.

Clive Watson

Executive Chairman

11 May 2021

Consolidated statement of comprehensive income

for the 52 week period ended 27 December 2020 (2019: for the 52 week period ended 29 December 2019)

	Notes	2020 £'000	2019 £'000
Revenue	4	25,815	60,028
Cost of sales		(6,280)	(15,165)
Gross profit		19,535	44,863
Other operating income	4a	5,391	-
Administrative expenses		(31,423)	(42,339)
Operating (loss)/profit	5	(6,497)	2,524
Reconciliation to adjusted EBITDA*
Operating (loss)/profit		(6,497)	2,524
Depreciation	5	5,494	3,407
Share option charge	27	397	274
Exceptional items	8	1,814	2,861
* Adjusted earnings before exceptional items, share option charge, interest, taxation and depreciation		1,208	9,066
Finance costs	6	(1,137)	(321)
(Loss)/profit before tax		(7,634)	2,203
Tax credit/(expense)	7	1,171	(891)
(Loss)/profit for the period and total comprehensive income		(6,463)	1,312
Earnings per share
Basic earnings per share (p)	10	(7.15)	2.20
Diluted earnings per share (p)	10	n/a	2.19

All activities comprise continuing operations.

There are no recognised gains or losses other than those passing through the consolidated statement of comprehensive income. The notes form part of these financial statements.

Consolidated statement of financial position

as at 27 December 2020 (2019: as at 29 December 2019)

Company No. 07814568	Notes	2020 £'000	2019 £'000
Assets
Non-current
Intangible assets	11	3,796	4,136
Property, plant and equipment	12	108,059	110,914
Right-of-use assets	13	19,565	-
Deferred tax assets	23	503	-
Financial assets at fair value through OCI	14	1,309	-
Total non-current assets		133,232	115,050
Current
Inventories	16	703	1,220
Trade and other receivables	17	3,064	3,406
Cash and cash equivalents		12,331	2,769
Total current assets		16,098	7,395
Total assets		149,330	122,445
Liabilities
Current liabilities
Trade and other payables	18	(8,430)	(9,027)
Financial liabilities - lease liabilities	13	(2,103)	-
Total current liabilities		(10,533)	(9,027)
Non-current
Borrowings	20	(24,801)	(32,310)
Other payables	19	-	(50)
Financial liabilities - lease liabilities	13	(17,750)
Deferred tax liabilities	23	(2,181)	(2,123)
Total non-current liabilities		(44,732)	(34,483)
Total liabilities		(55,265)	(43,510)
Net assets		94,065	78,935
Equity
Share capital	24	31,275	30,812
Share premium	24	59,303	38,570
Own shares (JSOP)	24	(3,272)	(3,272)
Other reserve	24	92	92
Share-based payment reserve	24	1,374	977
Retained earnings	24	5,293	11,756
Total equity		94,065	78,935

The notes form part of these accounts.

Approved by the Board and authorised for issue on 10 May 2021.

Clive Watson  Tarquin Williams

Chairman  Chief Financial Officer

Company statement of financial position

as at 27 December 2020 (2019: as at 29 December 2019)

Company No. 07814568	Notes	2020 £'000	2019 £'000
Assets
Non-current
Intangible assets	11	3,796	4,136
Property, plant and equipment	12	108,059	110,914
Right-of-use assets	13	19,565	-
Deferred tax assets	23	503	-
Financial assets at fair value through OCI	14	1,309	-
Investments in subsidiaries	15	1,067	12,730
Total non-current assets		134,299	127,780
Current
Inventories	16	703	1,220
Trade and other receivables	17	3,064	3,406
Cash and cash equivalents		12,331	2,769
Total current assets		16,098	7,395
Total assets		150,397	135,175
Liabilities
Current liabilities
Trade and other payables	18	(9,497)	(24,542)
Financial liabilities - lease liabilities	13	(2,103)	-
Total current liabilities		(11,600)	(24,542)
Non-current
Borrowings	20	(24,801)	(32,310)
Other payables	19	-	(50)
Financial liabilities - lease liabilities	13	(17,750)
Deferred tax liabilities	23	(2,181)	(2,123)
Total non-current liabilities		(44,732)	(34,483)
Total liabilities		(56,332)	(59,025)
Net assets		94,065	76,150
Equity
Share capital	24	31,275	30,812
Share premium	24	59,303	38,570
Own shares (JSOP)	24	(3,272)	(3,272)
Share-based payment reserve	24	1,374	977
Retained earnings	24	5,385	9,063
Total equity		94,065	76,150

The loss for the financial period of the Parent Company, The City Pub Group plc was £3,678,000 (2019: profit £6,921,000). The notes form part of these accounts. Approved by the Board and authorised for issue on 10 May 2021.

Clive Watson  Tarquin Williams

Chairman  Chief Financial Officer

Consolidated statement of changes in equity

for the 52 week period ended 27 December 2020

	Notes	Share capital	Share premium	Own shares (JSOP)	Other reserve	Share- based payment reserve	Retained earnings	Total
Balance at 30 December 2018		30,651	38,287	(3,272)	92	703	12,077	78,538
Employee share-based compensation	27	-	-	-	-	274	-	274
Issue of new shares	24	161	283	-	-	-	-	444
Dividends	9	-	-	-	-	-	(1,633)	(1,633)
Transactions with owners		161	283	-	-	274	(1,633)	(915)
Profit for the period		-	-	-	-	-	1,312	1,312
Total comprehensive income for the period		-	-	-	-	-	1,312	1,312
Balance at 29 December 2019		30,812	38,570	(3,272)	92	977	11,756	78,935
Employee share-based compensation	27	-	-	-	-	397	-	397
Issue of new shares	24	463	20,733	-	-	-	-	21,196
Transactions with owners		463	20,733	-	-	397	-	21,593
Loss for the period		-	-	-	-	-	(6,463)	(6,463)
Total comprehensive income for the period		-	-	-	-	-	(6,463)	(6,463)
Balance at 27 December 2020		31,275	59,303	(3,272)	92	1,374	5,293	94,065

The notes form part of these accounts.

Company statement of changes in equity

for the 52 week period ended 27 December 2020

	Notes	Share capital	Share premium	Own shares (JSOP)	Share- based payment reserve	Retained earnings	Total
Balance at 30 December 2018		30,651	38,287	(3,272)	575	3,903	70,144
Employee share-based compensation	27	-	-	-	274	-	274
Issue of new shares	24	161	283	-	-	-	444
Transfer of share-based payment reserve on hive-up	24	-	-	-	128	(128)	-
Dividends	9	-	-	-	-	(1,633)	(1,633)
Transactions with owners		161	283	-	402	(1,761)	(915)
Profit for the period		-	-	-	-	6,921	6,921
Total comprehensive income for the period		-	-	-	-	6,921	6,921
Balance at 29 December 2019		30,812	38,570	(3,272)	977	9,063	76,150
Employee share-based compensation	27	-	-	-	397	-	397
Issue of new shares	24	463	20,733	-	-	-	21,196
Transactions with owners		463	20,733	-	397	-	21,593
Loss for the period		-	-	-	-	(3,678)	(3,678)
Total comprehensive income for the period		-	-	-	-	(3,678)	(3,678)
Balance at 27 December 2020		31,275	59,303	(3,272)	1,374	5,385	94,065

The notes form part of these accounts.

Consolidated statement of cash flows

for the 52 week period ended 27 December 2020 (2019: for the 52 week period ended 29 December 2019)

	Notes	2020 £'000	2019 £'000
Cash flows from operating activities
(Loss)/profit for the period		(6,463)	1,312
Taxation	7	(1,171)	891
Finance costs	6	1,137	321
Operating (loss)/profit		(6,497)	2,524
Adjustments for:
Depreciation	5	5,494	3,407
Gain on disposal of property, plant & equipment		-	(1)
Share-based payment charge	27	397	274
Impairment	12	933	1,914
Change in inventories		517	(260)
Change in trade and other receivables		1,055	(778)
Change in trade and other payables		(258)	(43)
Cash generated from operations		1,641	7,037
Tax paid		(341)	(601)
Net cash from operating activities		1,300	6,436
Cash flows from investing activities
Purchase of property, plant and equipment	12	(2,304)	(14,949)
Acquisition of new property sites		-	(10,532)
Purchase of investments	14	(1,309)	-
Proceeds from disposal of property, plant and equipment		821	50
Net cash used in investing activities		(2,792)	(25,431)
Cash flows from financing activities
Proceeds from issue of share capital	24	21,196	218
Repayment of borrowings		(7,544)	-
Dividends paid	9	-	(1,406)
Principal element of lease payments		(1,347)	-
Proceeds from new borrowings	20	-	20,695
Interest paid (includes implied interest under IFRS16)	6	(1,251)	(596)
Net cash from financing activities		11,054	18,911
Net change in cash and cash equivalents		9,562	(84)
Cash and cash equivalents at the start of the period		2,769	2,853
Cash and cash equivalents at the end of the period		12,331	2,769

The notes form part of these accounts.

