Interim Results

RNS Number : 8669M

City Pub Group PLC (The)

19 September 2019

 

The City Pub Group PLC

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

INTERIM RESULTS FOR THE 26 WEEK PERIOD ENDING 30 JUNE 2019

Strategic expansion drives sales and EBITDA growth

The City Pub Group is pleased to announce its unaudited results for the 26 weeks ended 30 June 2019. The Group operates a predominately freehold estate of 47 wet-led pubs in London, Southern England and Wales.

Highlights:

·    Revenue up 36% to £27.1 million (2018: £20.0 million)

·    Like for like sales increased by 2.6% year on year

·    Adjusted EBITDA* up 20% to £3.6 million (2018: £3.0 million)

·    Adjusted profit before tax** up 19% to £1.9 million (2018: £1.6 million)

* Adjusted earnings before exceptional items, share option charge, interest, taxation, depreciation and amortisation.

** Adjusted profit before tax is the profit before tax, share option charge and exceptional items.

·    Strategic expansion continued with four pubs opened in 2019. The expanded estate and our wet-led focus resulted in substantial EBITDA and sales growth. Progress has continued into the second half with sales up by 35% over the last eleven weeks.

·    With a further four projects in development and a continued focus on the existing estate, the Board expects the Group to continue to deliver significant growth for the foreseeable future.

·    The Group is beginning to see the benefits of the new regional management structure and the new Weekly Employee Bonus Scheme, both of which will drive growth and further incentivise the Group's employees.

·    Due to political and economic uncertainty the Group will take a much more prudent and even more selective approach to acquisitions and focus instead on completing the development sites for trading, reducing debt and improving the dividend for shareholders as cash generated increases, until a time where there is more certainty.

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

"Our targeted expansion of high-quality larger pubs with letting rooms has delivered strong progress for the Group in the first half. In the face of robust comparatives, we have delivered good like for like growth too. As our development sites begin trading during 2020, they will drive our performance onward. Our momentum has continued into the second half with strong sales growth.

"We cannot ignore the uncertainty in the market due primarily to Brexit and the potential impact of a No Deal. We are a management team that is focused on the long-term and as such we believe it is prudent for us to rein in our expansion programme until there is more certainty. Instead we will focus on getting our development sites trading, developing our existing estate, reducing our debt and improving our dividends for shareholders. This will further strengthen our position and minimise the impact of any headwinds whilst continuing to deliver significant growth into the future."

19 September 2019

This announcement contains inside information for the purposes of EU Regulation 596/2014.

Enquiries:
City Pub Group Clive Watson, Chairman Tarquin Williams, CFO
Instinctif Partners Matthew Smallwood Andy Low	[phone]
Liberum (Nomad & Joint Broker) Chris Clarke Edward Thomas Clayton Bush	[phone]
Berenberg (Joint Broker) Chris Bowman Toby Flaux Marie Stolberg	[phone]

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

CHAIRMAN'S STATEMENT

The Group has continued its expansion in the first half of the 2019. We now have 47 pubs trading, a further 3 sites in the development stage and a project to add additional bedrooms to an existing site. The Board's ambition of having an estate of around 65 pubs is well within our reach. As the Group expands, we are continuing to build our expertise and local knowledge in the areas we already trade in, thereby driving further growth and improving our overall performance.

Financial Highlights

The Board is pleased with the financial performance of the Group over the period. Highlights include:

-       Revenue growth of 36% to £27.1 million (2018: £20.0 million)

-       Adjusted EBITDA* increased by 20% to £3.6 million (2018: £3.0 million)

-       Adjusted Profit before tax** up 19% to £1.9 million (2018: £1.6 million)

These results have been achieved through our strategy of increasing the number of pubs we operate as well as delivering organic growth from the existing estate.

Like-for-like sales increased by 2.6% in the first six months. We are pleased with this result as it is against strong comparatives and a period which benefitted from the FIFA World Cup and hot weather. 

Operating margins were lower in the period primarily due to one-off investments to build infrastructure for future growth, including establishing a new regional management structure and the overlapping of the new Weekly Employee Bonus Scheme which replaced the Annual Employee Profit share. These projects will ensure that we have an optimal structure and rewards programme in place to provide a platform for us to grow. The Board is confident that operating margin will return to its growth trajectory. A target of 20% has been set by the end of 2021.

Trading Estate

The Group operates 47 high-quality predominantly drink-led pubs. It also acquired a freehold pub in London in July 2019, which is leased to another operator.

