Final Results

RNS Number : 6472K

City Pub Group PLC (The)

12 April 2018

 

The City Pub Group PLC

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

Final Results for the 53 weeks ended 31 December 2017

Pivotal year in the evolution of the business with AIM listing, significant sales and EBITDA growth, strategic expansion and maiden PLC dividend.

The City Pub Group is pleased to announce its audited results for the 53 weeks ended 31 December 2017. The Group operates a predominately freehold estate of 34 wet-led pubs in Southern England and Wales. 5 additional sites acquired and a further 2 are to be completed imminently, bringing the size of the estate to 41.

Highlights:

·     Revenue up 35% to £37.4 million (2016: £27.8 million)

·     Strong performance with like for like sales growth of 3.8%, driven by good growth in drink and accommodation

·     Adjusted EBITDA* up 51% to £6.1 million (2016: £4.1 million)

·    Adjusted profit before tax** up 102% to £3.2 million (2016: £1.6 million)

·     Total annual dividend up 50% to 2.25p (2016: 1.50p)

·     Net debt to EBITDA of nil (2016: 3.3 times)

·     Reported (loss)/profit after tax including IPO and other exceptional items of (£0.7) million (2016: £0.4 million)

		2017								2016
		Revenue		Operating profit		EBITDA		(Loss)/profit before tax		Revenue		Operating profit		EBITDA		Profit before tax
		£m		£m		£m		£m		£m		£m		£m		£m
Reported		37.4		0.7		2.7		(0.2)		27.8		1.6		3.1		0.6
Share option charge		-		0.2		0.2		0.2		-		0.3		0.3		0.3
Exceptional items		-		3.2		3.2		3.2		-		0.7		0.7		0.7
Adjusted		37.4		4.1		6.1		3.2		27.8		2.6		4.1		1.6

* 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.

A number of the financial measures, including Adjusted Profit before tax and Adjusted EBITDA are not defined under IFRS, so they are termed 'Alternative Performance Measures' (APMs). Management use these measures to monitor the Group's financial performance alongside IFRS measures because they help illustrate the underlying performance and position of the Group.

·     Continued significant progress throughout the year including the combination of City Pub Company East and City Pub Company West to form the City Pub Group and admission to AIM - raising a total of £35m of new equity to fund future growth.

·     Strategic expansion with 8 pubs opened in 2017. This increased number of sites and wet-led focus of the business resulted in substantial EBITDA and sales growth.

·     A further 7 openings have already been earmarked for 2018 - additional sites have been identified and are in legals.

·     Dividends increased by 50% on 2016 to 2.25p per share and the Group's innovative Profit Share Scheme saw eligible Employees rewarded with a payment of £750 each as a result of the Group's strong financial performance.

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

"2017 was a pivotal year in the evolution of the business. Not only did we combine the two divisions under one roof, but we made the important step of listing on AIM. We have also continued to expand our high-quality drink-led estate which has significantly increased revenue and Group EBITDA. Our increased dividend signals the progress made, our strong financial performance and our confidence for the future.

The momentum from 2017 has continued into the current financial year and we have already earmarked 7 new pub openings for this year. We are on course to meet our target of doubling the size of the estate to around 65 pubs by mid-2021. We have a great head office team in place to deliver on this goal.

The sector continues to experience a number of well-trailed headwinds but we are positioned to meet these challenges and with our robust balance sheet, well invested estate and strong cash generation, we are confident of delivering continued strong progress and meeting our expectations for the year as a whole."

Enquiries:	12 April 2018
City Pub Group                                                                                                                                       Clive Watson, Chairman Tarquin Williams, CFO
Instinctif Partners Matthew Smallwood Andy Low	[phone]
Liberum (Nomad & Joint Broker)                       Chris Clarke Jill Li Clayton Bush	[phone]
Berenberg (Joint Broker)                                    Chris Bowman Toby Flaux Marie Stolberg	[phone]

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

 

CHAIRMAN'S STATEMENT

2017 was a pivotal year in the evolution of the City Pub Group. At the end of last October, the City Pub Company (East) Plc ("CPCE") combined with City Pub Company (West) Ltd ("CPCW") to form the City Pub Group plc. The Group was subsequently listed onto AIM on 23 November 2017 raising £35m at 170p. EIS shareholders also placed £11.6m of shares with new institutional shareholders.

The AIM listing achieved a liquidity event for existing EIS shareholders and the Group's statement of financial position has been significantly strengthened providing the platform for the Group to acquire further pubs and double the size of its estate to around 65 pubs by mid-2021.

2017 was a strong year financially with sales up 35% to £37.4m, adjusted EBITDA up 51% to £6.1m and adjusted EBITDA margin increased from 14.7% to 16.4%.