Company statement of cash flows

for the 52 week period ended 27 December 2020 (2019: for the 52 week period ended 29 December 2019)

	Notes	2020 £'000	2019 £'000
Cash flows from operating activities
(Loss)/profit for the period		(3,678)	6,921
Taxation		(1,171)	669
Finance costs		1,137	231
Operating (loss)/profit		(3,712)	7,821
Adjustments for:
Depreciation	5	5,494	2,664
Realised gain on final hive-up dividend		(2,785)	-
Gain on disposal of property, plant and equipment		-	(1)
Share-based payment charge		397	274
Impairment		933	1,914
Change in inventories		517	(339)
Change in trade and other receivables		1,055	(2,714)
Change in trade and other payables		(258)	(948)
Cash generated from operations		1,641	8,671
Tax paid		(341)	(280)
Net cash generated from in operating activities		1,300	8,391
Cash flows from investing activities
Purchase of property, plant and equipment	12	(2,304)	(7,415)
Acquisition of new property sites		-	(10,532)
Purchase of investments	14	(1,309)	-
Proceeds from disposal of property, plant and equipment	12	821	50
Net cash hived up from other Group undertakings		-	1,473
Net cash used in investing activities		(2,792)	(16,424)
Cash flows from financing activities
Proceeds from issue of share capital		21,196	218
Repayment of borrowings		(7,544)	-
Dividends paid		-	(1,406)
Principal element of lease payments		(1,347)	-
Proceeds from new borrowings		-	10,195
Interest paid		(1,251)	(451)
Net cash from financing activities		11,054	8,556
Net change in cash and cash equivalents		9,562	523
Cash and cash equivalents at the start of the period		2,769	2,246
Cash and cash equivalents at the end of the period		12,331	2,769

The notes form part of these accounts.

Notes to the financial statements

for the 52 week period ended 27 December 2020 (2019: for the 52 week period ended 29 December 2019)

1 Company information

The financial statements of The City Pub Group plc (as consolidated "the Group") for the 52 week period ended 27 December 2020 were authorised for issue in accordance with a resolution of the directors on 10 May 2021. The Company is a public limited company incorporated and domiciled in the UK. The Company number is 07814568 and the registered office is located at Essel House 2nd Floor, 29 Foley Street, London, England, W1W 7TH.

The Group's principal activity is the management and operation of public houses. Information on the Company's ultimate controlling party and other related party relationships is provided in Note 29.

Exemption from audit

For the period ended 27 December 2020 the subsidiaries are exempt from audit under section 480 of the Companies Act 2006.

2 Significant accounting policies

2.1 Basis of preparation

This preliminary announcement does not constitute the Group's full financial statements for the 52 week period ended 27 December 2020. The auditors have reported on the Group's statutory accounts for the 52 week period ended 27 December 2020 under s495 of the Companies Act 2006, which do not contain statements under s498(2) or s498(3) of the Companies Act 2006 and are unqualified. The statutory accounts for the 52 week period ended 27 December 2020 will be filed with the Registrar of companies in due course.

The consolidated financial statements of The City Pub Group Plc ("the Group") have been prepared in accordance with International Financial Reporting Standards ("IFRSs"), as adopted by the EU, IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

IFRS is subject to amendment and interpretation by the IASB and the IFRS Interpretations Committee, and there is an on-going process of review and endorsement by the European Commission. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 52 week period ended 27 December 2020.

The financial statements have been prepared under the historical cost convention as modified for financial instruments at fair value and in accordance with applicable accounting standards.

2.2 Statement of Compliance

The financial statements of the Company and Group are prepared in accordance with applicable International Financial Reporting Standards ("IFRS") as adopted by the European Union.

2.3 New and Revised Standards

IFRS applied for the first time in the current financial statements

This note explains the impact of the adoption of IFRS 16 "Leases" on the Group's financial statements and discloses the new accounting policy adopted in relation to Government grants, which have been received for the first time as a result of COVID-19, that have been applied since 30 December 2019.

IFRS 16, "Leases"

This section explains the impact of the adoption of IFRS 16 "Leases" on the Group's financial statements .

The Group has adopted IFRS 16 "Leases" and has opted to adopt the standard using the modified retrospective approach as at 30 December 2019 and as a result has not restated comparative for the 2019 report period. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 30 December 2019. The new accounting policies are disclosed within the "Leases" policy below.

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 30 December 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 30 December 2019 ranged from 3.0% to 3.7% depending on the length of the lease. There were no leases previously classified as finance leases and no onerous leases recognised.

(i) Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

· excluding leases which are considered to be low value leases (<£3,000)

· accounting for operating leases with a remaining lease term of less than 12 months as at 30 December 2019 as short-term leases

The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.

Following the publication on the amendment to IFRS 16 in relation to rent concessions, the Group has applied the practical expedient in all cases where relevant conditions were met. Changes in leases which do not fulfil the criteria of the practical expedient have been treated as additions or disposals in line with normal IFRS 16 accounting.

The treatment of rent concessions granted during the period was to recognise them immediately within the profit and loss.

(ii) Measurement of lease liabilities		Group & Company 29 Dec 2019 £'000
Operating lease commitments disclosed as at 29 December 2019		28,294
Discounted using the lessee's incremental borrowing rate at the date of initial application		22,021
Less: discounted element on adoption		(979)
Lease liability recognised as at 30 December 2019		21,042
Of which are:
Current lease liabilities		2,083
Non-current lease liabilities		18,959
		21,042

(iii) Measurement of right-of-use assets

The associated right-of-use assets were measured on a retrospective basis as if the new rules had always been applied. The right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 29 December 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

(iv) Adjustments recognised in the statement of financial position on 30 December 2019

The change in accounting policy affected the following items in the Group and Company balance sheets on 30 December 2019:

· Right-of-use assets - increased by £21,042,000; and

· Lease liabilities - increased by £21,042,000.

The net impact on retained earnings on 30 December 2019 was £nil (Parent Company: £nil).

Government Grants

The Group has received Government grants for the first time during the period ended 27 December 2020, mainly in relation to the Coronavirus Job Retention Scheme (CJRS) provided by the Government in response to COVID-19's impact on our business. The Group has elected to account for these grants as other operating income, rather than to off-set the Government grants within administrative expenses, so that the gross impact is disclosed on the face of the Statement of Comprehensive Income.

Total Government grants included as other operating income total £5,391,000 (2019: £nil).

IFRS in issue but not applied in the current financial statements

The following IFRS and IFRIC Interpretations have been issued but have not been applied by the Group in preparing these financial statements, as they are not as yet effective. The Group intends to adopt these Standards and Interpretations when they become effective, rather than adopt them early.

· IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)

· IFRS 3 Business Combinations (Amendment - Definition of Business)

· Revised Conceptual Framework for Financial Reporting

The Directors are currently evaluating the impact of the adoption of all other standards, amendments and interpretations but do not expect them to have a material impact on the Group operation or results.

2.4 Predecessor value method

During the period ended 31 December 2017 the Company undertook a common control combination, through the issue of new Ordinary Shares, B-Ordinary Shares and Convertible Preference Shares in exchange for 100% of the Ordinary Shares, B Ordinary Shares and Convertible Preference Shares of The City Pub Company (West) Limited an entity under common control. The Directors considered the business combination to be a common control combination, as the combining entities were ultimately controlled by the same parties both before and after the combination and the common control was not transitory. As a common control combination, the transaction was outside the scope of IFRS 3 ("Business Combinations") and the Directors therefore considered the nature of the transaction, which was eligible for Merger Relief under the Companies Act, and decided that the predecessor value method would be most appropriate for preparing those and subsequent Group financial statements.

The predecessor value method involves accounting for the assets and liabilities of the acquired business using existing carrying values rather than at fair values, as a result no goodwill arose on the combination. The use of the predecessor value method gave rise to an "other reserve", which represents the share premium of the subsidiary entity on consolidation.

The financial results of subsidiaries are included in the consolidated financial information from the date that control commences until the date that control ceases. The consolidated financial information presents the results of the companies within the same group. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial information.

2.5 Going concern

The Group agreed a £35m revolving credit facility (RCF) with Barclays Bank plc in July 2019 with an accordion option of another £15m all on improved terms. This was initially a 3-year deal, but with the options to extend for two additional years, so taking the facility out to July 2024.