Since the start of the year the Group has opened the following pubs:

February: Pride of Paddington, a landmark pub opposite Paddington Station which benefits from letting accommodation.

April: The Hoste, an iconic site located in Burnham Market, North Norfolk, benefitting from 53 bedrooms as well as a lovely pub and dining area.

June: Aragon House, a landmark site located in London's Parsons Green with three trading floors, a large garden and 15 bedrooms.

July: Market House, a former Lloyd's Bank building located in Market Square, Reading, now operating as a large pub with 24 letting rooms and a rooftop garden.

The Board is satisfied with the performance of these new openings.  

In addition, there are 4 projects in the development pipeline:

Norwich - Land and building adjacent to our city centre site, the Georgian Town House. Works are ongoing and should be completed by end of the year, delivering a further 12 letting rooms, which will enhance the existing operation.

Exeter - Former Turks Head Pub. As part of our refurbishment programme we will be adding 6 letting rooms and a roof garden. It is expected to open in the second quarter of 2020.

Cambridge - Former Tivoli Pub. Planning permission has been received to redevelop the site with a roof garden. It is expected to open in the third quarter of 2020 and adds to our growing presence in Cambridge.

Bath - Former Nest Pub. This site is currently going through the planning process. We are targeting an opening date in the third quarter of 2020.

In addition to the sites acquired, we have a further site which we are in the process of completing the legal documentation for and we continue to appraise other opportunities. 

During the period we sold The Grapes in Oxford for £120,000.

The Group's acquisition strategy is focused on developing large, prominent sites in our target cities which ideally have existing letting rooms or at least space for us to develop some.  These types of pubs are attractive to us as, whilst obtaining the necessary consents can take time, they perform well and deliver strong returns.

Market / Brexit

We have been pleased with our trading performance to date. We operate in a market that is benefitting from full employment and low interest rates. Our focus continues to be building local custom in our pubs to ensure a sustainable pattern of trade. To assist this, we continue to evolve our retailing offer through innovation, better customer service and driving trade through the City Club App.

For us it is important to take into account both the long-term view of the future of the business and short term macro-economic factors. The uncertainty caused by Brexit hangs over the pub industry and the UK economy as a whole. The Board believes that given this, it is prudent at this time to be more discerning on our acquisition strategy. The reason behind our decision is primarily opportunism - prices of pubs should fall in a No Deal Brexit scenario.

The Group has grown rapidly in recent years and we have a number of development sites with significant potential to concentrate on in the short term, which together with additional management attention on the entire existing and development estate, there are considerable gains to be made providing substantial growth for some time to come.

The Group will continue to look at acquisitions of sites on a selective basis and take advantage of our ability to move quickly and decisively.

Regional Structure / Weekly Employee Bonus Scheme

The introduction of the Regional structure and the Weekly Employment Bonus Scheme have had an upfront cost, but have created a structure for further growth and provided additional motivation for our employees. The Board believes decentralisation of our head office functions will maintain our cutting edge as we go forward by empowering our management team further and enabling them to focus on the opportunity in their local markets. As part of this activity, we have appointed our first Regional Director, Jim Charlton, in our Western region and will make more appointments in our other divisions later this year.

The Weekly Employee Bonus Scheme has encouraged the overall entrepreneurial culture of the business with very tangible benefits of staff retention and improved productivity now coming through.

Banking Facilities / Borrowings

The Group entered into a new 5 year, £50 million banking facility (£35m facility with £15m accordion option) with Barclays Bank plc in July on more favourable terms than our previous facility. This renewed facility ensures that we are fully funded to make acquisitions at the appropriate time.

Current net debt is c. £30 million and it is the Board's intention to maintain this level, or even reduce it, until there is more clarity.

Dividend

It is currently Group policy not to declare interim dividends. The Board is committed to increasing dividends in line with earnings and will finalise the intended dividend payment when we announce our full year results in April 2020.

Current Trading

Sales in the 11 weeks since the period end have increased 35% driven by our strategy of opening larger sites and capitalising on local trading opportunities. The quality of our trading estate is continually improving and has been enhanced by the recent openings. The increased number of letting bedrooms across the estate will drive future operational efficiencies.

The Group's focus is now on raising the quality of the estate, completing our development programme, acquiring new sites on an opportunistic basis, reducing our debt and growing dividend payments for shareholders as cash generation increases.