The impact of COVID-19 has had a devastating impact on the pub sector, with the enforced closure of all pubs on 20 March 2020.

The Board acted decisively to secure the appropriate liquidity for the business to endure a prolonged period of closure should that be mandated. £15m of new shares were placed with Institutional Shareholders and a further £7m was raised from existing shareholders in an open offer with total funds raised of £22m pre expenses, which was received in April 2020. This enabled the business to reduce its net debt by two thirds and as a result has significantly strengthened the Group's balance sheet. At this time Barclays agreed to replace The City Pub Group plc's RCF's existing financial covenants with a Minimum Liquidity Test in the sum of £8m up to 30 June 2021.

During 2020, we reduced Pub and head office costs to the minimum whilst the pubs were closed. Some 99% of staff have been furloughed on the governments Job Retention Scheme during certain times of the year. The Directors took a voluntary 50% pay cut from March 2020 until pubs reopened in July 2020 and other head office salaries were reduced. We applied for Grants where applicable. The Group negotiated settlement discounts from some larger suppliers during the first lockdown, but at the same time ensured that smaller suppliers are paid in full. We have been in negotiations with landlords with regards to rent holidays, rent deferrals and changes in terms of some leases. The Group pursued a claim under our insurance policies where the Company benefits from a loss of trade clause in the event of an outbreak of a notifiable disease. This claim was eventually successful and we received a pay-out of £1m relating to this claim post the year end. 

Having successfully opened a large number of our sites through July and August 2020, it was very disappointing to be faced with another full closure for 4 weeks of November and then again in December for a full 4 months through to April 2021.

With the second and third lockdowns and the uncertainty about any further future lockdowns, we decided to access funds via the Government's Coronavirus Large Business Interruption Loan Scheme (CLBILS), via our bankers, Barclays. This was completed in March 2021 and we have an additional £5m of funding available to increase liquidity. Barclays again agreed to waive the RCF's existing financial covenants through to June 2022. They have been replaced with the same Minimum Liquidity Test in the sum of £8m plus an additional Minimum EBITDA Test to be tested on a monthly basis, after which date the financial covenant tests as currently documented will recommence. We have significant headroom between our forecasts and the requirements in the Minimum EBITDA Test.

When making our assessment of going concern, our assumptions have included a reopening of half of the pubs during April 2021 with external trading only followed by more pub openings at the end of May 2021 with restrictions being relaxed and trading allowed indoors, but still with social distancing measures in place. We have assumed that by 2022 trading gets back to pre Covid 19 levels.

Based on the current financial projections to the end of January 2023 and having considered the facilities available, together with potential sensitivities to changes in levels of trade (including further possible Covid 19 driven pub closures), the Board is confident that the Group have adequate resources to continue in operational existence for the foreseeable future, while also meeting its loan covenant requirements as they presently stand. For this reason, the Board consider it appropriate for the Group to adopt the going concern basis in preparing its financial statements.

Should there be further prolonged enforced periods of closure due to Covid that may cast doubt on the Company's ability to pass the new Minimum EBITDA Test, this gives rise to a possible material uncertainty that may cast significant doubt over the Group's ability to continue as a going concern.

COVID-19 has created immense challenges to our sector but as a result of the Board's quick actions to strengthen the balance sheet through share placing, decisive actions on cutting costs and the additional £5m CLBLS, the Board believes the Group has significantly mitigated the devastating effect that COVID-19 has had on the pub sector and that it has sufficient financial liquidity to see the Company through to well into 2023.

2.6 Revenue

Revenue represents external sales (excluding taxes) of goods and services net of discounts. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration receivable net of trade discounts and VAT.

Revenue principally consists of drink, food and accommodation sales, which are recognised at the point at which goods and services are provided and rental income which is recognised on a straight line basis over the lease term. Revenue for bedroom accommodation is recognised at the point the services are rendered. Loyalty card revenue is immaterial and therefore no change in accounting policy is considered necessary.

2.7 Cost of sales

Costs considered to be directly related to revenue are accounted for as cost of sales. Costs of goods sold are determined on the basis of the cost of purchase, adjusted for movements of inventories. Cost of services rendered is recognised at the time the revenue is recognised.

2.8 Operating profit

Operating profit is revenue less operating costs. Revenue is as detailed above and as shown in note 4. Operating costs are all costs excluding finance costs, costs associated with the disposal of properties and the tax charge.

2.9 Exceptional items

The Group presents as exceptional items those significant items of income and expense which, because of their size, nature and infrequency of the events giving rise to them merit separate presentation to allow Shareholders to understand better the elements of financial performance in the period, so as to facilitate comparison with prior periods to assess trends in financial performance more readily. These items are primarily pre-opening costs (including acquisition costs) and non-recurring costs, which are not expected to recur at a particular site.

2.10 Finance income and expense

Finance income is recognised as interest accrues (using the effective interest method) on funds invested outside the Group. Finance expense includes the cost of borrowing from third parties and is recognised on an effective interest rate basis, resulting from the financial liability being recognised on an amortised cost basis, including commitment fees. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale.

2.11 Taxation and deferred taxation

The income tax expense or income for the period is the tax payable on the current period's taxable income. This is based on the national income tax rate enacted or substantively enacted with any adjustment relating to tax payable in previous years and changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the Financial Statements.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applicable when the asset or liability crystallises based on current tax rates and laws that have been enacted or substantively enacted by the reporting date. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.

A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of temporary differences can be deducted. The carrying amount of deferred tax assets are reviewed at each reporting date.

2.12 Financial instruments

Recognition, initial measurement and derecognition

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs. Subsequent measurement of financial assets and financial liabilities is described below.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.

Classification and subsequent measurement of financial assets

For the purpose of subsequent measurement the Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other comprehensive income (FVOCI) or through the income statement (FVPL)) and those to be held at amortised cost.

Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows.

Management determines the classification of financial assets at initial recognition. The Group's policy with regard to financial risk management is set out in note 21. Generally, the Group does not acquire financial assets for the purpose of selling in the short term and does not have any financial assets measured at fair value through the income statement (FVPL) in either the current or prior year.

The Group's business model is primarily that of "hold to collect" (where assets are held in order to collect contractual cash flows).

Financial assets held at amortised cost

This classification applies to the Group's trade & other receivables which are held under a hold to collect business model and which have cash flows that meet the solely payments of principal and interest (SPPI) criteria. At initial recognition, trade and other receivables that do not have a significant financing component, are recognised at their transaction price. Other financial assets are initially recognised at fair value plus related transaction costs; they are subsequently measured at amortised cost using the effective interest method. Any gain or loss on derecognition or modification of a financial asset held at amortised cost is recognised in the income statement.

Financial assets at fair value through other comprehensive income (FVOCI)

The Group accounts for financial assets at FVOCI if the assets meet the following conditions:

• they are held under a business model whose objective it is "hold to collect" the associated cash flows and

• the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Group has opted to classify financial assets which are investments in equity instruments as financial assets at fair value through other comprehensive income.

Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset.

Impairment of financial assets

A forward-looking expected credit loss (ECL) review is required for: debt instruments measured at amortised cost or held at fair value through other comprehensive income; loan commitments and financial guarantees not measured at fair value through profit or loss; lease receivables and trade receivables that give rise to an unconditional right to consideration.

IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses - the "expected credit loss (ECL) model". This replaces IAS 39's "incurred loss model". The Group's instruments within the scope of the new requirements included trade and other receivables.

Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

As permitted by IFRS 9, the Group applies the "simplified approach" to trade and other receivable balances and the "general approach" to all other financial assets. The simplified approach in accounting for trade and other receivables records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. The general approach incorporates a review for any significant increase in counterparty credit risk since inception. The ECL reviews include assumptions about the risk of default and expected loss rates.

The nature of the Group's trade and other receivables are such that the expected credit loss is immaterial in the current and prior year, therefore no additional disclosures are considered necessary within the credit risk section of note 21.

Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short term highly liquid deposits with original maturities of three months or less.

Classification and subsequent measurement of financial liabilities

The Group's financial liabilities include trade and certain other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest rate.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period, which are unpaid.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

Classification of Shares as Debt or Equity

When shares are issued, any component that creates a financial liability of the Group is presented as a liability in the statement of financial position; measured initially at fair value net of transaction costs and thereafter at amortised cost until extinguished on conversion or redemption. The corresponding dividends relating to the liability component are charged as interest expense in the Income Statement. The initial fair value of the liability component is determined using a market rate for an equivalent liability without a conversion feature.

The remainder of the proceeds on issue is allocated to the equity component and included in shareholders' equity, net of transaction costs.

The carrying amount of the equity component is not remeasured in subsequent years. The Group's ordinary shares are classified as equity instruments. For the purposes of the disclosures given in note 24, the Group considers its capital to comprise its ordinary share capital, share premium and accumulated retained earnings. There have been no changes to what the Group considers to be capital since the prior year.

Share repurchases

Where shares are repurchased wholly out of the proceeds of a fresh issue of shares made for that purpose, no amount needs to be transferred to a capital redemption reserve as there is no reduction in capital as a result of the purchase and issue of shares.

2.13 Business combinations and goodwill

Other than the group re-organisation that took place prior to Listing, business combinations, which include sites that are operating as a going concern at acquisition and where substantive processes are acquired, are accounted for under IFRS 3 using the purchase method. Any excess of the consideration of the business combination over the interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised in the statement of financial position as goodwill and is not amortised. To the extent that the net fair value of the acquired entity's identifiable assets, liabilities and contingent liabilities is greater than the cost of the investment, a gain is recognised immediately in the profit or loss.

Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment losses. Refer to Note 11 for a description of impairment testing procedures.

2.14 Property, plant and equipment

Property, plant and equipment, other than freehold land, are stated at cost or deemed cost less accumulated depreciation and any impairment in value. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, with effect from the first full year of ownership, as follows:

Freehold properties   To residual value over fifty years straight line

Leasehold properties  Straight line over the length of the lease

Fixtures, fittings and equipment  Between four and ten years straight line

Computer equipment  Between two and five years straight line

No depreciation is charged on freehold land. Where there is no depreciation on historic freehold buildings as a result of a high residual value/long useful lives, the freehold building is subject to an impairment review. Residual values and useful lives are reviewed every year and adjusted if appropriate at each financial period end.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss.

2.15 Investments in subsidiaries

The Company recognises its investments in subsidiaries at cost, less any provisions for impairment. Income is recognised from these investments only in relation to distributions receivable basis from post-acquisition profits. Distributions received in excess of post-acquisition profits are deducted from the cost of the investment.

2.16 Impairment of goodwill, property, plant and equipment and investments in subsidiaries

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of a related business combination and represent the lowest level within the Group at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated (determined by the Group's management as equivalent to its operating segments) are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's (or cash-generating unit's) carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessments of the time value of money and asset-specific risk factors.

Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.

2.17 Inventories

Inventories are counted independently and stated at the lower of cost and net realisable value. Cost is calculated using the First In First Out method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs to sell.

2.18 Leases

As described in the "New and Revised Standards" section above, the Group has applied IFRS 16 using the modified retrospective approach and therefore comparative information has not been restated. This means that comparative information is still reported under IAS 17 and IFRIC 4.

Accounting policy applicable from 30 December 2019

For any new contracts entered into on or after 30 December 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

· the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group

· the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract

· the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

· fixed payments (including in-substance fixed payments), less any lease incentives receivable;

· variable lease payments that are based on an index or a rate;

· amounts expected to be payable by the lessee under residual value guarantees;

· the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

· payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available. If that rate cannot be readily determined, which is generally the case for leases in the Group, the Group's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Group:

· where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third-party financing was received

· uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third-party financing, and

· makes adjustments specific to the lease, e.g. term, country, currency and security.

Where the Group is exposed to potential future increases in variable lease payments based on an index or rate, these are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Subsequent to initial measurement, lease payments are allocated between principal, which reduces the liability, and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

· the amount of the initial measurement of lease liability;

· any lease payments made at or before the commencement date less any lease incentives received;

· any initial direct costs; and

· restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. The Group also assesses the right-of-use asset for impairment when such indicators exist.

The Group has elected to account for short-term leases and leases of low value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

The right-of-use assets and lease liabilities have been disclosed separately on the face of the Statement of Financial Position, within Non-current assets and across Current & Non-current liabilities respectively.

Accounting policy applicable before 30 December 2019

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. These are the only types of lease utilised by the entity. Operating lease payments for assets leased from third parties are charged to profit or loss on a straight line basis over the period of the lease, on an accrued basis.

2.19 Share-based employee remuneration

The Company operates equity-settled share-based remuneration plans for its employees. None of the Company's plans are cash-settled.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values.

Where employees are rewarded using share-based payments, the fair value of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions). The fair value is determined by using the Black-Scholes method.

All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to share-based payments reserve. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest.

Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any adjustment to cumulative share-based compensation resulting from a revision is recognised in the current period. The number of vested options ultimately exercised by holders does not impact the expense recorded in any period.

Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs, are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being recorded as share premium.

2.20 Investment in own shares (JSOP)

Shares held in the City Pub Group Joint Share Ownership Plan ("JSOP") are shown as a deduction in arriving at equity funds on consolidation. Assets, liabilities and reserves of the JSOP are included in the statutory headings to which they relate. Purchases and sales of own shares increase or decrease the book value of "Own shares" in the statement of financial position. At each period end the Group assess and recognises the value of "Own shares" held with reference to the expected cash proceeds and accounts for any difference as a reserves transfer.

2.21 Government grants

The Group has received Government grants for the first time during the period ended 27 December 2020, mainly in relation to the Coronavirus Job Retention Scheme provided by the Government in response to COVID-19's impact on our business. The Group has elected to account for these grants as other operating income, rather than to off-set the Government grants within administrative expenses, so that the gross impact is disclosed on the face of the Statement of Comprehensive Income.

3 Significant judgements and estimates

The judgements, which are considered to be significant, are as follows:

Judgement is required when determining if an acquisition is a business combination or a purchase of an asset. Each acquisition is assessed individually to determine which is the most appropriate classification.

Judgement is used to determine those items that should be separately disclosed to allow a better understanding of the underlying trading performance of the Group. The judgement includes assessment of whether an item is of a nature that is not consistent with normal trading activities or of a sufficient size or infrequency.

Judgement is required when accounting for hive ups that are operationally enacted and that determines when control has passed. See note 15.

The estimates, which are considered to be significant, are as follows:

The Group determines whether goodwill is impaired on an annual basis and this requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. This involves estimation of future cash flows, choosing a suitable discount rate and growth rate. Full details are supplied in note 11, together with an analysis of the key assumptions.

The determination of any impairment of property, plant & equipment (including the right of use assets) also requires estimation of fair value and value in use. As with goodwill, this requires estimation of future cash flows and selection of a suitable discount rate, together with assessment of the market values of properties (if applicable). Goodwill was allocated to the carrying value of property, plant & equipment for the purposes of the impairment review, with further details around key assumptions provided in note 11 (such assumptions are also relevant to the carrying value of property, plant & equipment are detailed in note 12).

The calculation of lease liabilities requires the Group to determine an incremental borrowing rate ("IBR") to discount future minimum lease payments. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group 'would have to pay', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.

The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of those options. Expectations around employee retention and meeting of performance criteria have also been considered. The model used by the Group is the Black-Scholes valuation model and the inputs are detailed in note 27.

The assessment of the probability of future taxable profits on which deferred tax assets can be utilised is based on the Group's latest approved budget forecasts, which is adjustment for significant non-taxable income and expenditure. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in respect of the period for which future profits can be confidently foreseen. 

The estimation of the recoverable value of net realisable value of inventory (and therefore any corresponding provision) is estimated based expectations as at 27 December 2020 around the timing of the recommencement of trade and which inventory will remain usable on this date and the extent to which it is expected to be fully realised through sale.

4 Segmental analysis

The Group focuses its internal management reporting predominantly on revenue, adjusted EBITDA (being earnings before exceptional items, share option charge, interest, taxation and depreciation) and operating profit.

The Chief Operating Decision Maker ("CODM") receives information on each pub and each pub is considered to be an individual operating segment. In line with IFRS 8, each operating segment has the same characteristics and therefore the pubs are aggregated to form the reportable segment below.

Revenue, and all the Group's activities, arise wholly from the sale of goods and services within the United Kingdom. All the Group's non-current assets are located in the United Kingdom.

Revenue arises wholly from the sale of goods and services within the United Kingdom.

	2020 £'000	2019 £'000
Revenue	25,815	60,028
Cost of sales	(6,280)	(15,165)
Gross profit	19,535	44,863
Other operating income (note 4(a))	5,391
Operating expenses:
• Operating expenses before adjusting items	(23,718)	(35,663)
Adjusted EBITDA	1,208	9,066
• Depreciation	5,494	3,407
• Share option charge	397	274
• Exceptional items	1,814	2,861
Total operating expenses	(31,423)	(42,339)
Operating (loss)/profit	(6,497)	2,524

(a). Other operating income

During 2020 the Group has received Government grants for the first time, mainly in relation to the Furlough Scheme provided by the Government in response to COVID-19's impact on our business. Further analysis of other operating income is set out below.