Clive Watson

Chairman

19 September 2019

* Adjusted Earnings before exceptional items, share option charge, interest, taxation, depreciation and amortisation.

** Adjusted profit before tax is the profit before tax, share option charge and exceptional items

Consolidated Statement of Comprehensive Income

For the 26 weeks ended 30 June 2019

				Unaudited		Unaudited			Audited
				26 weeks ended		26 weeks ended			52 weeks ended
				30 June 2019		1 July 2018			30 December 2018
		Notes		£'000		£'000			£'000
Revenue				27,107		19,965			45,674
Costs of sales				(6,824)		(5,017)			(11,621)
Gross profit				20,283		14,948			34,053
Administrative expenses				(19,251)		(13,842)			(31,244)
Operating profit				1,032		1,106			2,809
Reconciliation to adjusted EBITDA*
Operating profit				1,032		1,106			2,809
Depreciation		6		1,594		1,207			2,552
Share option charge				180		181			377
Exceptional items		2		803		514			2,121
*Adjusted earnings before exceptional items, share option charge, interest, taxation and depreciation				3,609		3,008			7,859
Finance costs				(86)		(174)			(189)
Profit before tax				946		932			2,620
Tax expense		3		(436)		(176)			(654)
Profit for the period and total comprehensive income				510		756			1,966
Earnings per share
Basic earnings per share (p)		4		0.86		1.34			3.44
Diluted earnings per share (p)		4		0.85		1.33			3.41

All activities comprise continuing operations. There are no recognised gains or losses other than those passing through the statement of comprehensive income.

The accompanying notes are an integral part of these interim financial statements.

Consolidated Statement of Financial Position

As at 30 June 2019

				Unaudited				Unaudited				Audited
				26 weeks ended				26 weeks ended				52 weeks ended
				30 June 2019				1 July 2018				30 December 2018
Assets		Notes		£'000				£'000				£'000
Non-current
Intangible assets				4,136				3,090				3,794
Property, plant and equipment		6		107,770				78,590				90,020
Total non-current assets				111,906				81,680				93,814
Current
Inventories				880				580				960
Trade and other receivables				2,885				1,995				2,542
Cash and cash equivalents				3,114				2,842				2,853
Total current assets				6,879				5,417				6,355
Total assets				118,785				87,097				100,169
Liabilities
Current liabilities
Trade and other payables				(9,178)				(7,715)				(8,494)
Total current liabilities				(9,178)				(7,715)				(8,494)
Non-current
Borrowings				(30,000)				(7,000)				(11,600)
Other payables				(50)				(310)				-
Deferred tax liabilities				(1,879)				(1,096)				(1,537)
Total non-current liabilities				(31,929)				(8,406)				(13,137)
Total liabilities				(41,107)				(16,121)				(21,631)
Net assets				77,678				70,976				78,538
Equity
Share capital				30,692				29,196				30,651
Share premium				38,328				33,586				38,287
Own shares (JSOP)				(3,272)				(3,272)				(3,272)
Other reserve				92				92				92
Share-based payment reserve				883				507				703
Retained earnings				10,955				10,867				12,077
Total equity				77,678				70,976				78,538

The accompanying notes are an integral part of these interim financial statements.

Consolidated Statement of Changes in Equity

For the 26 weeks ended 30 June 2019

		Share capital £'000		Share premium £'000		Own shares (JSOP) £'000		Other reserve £'000		Share-based payment reserve £'000		Retained earnings £'000		Total £'000
Balance at 31 December 2017 (Audited)		28,234		31,276		-		92		326		11,382		71,310
Employee share-based compensation		-		-		-		-		181		-		181
Dividends		-		-		-		-		-		(1,271)		(1,271)
Purchase of JSOP shares		962		2,310		(3,272)		-		-		-		-
Transactions with owners		962		2,310		(3,272)		-		181		(1,271)		(1,089)
Profit for the period		-		-		-		-		-		756		756
Total comprehensive income for the period		-		-		-		-		-		756		756
Balance at 1 July 2018 (Unaudited)		29,196		33,586		(3,272)		92		507		10,867		70,976
Employee share-based compensation		-		-		-		-		196		-		196
Issue of new shares		1,455		4,701		-		-		-		-		6,156
Transactions with owners		1,455		4,701		-		-		196		-		6,352
Profit for the period		-		-		-		-		-		1,210		1,210
Total comprehensive income for the period		-		-		-		-		-		1,210		1,210
Balance at 30 December 2018 (Audited)		30,651		38,287		(3,272)		92		703		12,077		78,538
Employee share-based compensation		-		-		-		-		180		-		180
Dividends		-		-		-		-		-		(1,632)		(1,632)
Issue of new shares		41		41		-		-		-		-		82
Transactions with owners		41		41		-		-		180		(1,632)		(1,370)
Profit for the period		-		-		-		-		-		510		510
Total comprehensive income for the period		-		-		-		-		-		510		510
Balance at 30 June 2019 (Unaudited)		30,692		38,328		(3,272)		92		883		10,955		77,678