	2020 £'000	2019 £'000
Coronavirus Job Retention Scheme	5,141	-
Other government grants	250	-
Total other operating income	5,391	-

5 (Loss)/profit on ordinary activities before taxation

The (loss)/profit on ordinary activities before taxation is stated after charging/(crediting):

	2020 £'000	2019 £'000
Costs of inventories recognised as an expense	6,376	15,632
Staff costs (note 25)	17,133	22,363
Depreciation	5,494	3,407
Fees payable to the company's auditor for the audit of the company's financial statements	60	67
Fees payable to the company's auditor for the audit of the group financial statements	-	11
Fees payable to the company's auditor for tax compliance	-	9
Fees payable to the company's auditor for tax advisory services	-	24
Exceptional costs (note 8)	1,814	2,861
Operating leases - land and buildings*	(351)	2,056

* The Group has adopted IFRS 16 in the year ended 27 December 2020 and the disclosure of leases has changed accordingly, see Accounting Policies and Note 13 for further information. Rent concessions relating to COVID19 of £450,000 have been recognised within this balance for 2020.

6 Interest payable and similar charges

	2020 £'000	2019 £'000
On bank loans and overdrafts	551	596
Interest and finance charges for lease liabilities	699	-
Interest expense capitalised within property, plant & equipment	(113)	(275)
Total finance cost	1,137	321

During the period £113,000 of interest was capitalised (2019: £275,000).

7 Tax charge on (loss)/profit on ordinary activities

(a) Analysis of tax charge for the period

The tax charge for the Group is based on the (loss)/profit for the period and represents:

	2020 £'000	2019 £'000
Current income tax:
Current income tax charge	(572)	608
Adjustments in respect of previous period	(154)	40
Total current income tax	(726)	648
Deferred tax:
Origination and reversal of temporary differences (note 23)	(445)	243
Adjustments in respect of deferred tax of previous period	-	-
Total deferred tax	(445)	243
Total tax	(1,171)	891

(b) Factors affecting total tax for the period

The tax assessed for the period differs from the standard rate of corporation tax in the United Kingdom 19.00% (2019: 19.00%). The differences are explained as follows:

	2020 £'000	2019 £'000
(Loss)/profit on ordinary activities before tax	(7,634)	2,203
(Loss)/profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.00% (2019: 19.00%)	(1,450)	419
Effect of:
Fixed asset differences	446	415
Items not deductible for tax purposes	(5)	61
Adjustment in respect of previous periods	(154)	40
Share options tax deduction	(8)	(44)
Total tax (credit)/charge	(1,171)	891

The deferred tax asset included in the balance sheet of £503,000 (2019: £nil) relates principally to the carry forward of tax losses. The Directors have recognised a deferred tax asset in respect of carried forward trading tax losses as, based on current estimates, the Group is forecast to make sufficient trading profit over the next 3 years, against which these losses can be offset.

8 Exceptional items

	2020 £'000	2019 £'000
Pre opening costs	14	777
Impairment of pub sites	933	1,914
Inventory impairments	662	-
Other non recurring items	205	170
	1,814	2,861

Exceptional items for both financial years presented are included within administrative expenditure in the Statement of Comprehensive Income.

9 Dividends

Dividends paid during the reporting period

The Board did not declare a dividend due the Covid pandemic (2019: 2.75p per share)

Dividends not recognised at the end of the reporting period

Since the year end, the Directors are not proposing a dividend due to the COVID-19 pandemic (2019: nil).

10 (Loss)/earnings per share

	2020 £'000	2019 £'000
(Loss)/earnings for the period attributable to Shareholders	(6,463)	1,312
(Loss)/earnings per share:
Basic (loss)/earnings per share (p)	(7.15)	2.20
Diluted earnings per share (p)	n/a	2.19

Weighted average number of shares:	Number of shares	Number of shares
Weighted average shares for basic EPS	90,451,692	59,523,815
Effect of share options in issue	n/a	456,481
Weighted average shares for diluted earnings per share	n/a	59,980,296

Shares held by the City Pub Group plc Joint Share Ownership Plan ("JSOP"), which has waived its entitlement to receive dividends, are treated as cancelled for the purpose of this calculation.

For the 52 week period ended 27 December 2020, the Group recorded a loss. As a result, share options in issue for this period are considered to be antidliutive and therefore no diluted loss per share has been presented.

11 Goodwill

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Cost brought forward	4,196	3,854	4,196	2,021
Additions	-	343	-	343
Disposal	-	(1)	-	-
Transfer of business - hive up	-	-	-	1,832
At end of period	4,196	4,196	4,196	4,196
Amortisation/impairment brought forward	(60)	(60)	(60)	(60)
Provided during the period	(340)	-	(340)	-
At end of period	(400)	(60)	(400)	(60)
Net book value at end of period	3,796	4,136	3,796	4,136
Net book value at start of period	4,136	3,794	4,136	1,961

The carrying value of goodwill included within the Group and Company statement of financial position is £3,796,000 (2019: £4,136,000), which is allocated to the cash-generating unit ("CGU") of groupings of public houses as follows:

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Freehold	2,396	2,396	2,396	2,396
Leasehold	1,400	1,740	1,400	1,740
	3,796	4,136	3,796	4,136

The CGU's recoverable amount has been determined as the higher of its fair value less costs to sell and value in use based on an internal discounted cash flow evaluation. During the period ended 27 December 2020 an impairment has been made against two sites, as described further in note 12.

The fair value less costs to sell is calculated based on the market value of the associated property.

For the 52 week period ended 27 December 2020, the cash-generating unit recoverable amount was determined based on value-in-use calculations, using cash flow projections based on one year budgets, (modified as appropriate for the impact of Covid-19 and the expected return to normal trading conditions), extrapolated into perpetuity for freehold properties and for the length of the lease for leasehold properties, with key assumptions for both CGU's being the long-term growth rate of 2% and pre-tax discount rate of 9%. Cash flows for the businesses are based on management forecasts, which are approved by the Board and reflect management's expectations of sales growth, operating costs and margin based on past experience and anticipated changes in the local market places and trading following the re-opening of sites during 2021.

Sensitivity to changes in key assumptions: impairment testing is dependent on management's estimates and judgements, in particular in relation to the forecasting of future cash flows, the long-term growth rate and the discount rate applied to the cash flows and uncertainty of future cash flows related to Covid-19.

Lowering the discount rate by 1% from 9% to 8% would have the effect of reducing the impairment charge by some £303k to £630k. An increase in the discount rate to 10% would result in the impairment charge increasing by £282k to £1,215k.

Lowering the long term growth rate used from 2% to 1% would result in an increase in the impairment charge of £214k to £1,147k. A higher growth rate of 3% would result in the impairment charge reducing by £225k to £708k.

The assumptions and outlined changes in impairment charge noted in the above sensitivities are relevant to the combined carrying value of goodwill and property plant & equipment, and are stated before any allocation between the two asset classes.

12 Property, plant and equipment

Group	Freehold & leasehold property £'000	Fixtures, fittings and computers £'000	Total £'000
Cost
At 30 December 2018	78,687	21,785	100,472
Additions	8,377	6,998	15,375
Acquisitions	10,319	638	10,957
Disposals	(91)	(64)	(155)
At 29 December 2019	97,292	29,357	126,649
Additions	311	2,107	2,418
Disposals	(821)	-	(821)
At 27 December 2020	96,782	31,464	128,246
Depreciation
At 30 December 2018	2,201	8,251	10,452
Provided during the period	643	2,764	3,407
Impairment	1,802	112	1,914
Disposals	(19)	(19)	(38)
At 29 December 2019	4,627	11,108	15,735
Provided during the period	747	3,112	3,859
Impairment	-	593	593
At 27 December 2020	5,374	14,813	20,187
Net book value
At 27 December 2020	91,408	16,651	108,059
At 29 December 2019	92,665	18,249	110,914
At 30 December 2018	76,486	13,534	90,020

During the period ended 27 December 2020 the group has made a provision for impairment against a number of sites totalling £933,000, split £340,000 against goodwill and £593,000 against fixtures and fittings. . The assumptions and sensitivities relating to the Group's impairment review laid out in note 11 are also relevant to this note.

During the period ended 29 December 2019 the group made a provision for impairment against a number of sites totalling £1,914,000.

During the period ended 27 December 2020 the group capitalised £113,000 (2019: £275,000) of interest within the Freehold & Leasehold property asset.

Company	Freehold & leasehold property £'000	Fixtures, fittings and computers £'000	Total £'000
Cost
At 30 December 2018	39,726	12,957	52,683
Additions	2,898	4,887	7,785
Acquisitions	10,319	638	10,957
Disposals	(91)	(64)	(155)
Transferred on hive-up of business	44,440	10,939	55,379
At 29 December 2019	97,292	29,357	126,649
Additions	311	2,107	2,418
Disposals	(821)	-	(821)
At 27 December 2020	96,782	31,464	128,246
Depreciation
At 30 December 2018	1,332	4,963	6,295
Provided during the period	505	2,159	2,664
Impairment	1,802	112	1,914
Disposals	(19)	(19)	(38)
Transferred on hive-up of business	1,007	3,893	4,900
At 29 December 2019	4,627	11,108	15,735
Provided during the period	747	3,112	3,859
Impairment	-	593	593
At 27 December 2020	5,374	14,813	20,187
Net book value
At 27 December 2020	91,408	16,651	108,059
At 29 December 2019	92,665	18,249	110,914
At 30 December 2018	38,394	7,994	46,388

13 Leases

Group and Company

This note provides information for leases where the Group is a lessee. The Group enters into property leases for certain of its pub sites. The lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

(i). amounts recognised in the consolidated statement of financial position

The consolidated statement of financial position shows the following amounts relating to leases:

Group and Company	27 December 2020 £'000
Right-of-use assets
On adoption	21,042
Addition	158
Depreciation	(1,635)
Total	19,565
Lease liabilities
Current	2,103
Non-current	17,750
Total	19,853

Additions to the right-of-use assets during the 2020 financial year were £158,000. Following the publication on the amendment to IFRS 16 in relation to rent concessions, the Group has applied the practical expedient in all cases where relevant conditions were met. These concessions totalled a credit to the income statement for the period of £450,000. Changes in leases which do not fulfil the criteria of the practical expedient have been treated as additions or disposals in line with normal IFRS 16 accounting.

(ii). amounts recognised in the consolidated statement of comprehensive income

The consolidated statement of comprehensive income shows the following amounts relating to leases:

Group and Company	27 December 2020 £'000	29 December 2019 £'000
Depreciation charge
Leasehold Properties	1,635	-
Interest expense (included in finance cost)	699	-
Expense relating to short-term leases (included in operating expenses)	99	-
Expenses relating to low value assets that are not shown above as short-term leases (included in operating expenses	-	-

The total cash outflow for leases in 2020 was £ 2,046,000 .

14 Financial assets at fair value through Other Comprehensive income

Group and Company	2020 £'000	2019 £'000
At start of period	-	-
Additions	1,309	-
Revaluations	-	-
At end of period	1,309	-

During the year the Group acquired a 14% stake in certain companies within the Mosaic Pub and Dining Group through a subscription of new shares issued in connection with a fundraising by The Galaxy (City) Pub Company Limited, The Pioneer (City) Pub Company Limited and The Sovereign (City) Pub Company Limited (the "Companies") for total cash consideration of approximately £1.2 million.

The Companies own and operate 9 pubs which are in prime locations and benefit from strong asset backing, with 7 freehold and 2 leasehold sites.

The Companies are part of the wider Mosaic Pub and Dining Group ("Mosaic"), which own 26 pubs across England. Mosaic has a similar ethos and model to the City Pub Group, with each pub having its own iden ti ty and talented and passionate staff who deliver a high-quality experience. Investing in Mosaic furthers the City Pubs Group's existing relationship with Mosaic who already nego ti ate their largest supply deals together to get the best terms and extends and strengthens the geographical area to which we have exposure. With a stronger balance sheet Mosaic will be able to focus on building shareholder value which will be beneficial to both parties.

Clive Watson is an investment consultant to Mosaic. Richard Pricke tt , Non-Execu ti ve Director of the City Pub Group, is a Non-Executive Director of The Pioneer (City) Pub Company Limited.

15 Investments in subsidiaries

Company	2020 £'000	2019 £'000
At start of period	12,730	12,063
Additions	-	407
Transferred on hive up of business	-	263
Disposal on liquidation of subsidiaries	-	(3)
Write-down of investment	(11,663)	-
At end of period	1,067	12,730

During the prior year the Company hived up the trade and assets of its subsidiary The City Pub Company (West) Limited via an intercompany transfer, which included the transfer of investments previously held by The City Pub Company (West) Limited. In the current year there was final dividend from The City Pub Company (West) Limited, which eliminated the amounts due to group undertakings balance (note 16) and resulted in a write down of the investments carrying value of £11,663,000.

The Company had the following subsidiary undertakings as at 27 December 2020:

Name of subsidiary	Class of share held	Country of incorporation	Proportion held	Nature of business
The City Pub Company (West) Limited	Ordinary	England and Wales	100%	Dormant
BNB Leisure Limited	Ordinary	England and Wales	100%	Dormant
Gresham Collective Ltd	Ordinary	England and Wales	100%	Dormant
Randall & Zacharia Limited	Ordinary	England and Wales	100%	Dormant
Chapel 1877 Ltd	Ordinary	England and Wales	100%	Dormant
Flamequire Limited	Ordinary	England and Wales	100%	Dormant

The above companies all had the same registered office as the parent company, being Essel House, 2nd Floor, 29 Foley Street, London, W1W 7TH.

16 Inventories

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Finished goods and goods for resale	703	1,220	703	1,220

During the year ended 27 December 2020 the Group (and Company) had to write off £662,000 (2019: £nil) of inventory due to the impact of the COVID-19 lockdowns in England, which has been recognised within the other non-recurring items line as part of the exceptional items in note 8.

17 Trade and other receivables

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Trade receivables	235	462	235	462
Government grant receivables	379	-	379	-
Corporation tax receivables	774	-	774	-
Other receivables	664	1,218	664	1,218
Prepayments and accrued income	1,012	1,726	1,012	1,726
	3,064	3,406	3,064	3,406

Rent deposits are included within other receivables, greater than one year. They are at £358k (2019: £358k).

18 Current trade and other payables

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Trade payables	2,641	3,392	2,641	3,392
Corporation taxation	-	300	-	300
Other taxation and social security	2,828	2,406	2,828	2,406
Amounts due to group undertakings	-	-	1,067	15,515
Accruals	2,190	1,488	2,190	1,488
Other payables	771	1,441	771	1,441
	8,430	9,027	9,497	24,542

Included within Other taxation and social security is £80k is due to be repaid greater than one year.

19 Non-current other payables

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Deferred consideration	-	50	-	50

In the prior year, deferred consideration arose in relation to the acquisition of both The Hoste and The Pride of Paddington, of this deferred consideration £50,000 was due after more than one year and £375,000 was due within one year and included within other payables. There is £375,000 of deferred consideration balance due in one year within other payables as at 27 December 2020.

20 Borrowings and lease liabilities

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Current borrowings and financial liabilities:
Lease liabilities	2,103	-	2,103	-
Non-current borrowings and financial liabilities:
Bank loans	24,801	32,310	24,801	32,310
Lease liabilities	17,750	-	17,750	-
	42,551	32,310	42,551	32,310

At 27 December 2020 a revolving credit facility of £25,000,000 (2019: £32,500,000) was outstanding, net of capitalised arrangement fees, Barclays Bank PLC had a fixed charge over certain freehold property as security in respect of this loan. Interest was charged at LIBOR plus a margin, which varied dependent on the ratio of net debt to EBITDA. The revolving credit facility is repayable in July 2022, but can be extended for an additional 2 years to July 2024.

Reconciliation of liabilities arising from financing activities

The changes in the Group's liabilities arising from financing activities can be classified as follows:

	Long-term Borrowings £'000	Short-term Borrowings £'000	Total £'000
At 30 December 2019	32,310	-	32,310
Cash flows:
Repayment	(7,500)	-	(7,500)
Non-cash items:
Amortisation of loan arrangement fees	(9)	-	(9)
At 27 December 2020	24,801	-	24,801

	Long-term Borrowings £'000	Short-term Borrowings £'000	Total £'000
At 31 December 2018	11,600	-	11,600
Cash flows:
Proceeds	20,695	-	20,695
Non-cash items:
Amortisation of loan arrangement fees	15	-	15
At 29 December 2019	32,310	-	32,310

The changes in the Company's liabilities arising from borrowings can be classified as follows:

	Long-term Borrowings £'000	Short-term Borrowings £'000	Total £'000
At 30 December 2019	32,310	-	32,310
Cash flows:
Repayments	(7,500)	-	(7,500)
Non-cash items:
Amortisation of loan arrangement fees	(9)	-	(9)
At 27 December 2020	24,801	-	24,801

	Long-term Borrowings £'000	Short-term Borrowings £'000	Total £'000
At 31 December 2018	7,100	-	7,100
Cash flows:
Proceeds	10,298	-	10,298
Transferred on hive up of business	14,897	-	14,897
Non-cash items:
Amortisation of loan arrangement fees	15	-	15
At 29 December 2019	32,310	-	32,310

The changes in the Group's and Company's liabilities arising from leases can be classified as follows:

	Long-term Lease liabilities £'000	Short-term Lease liabilities £'000	Total £'000
At 30 December 2019	-	-	-
Recognised on adoption of IFRS 16	18,959	2,083	21,042
At 30 December 2019 -post adoption of IFRS 16	18,959	2,083	21,042
Cash flows:
Repayments	-	(2,046)	(2,046)
Accrued interest	-	699	699
Non-cash items:
Additions	158	-	158
Reclassification	(1,367)	1,367	-
At 27 December 2020	17,750	2,103	19,853

21 Financial instruments and risk management

Financial instruments by category:

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Financial assets - loans and receivables
Trade and other receivables	899	1,680	899	1,680
Cash and cash equivalents	12,331	2,769	12,331	2,769
	13,230	4,449	13,230	4,449

Prepayments are excluded, as this analysis is required only for financial instruments.