The accompanying notes are an integral part of these interim financial statements.

Consolidated Statement of Cashflows

For the 26 weeks ended 30 June 2019

		Unaudited		Unaudited		Audited
		26 weeks ended		26 weeks ended		52 weeks ended
		30 June 2019		1 July 2018		30 December 2018
		£'000		£'000		£'000
Cash flows from operating activities
Profit for the period		510		756		1,966
Taxation		436		176		654
Finance costs		86		174		189
Operating profit		1,032		1,106		2,809
Adjustments for:
Depreciation		1,594		1,207		2,552
Gain on disposal of property, plant and equipment		(1)		-		-
Share-based payment charge		180		181		377
Impairment		160		-		480
Change in inventories		80		(26)		(406)
Change in trade and other receivables		(273)		(343)		(992)
Change in trade and other payables		(2,112)		239		2,152
Cash generated from operations		660		2,364		6,972
Tax paid		(15)		(104)		(535)
Net cash from operating activities		645		2,260		6,437
Cash flows from investing activities
Purchase of property, plant and equipment		(8,787)		(7,083)		(11,430)
Proceeds from disposal of property, plant and equipment		50		-		-
Acquisition of new property sites		(9,840)		(5,332)		(14,361)
Net cash used in investing activities		(18,577)		(12,415)		(25,791)
Cash flows from financing activities
Proceeds from issue of share capital		82		-		5,973
Repayment of borrowings		-		-		(245)
Dividends paid		-		-		(1,087)
Proceeds from new borrowings		18,400		7,000		11,600
Interest paid		(289)		(418)		(449)
Net cash from financing activities		18,193		6,582		15,792
Net change in cash and cash equivalents		261		(3,573)		(3,562)
Cash and cash equivalents at the start of the period		2,853		6,415		6,415
Cash and cash equivalents at the end of the period		3,114		2,842		2,853

The accompanying notes are an integral part of these interim financial statements.

Notes to the Financial Statements

For the 26 weeks ended 30 June 2019

 

1       Basis of preparation

This interim report was approved by the board on 19 September 2019. The interim financial statements are unaudited and are not the Group's statutory accounts as defined in section 434 of the Companies Act 2006.

The consolidated interim financial statements have been prepared under IFRS as adopted by the European Union and on the basis of the accounting policies set out in the statutory accounts of The City Pub Group plc, for the period ended 30 December 2018. The financial statements have not been prepared (and are not required to be prepared) in accordance with IAS 34: 'Interim Financial Reporting'. They do not include any of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the period ended 30 December 2018.

Statutory accounts for the period ended 30 December 2018 have been delivered to the Registrar of Companies. These accounts contain an unqualified audit report under Section 495 of the Companies Act 2006, which did not make any statements under Section 498 of the Companies Act 2006.

The interim report is presented in Great British Pounds and all values are rounded to the nearest thousand pounds, except where otherwise indicated.

This interim report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

2        Exceptional items

			Unaudited				Unaudited				Audited
			26 weeks ended				26 weeks ended				52 weeks ended
			30 June 2019				1 July 2018				30 December 2018
			£'000				£'000				£'000
	Pre opening costs		506				450				1,455
	Impairment of a pub site (note 6)		160				-				480
	Other non recurring items		137				64				186
			803				514				2,121

3        Tax charge on profit on ordinary activities

The taxation charge is calculated by applying the Directors' best estimate of the annual effective tax rate to the profit for the period. All items of taxation are reflected through the Statement of Comprehensive Income.