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Non-current
Borrowings	24,801	32,310	24,801	32,310
Lease liabilities	17,750	-	17,750	-
Other payables	-	50	-	50
	42,551	32,360	42,551	32,360
Current
Current borrowings	-	-	-	-
Lease liabilities	2,103	-	2,103	-
Trade and other payables	3,412	4,833	3,412	4,833
Amounts due to group undertakings	-	-	1,067	15,515
	5,515	4,833	6,582	20,348

Statutory liabilities and deferred income are excluded from the trade payables balance, as this analysis is required only for financial instruments.

There is no material difference between the book value and the fair value of the financial assets and financial liabilities disclosed above.

The Group's operations expose it to financial risks that include market risk and liquidity risk. The Directors review and agree policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous periods.

Cash at bank and short-term deposits	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
A1	12,082	2,637	12,082	2,637
Not rated	249	132	249	132
	12,331	2,769	12,331	2,769

A1 rating means that the risk of default for the investors and the policy holder is deemed to be very low.

Not rated balances relate to petty cash amounts.

Market risk - cash flow interest rate risk

The Group had outstanding borrowing of £25,000,000 at year end as disclosed in note 20. These were loans taken out with Barclays to facilitate the purchase of public houses.

The Group's policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. At 27 December 2020, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group's cash at bank and short-term deposits is considered immaterial.

The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 1% on borrowings in the period. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate on borrowings for each period. All other variables are held constant.

		Profit for the year		Equity
	+1%	-1%	+1%	-1%
27 December 2020	(317)	317	(317)	317
29 December 2019	(285)	285	(285)	285

Credit risk

The risk of financial loss due to a counter party's failure to honour its obligations arises principally in relation to transactions where the Group provides goods and services on deferred payment terms and deposits surplus cash.

Group policies are aimed at minimising losses and deferred terms are only granted to customers who demonstrate an appropriate payment history and satisfy credit worthiness procedures. Individual customers are subject to credit limits to control debt exposure. Credit insurance is taken out where appropriate for wholesale customers and goods may also be sold on a cash with order basis.

Cash deposits with financial institutions for short periods are only permitted with financial institutions approved by the Board. There are no significant concentrations of credit risk within the Group. The maximum credit risk exposure relating to financial assets is represented by their carrying value as at the financial period end.

Liquidity risk

The Group actively maintains cash and banking facilities that are designed to ensure it has sufficient available funds for operations and planned expansions. The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the period end date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Group	Less than 1 year £'000	Between 1 and 2 years £'000	Between 2 and 5 years £'000	Over 5 years £'000
As at 27 December 2020:
Borrowings	-	-	24,801	-
Lease liabilities	2,103	2,103	6,119	15,108
Trade and other payables	3,412	-	-	-
As at 29 December 2019:
Borrowings	-	-	32,310	-
Trade and other payables	4,833	50	-	-

Company	Less than 1 year £'000	Between 1 and 2 years £'000	Between 2 and 5 years £'000	Over 5 years £'000
As at 27 December 2020:
Borrowings	-	-	24,801	-
Lease liabilities	2,103	2,103	6,119	15,108
Trade and other payables	4,479	-	-	-
As at 29 December 2019:
Borrowings	-	-	32,310	-
Trade and other payables	20,348	50	-	-

Capital risk management

The Group manages its capital to ensure it will be able to continue as a going concern while maximising the return to shareholders through optimising the debt and equity balance.

The Group monitors cash balances and prepare regular forecasts, which are reviewed by the board. In order to maintain or adjust the capital structure, the Group may, in the future, return capital to shareholders, issue new shares or sell assets to reduce debt.

22 Fair value measurements of financial instruments

Financial assets and financial liabilities measured at fair value are required to be grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3: unobservable inputs for the asset or liability.

There were no financial asset or liabilities measured at fair value as at 30 December 2018 or 29 December 2019. During the period ended 27 December 2020 the Group acquired investments in other companies, which have been recognised at fair value at the reporting date.

All investments in equity instruments are considered to be level 3 investments.

23 Deferred tax

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Provision for deferred tax liabilities
Accelerated capital allowances	1,044	986	1,044	986
Arising on acquisition	1,137	1,137	1,137	1,137
	2,181	2,123	2,181	2,123
Provision at the start of the period	2,123	1,537	2,123	667
Arising on acquisition	-	343	-	343
Transferred on hive up of business	-	-	-	870
Deferred tax charge for the period	58	243	58	243
Provision at the end of the period	2,181	2,123	2,181	2,123

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Deferred tax asset
Arising on tax losses carried forward	503	-	503	-
Deferred tax asset at the start of the period	-	-	-	-
Deferred tax credit for the period	503	-	503	-
Deferred tax asset at the end of the period	503	-	503	-

24 Share capital

	2020 £'000	2019 £'000
Allotted called up and fully paid
105,684,425 Ordinary shares of 1 pence each: (2019: 61,623,791 Ordinary share of 50p each)	1,057	30,812
3,021,770,759 Deferred shares of 1 pence each (2019: nil)	30,218	-
Total	31,275	30,812

In February 2020 the Group issued 45,000 £0.50 shares at a price of £1.00 per share in relation to the exercise of share options. The premium on the shares issued was credited to the share premium account.

In April 2020 the Group undertook a subdivision of its ordinary share capital, which resulted in the issued ordinary share capital of 61,668,791 ordinary £0.50 shares being subdivided into 3,083,439,550 ordinary £0.01 shares. After the subdivision 3,021,770,759 ordinary £0.01 shares were re-designated as 3,021,770,759 deferred £0.01 shares, leaving 61,668,791 ordinary shares of £0.01 each.

In April 2020 the Group completed a Placing and Open Offer, which were fully subscribed and resulted in the issue of 30,000,000 ordinary £0.01 shares at a price of £0.50 per share and 14,015,634 ordinary £0.01 shares at a price of £0.50 per share respectively. The premium on the shares issued as part of the Placing and Open Offer, less the share issue costs of £857,000 was credited to the share premium account.

The ordinary shareholders are entitled to be paid a dividend out of any surplus profits and to participate in surplus assets on winding up in proportion to the nominal value of each class of share. All equity shares in the Company carry one vote per share.

The deferred shareholders are not entitled to be paid a dividend out of any surplus profits and only participate in surplus assets on winding up after certain conditions. The deferred shares do not entitle the holder to vote at a General Meeting.

The ordinary share capital account represents the amount subscribed for shares at nominal value.

	£0.50 Ordinary shares Number	£0.01 Ordinary shares Number	Deferred shares Number
At 30 December 2018	61,302,514	-	-
Issue of new ordinary shares for Scrip dividend	103,777	-	-
Issue of new ordinary shares on exercise of share options	217,500	-	-
At 29 December 2019	61,623,791	-	-
Issue of new ordinary shares on exercise of share options	45,000	-	-
Sub-total	61,668,791	-	-
Impact of the subdivision of £0.50 ordinary shares to £0.01 ordinary shares	(61,668,791)	3,083,439,550	-
Impact of the re-designation to deferred shares	-	(3,021,770,759)	3,021,770,759
Issue of new ordinary shares on Placing	-	30,000,000
Issue of new ordinary shares on Open Offer	-	14,015,634
At 27 December 2020	-	105,684,425	3,021,770,759

Own shares held (JSOP)

The Group announced the establishment of a Joint Share Ownership Plan ("JSOP") in January 2018, as detailed in the Company's AIM Admission Document, to be used as part of the remuneration arrangements for employees. This resulted in the purchase of the Group's own shares and the creation of an Employee Benefit Trust.