			Unaudited				Unaudited				Audited
			26 weeks ended				26 weeks ended				52 weeks ended
			30 June 2019				1 July 2018				30 December 2018
			£'000				£'000				£'000
	Current income tax:
	Current income tax charge		436				162				604
	Adjustments in respect of previous period		-				-				(81)
	Total current income tax		436				162				523
	Deferred tax:
	Origination and reversal of temporary differences		-				14				131
	Adjustments in respect of previous period		-				-				-
	Total deferred tax		-				14				131
	Total tax		436				176				654

4        Earnings per share

			Unaudited		Unaudited		Audited
			26 weeks ended		26 weeks ended		52 weeks ended
			30 June 2019		1 July 2018		30 December 2018
			£'000		£'000		£'000
	Earnings for the period attributable to Shareholders
			510		756		1,966
	Earnings per share:
	Basic earnings per share (p)		0.86		1.34		3.44
	Diluted earnings per share (p)		0.85		1.33		3.41
	Weighted average number of shares:		Number of shares		Number of shares		Number of shares
	Weighted average shares for basic EPS		59,378,421		56,467,333		57,216,344
	Effect of share options in issue		644,168		374,862		476,688
	Weighted average shares for diluted earnings per share		60,022,589		56,842,195		57,693,032

5        Dividends

The Company declared a dividend of 2.75p per ordinary share during the year ended 30 December 2018, which was approved at the Annual General Meeting on 20^th May 2019. The dividend payable of £1,632,820 has been accrued as at 30 June 2019 and deducted from retained earnings.

After the period end £1,405,798 of the dividend was paid in cash and £227,022 was distributed as a scrip dividend.

6        Property, plant and equipment

		Freehold & leasehold property		Fixtures, fittings and computers
Group
						Total
Cost		£'000		£'000		£'000
At 31 December 2017 (Audited)		59,588		15,839		75,427
Additions		5,794		1,289		7,083
Acquisitions		4,473		294		4,767
At 1 July 2018 (Unaudited)		69,855		17,422		87,277
Additions		1,587		3,019		4,606
Acquisitions		7,245		1,344		4,469
At 30 December 2018 (Audited)		78,687		21,785		100,472
Additions		5,988		3,001		8,989
Acquisitions (Note 8)		10,344		288		10,632
Disposals		(91)		(64)		(155)
At 30 June 2019 (Unaudited)		94,928		25,010		119,938
Depreciation
At 31 December 2017 (Audited)		1,432		6,048		7,480
Provided during the period		149		1,058		1,207
At 1 July 2018 (Unaudited)		1,581		7,106		8,687
Provided during the period		200		1,145		1,345
Impairment		420		-		420
At 30 December 2018 (Audited)		2,201		8,251		10,452
Provided during the period		330		1,264		1,594
Impairment		48		112		160
Disposals		(19)		(19)		(38)
At 30 June 2019 (Unaudited)		2,560		9,608		12,168
Net book value
At 30 June 2019 (Unaudited)		92,368		15,402		107,770
At 30 December 2018 (Audited)		76,486		13,534		90,020
At 1 July 2018 (Unaudited)		68,274		10,316		78,590
At 31 December 2017 (Audited)		58,156		9,791		67,947

During the period ended 30 December 2018 the group made a provision for impairment against a Pub Site in Cambridge, due to poor performance and it has been reduced to its value in use, with the asset being held at its recoverable amount of £340,000. In addition, the group made a provision for impairment against the Grapes in Oxford, which was written down to its recoverable amount, with its disposal completed on 25th February 2019.

During the period ended 30 June 2019 the group made an additional provision for impairment against the Pub site in Cambridge, due to poor performance and it has been reduced to its value in use, with the asset being held at its recoverable amount of £150,000.

7        Business combinations

During the period ended 30 June 2019 the Group has acquired 2 new sites through business combinations, the fair values of the assets and liabilities acquired, and the nature of the consideration, are outlined within the table below.

All of the above acquisitions were part of the Group's continuing strategy to expand its pub portfolio via selective quality acquisitions. All other pub acquisitions have been accounted for as property acquisitions.

		Unaudited
		26 weeks ended
		30 June 2019
Fair value:		£'000
Property, plant and equipment acquired		10,632
Deferred tax liability		(343)
Goodwill		343
Total		10,632
Satisfied by:
Cash		9,840
Deferred consideration		792
Total		10,632

8        Events after the reporting period

The Group settled the final dividend, which was approved at the AGM in May 2019, on 1 July 2019.

In July 2019 the Company agreed a new £35 million revolving credit facility, with a £15 million accordion option, with Barclays Bank PLC.

On 12 July 2019, the Company purchased The Island, a freehold site in Kensal Green.

 

END

 

 

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