The JSOP purchases shares in the Company to satisfy the Company's obligations under its JSOP performance share plan. No shares (2019: no shares) in the Company were purchased during the period at a cost of £nil (2019: £nil).

At 27 December 2020 the JSOP held 1,925,000 ordinary shares in The City Pub Group plc (2019: 1,925,000).

At 27 December 2020 awards over 1,925,000 (2019: 1,925,000) ordinary shares The City Pub Group plc, made under the terms of the performance share plan, were outstanding.

Nature and purpose of reserves

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Own shares (JSOP) represents shares in the Company purchased by the Group's Employee Benefit Trust as part of a Joint Share Ownership Plan ("JSOP").

The other reserve has arisen from using the predecessor value method to combine the results of the Company and its subsidiary The City Pub Company (West) Limited, which was acquired through a share for share exchange as part of the reorganisation of two entities under common control prior to the Company's Listing on AIM. The reserve represents the share premium that exists within The City Pub Company (West) Limited.

Share-based payments reserve is used to recognise the grant date fair value of options issued to employees but not exercised.

Retained earnings include all results as disclosed in the statement of comprehensive income.

25 Staff costs

Number of employees

The average monthly numbers of employees (including salaried Directors) during the period was:

	2020	2019
Management and Administration	92	98
Operation of Public Houses	892	1,111
	984	1,209

Employment costs (including Directors)

	2020 £'000	2019 £'000
Wages and salaries	15,500	20,392
Pension costs	323	380
Social security costs	913	1,318
Share based payments charge	397	273
	17,133	22,363

26 Directors' remuneration

Single total figure of remuneration table

The following table shows a breakdown of the remuneration of individual Directors who served in all or part of the year:

	Salary/Fees		Taxable Benefits		Pension/Other		Compensation for loss of office		Total
	2020 £000	2019 £000	2020 £000	2019 £000	2020 £000	2019 £000	2020 £000	2019 £000	2020 £000	2019 £000
Clive Watson	112	145	9	21	7	7	-	-	128	173
Alex Derrick	101	145	6	13	5	7	166	-	278	165
Rupert Clark	112	145	9	9	7	7	-	-	128	161
Tarquin Williams	104	130	2	2	2	6	-	-	108	138
Toby Smith	33	-	-	-	-	-	-	-	33	-
Richard Prickett	38	47	-	-	-	-	-	-	38	47
John Roberts	26	33	-	-	26	50	-	-	52	83
Neil Griffiths	32	42	-	-	-	-	-	-	32	42
Total	558	687	26	45	47	77	166	-	797	809

Emoluments in respect of the Directors are as follows:

	2020 £'000	2019 £'000
Remuneration for qualifying services	797	809

The highest paid Director in the period received remuneration of £278,000; (2019: £173,000). Four directors had equity settled share options in issue at the period end (2019: Four). Additional information on Directors' remuneration is given within the Corporate Governance Report.

27 Share-based payments

The Group provides share-based payments to employees, which are all equity settled, in the form of a Company Share Ownership Plan (CSOP), started in 2016, a Joint Share Ownership Plan ("JSOP") started in 2018 and the Group's Long Term Incentive Plan ("LTIP") started in 2020. The Company uses the Black-Scholes valuation model to value these types of share-based payment plan and the resulting value is amortised through the consolidated income statement over the vesting period of the share-based payments.

In prior periods the Group also operated an equity settled share option plan known as the Enterprise Management Incentive Share Option Plan. The Group was required to reflect the effects of share-based payment transactions in profit or loss and in its statement of financial position. For the purposes of calculating the fair value of share options granted, the Black Scholes Pricing Model was used by the Group. Fair values have been calculated on the date of grant. A key input into the model is the share price, on the date of grant of the options. The share price has been estimated based on the most recent subscription for shares. In the prior period a transfer was made between the share-based payment reserve and the retained earnings in respect of the EMI share options that were all exercised during the prior period.

During the period ended 27 December 2020 2,515,000 options were granted under the CSOP scheme (2019: no options granted), 2,100,000 options were granted under the Group's Long Term Incentive Plan (2019: no options granted); and no awards were made under the JSOP scheme (2019: no awards). A share-based payment charge of £397,000 (2019: £274,000) has been reflected in the consolidated statement of comprehensive income.

The fair value of options granted in the current period and the assumptions used in the calculation are shown below:

Year of grant	2020 - CSOP	2020 - LTIP
Exercise price (£)	0.60	0.00
Number of awards granted	2,515,000	1,900,000
Performance based criteria (see Directors options for criteria)	No	Yes
Vesting period (years)	3	3
Expected Life (years)	7	4
Contractual life (years)	10	10
Risk free rate	0.048%	(0.0011)%
Expected dividend yield	1.40%	1.00%
Volatility	30%	27%
Fair value (£)	0.15	0.92

Movements in share-based payments are summarised in the table below:

	2020 Number of Awards	2020 Weighted average exercise price £	2019 Number of Awards	2019 Weighted average exercise price £
Outstanding at start of period	3,332,500	1.75	3,785,000	1.69
Granted	4,615,000	0.33	-	-
Exercised	(45,000)	1.00	(217,500)	1.00
Expired	(922,500)	1.11	(235,000)	1.48
Outstanding at end of period	6,980,000	0.90	3,332,500	1.75
Exercisable at 27 December 2020	405,000	1.00	735,000	1.00

The weighted average remaining contractual life of options outstanding at the end of the period is 6.66 years (2019: 3.58 years).

Previous issues of CSOPs in both 2016 and 2018 had a vesting period of 3 years, an expected life of 7 years and a contractual life of 10 years. The exercise price for the 2016 CSOPs was £1.00 and the exercise price for the 2018 CSOPs was £1.70. The JSOP has an exercise price of £2.05 and contractual life of 10 years.

At the end of the period there were 6,980,000 outstanding options. The breakdown of these is as follows:

405,000 - 2016 CSOP, 235,000 - 2018 CSOP, 1,925,000 - JSOP, 1,900,000 - LTIP and 2,515,000 - 2020 CSOP.

28 Financial commitments

From 1 October 2019, the Group has recognised right-of-use assets for these leases, except for short-term and low value leases, see Accounting Policies and Note 13 for further information. In the prior year, the Group had commitments under non-cancellable operating leases in respect of land and buildings. The Group's future minimum operating lease payments were as follows:

	Group 2020 £'000	Group 2019 £'000	Company 2020 £'000	Company 2019 £'000
Within one year	-	2,061	-	1,508
Between one and five years	-	8,242	-	6,031
After five years	-	17,991	-	13,923
	-	28,294	-	21,462

Commercial operating leases are typically for 15 to 25 years, although certain leases have lease periods extending up to 99 years.

29 Ultimate controlling party and related party transactions

(i) Ultimate controlling party and related party transactions

The Directors consider there to be no ultimate controlling party. The following related party transactions took place during the period:

£1,500 (2019: £15,006) was paid to Helen Watson, who is related to Clive Watson. At the period end Helen Watson was owed £nil (2019: £nil). Helen Watson has an existing £10,000 float with the group.

At the end of the prior period an advance of £20,000 was paid to Alex Derrick, which was repaid following his CSOP exercise in February 2020.

Clive Watson is an investment consultant to Mosaic. Richard Pricke tt , Non-Execu ti ve Director of the City Pub Group, is a Non-Executive Director of The Pioneer (City) Pub Company Limited, a company which forms part of the Mosaic Pub and Dining Group. James Watson, CEO of Mosaic, is related to Clive Watson.

 (ii) Remuneration of Key Management Personnel

The Company consider that the Directors are their key management personnel and further detail of their remuneration is disclosed in note 26.

No key personnel other than the directors have been identified in relation to the periods ended 27 December 2020 and 29 December 2019.

30 Post balance sheet events

New £5m CLBLS

In March 2021, the Company agreed a new £5m CLBLS facility through our bankers, Barclays over a 3 year period. This is in addition to our existing £35m RCF.

Covid 19 Insurance Payment

In March 2021, the Company also received the £1m insurance pay out from our insurers QBE for our claim relating to Covid.

KPH / Barts Pub Investment

We recently announced that we have acquired a 49% stake in Barts Pub Ltd, owner of the iconic Kensington Park Hotel (KPH), based in Ladbroke Grove for £750k. We will operate this pub under a management contract initially and have also secured an option to acquire the freehold of KPH to ensure that this asset comes into our ownership soon.

Mosaic Investment

We also recently announced that we increased our investment into Mosaic Pub and Dining (Tranche 1 of companies) by £1.2m in March 2021. Our total stake in Mosaic is now 24% for a total investment of £2.4m.

31 Capital commitments

At the period end the Group and Company has no capital commitments excluding the financial commitments disclosed in note 28.  

 

END

 

 

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