The Board recommends a final dividend of 2.25p per share (2016 1.5p) representing a 50% increase on the prior year.

Trading Estate

The Group is made up of 39 high quality local pubs that are predominately drink led. The Group has grown steadily by selective acquisitions to build the Group as it is today (34 trading & 5 completed acquisitions to open).

2017 was a year of significant growth and development driven by acquisitions and good performance. The Group began the year trading with 25 pubs and 3 newly acquired sites that had yet to trade.

At the end of January, the Group opened its first pub in Southampton, the London Road Brew House (previously Varsity). It had a very encouraging start and has continued to improve performance in the early stages of 2018.

A busy February saw the Group increase its presence in Oxford through the acquisition of Beerd on George Street. This pub traded as Beerd until August before being closed for refurbishment and reopening as The Grapes. At the end of this month we also opened The Petersfield in Cambridge (previously called Backstreet Bistro).  During February the Group also acquired its tenth London pub, The Three Crowns in Shoreditch, which was closed for a minor refurbishment before reopening at the end of March. Performance of the Three Crowns has been encouraging to date and with significant development of the local area in progress, we see further potential for growth.

After significant investment, May saw the highly anticipated opening of our largest pub, The Walrus in Brighton. The pub, previously named Smugglers, was purchased in 2015 and it has traded well under our ownership, building on its strong start with an excellent Christmas performance.

In June, the Group added another two well-established freeholds to its estate: the Old Fire House in Exeter and The Red Lion in Histon, Cambridge. The Group also added The Waterman in Cambridge, in July, building on its existing presence in the area. The Waterman has had a major refurbishment.

In September 2017, the Group acquired Aragon House, a freehold pub on the New Kings Road in London, which is due to open in September 2018. The acquisition of the long-leasehold interest of the King Street Brew House in Bristol towards the end of the year further strengthened the balance sheet.

The momentum since IPO in November 2017 has continued with the Group acquiring five further pubs to date and exchanging contracts on another 2 pubs.

·     The Belle Vue in Clapham, a freehold asset, was acquired in January and re-opened at the end of February following a minor refurbishment. 

·     An all-vegan pub in Parsons Green in London will open in April 2018

·     The acquisition of two further freehold pubs in Reading and Cardiff allowed the Group to expand its geographic footprint

·     The completion of the acquisition of the Old Ticket Office in Cambridge has seen the Group further grow its existing hub there

·     Most recently, contracts have been exchanged on two new sites with completion expected at the end of April.

Once the development pubs are opened and contracts for the new pubs completed, the Group will have 41 sites of which 56% are freehold.

Market

While the wider UK pub sector has experienced contraction, the managed pub sub-sector in which the Group operates is forecast to grow in value by 11% from £9.9 billion in 2016 to £11.1 billion in 2019 (Source: MCA UK Pub Market Report).

The Directors believe this growth is driven by consumer preferences moving away from chain and branded pubs and towards pubs with an individual identity and an ambience which reflects the local market. Together with the move toward individual pubs, consumer tastes have continued to evolve, trending towards craft ales and lagers, premium spirits and wines and good quality food which incorporate local produce. The Directors therefore believe that a managed pub with an entrepreneurial tenant or owner, who is able to tailor both the ambience and product range of a pub to its local target market, can retain the flexibility required to respond to evolving consumer trends.

Financial Highlights

As the number of pubs has increased the Group has benefitted from economies of scale which has assisted the financial performance of the Group.

Summary for the year ended 31 December 2017:

-     Revenue up 35% to £37.4 million (2016: £27.8 million)

-     Adjusted EBITDA* up 51% to £6.1 million (2016: £4.1 million)

-     Adjusted profit before tax** up 102% to £3.2 million (2016: £1.6 million)

-     Reported (loss) / profit of (£0.7) million (2016: £0.4 million)

-     Total annual dividend up 50% to 2.25p (2016: 1.50p)

-     Net debt to EBITDA ratio of nil  (2016: 3.3 times).

*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.

The reported loss has been adversely affected by a number of one off costs largely relating to the flotation (see Note 8 for further explanation).

The Board is pleased with the significant increase in the Group's adjusted EBITDA performance

and the improvements in its operating (EBITDA) margins which have increased from 14.7% to 16.4% and should increase further as the central overhead base becomes more efficient.

Statement of Financial Position and Bank Borrowings

As a result of the equity fundraising the statement of financial position has been significantly strengthened. Using the net proceeds of the IPO, the Group repaid its revolving credit facility and ended the year without any borrowings and subsequent to the recent pub purchases bank debt remains low at approximately £3m.

The Group has in place a £30m revolving credit facility with Barclays expiring in July 2021. At the appropriate time it is the Board's intention to renegotiate these facilities, increase their quantum extend the length. The Board has adopted a conservative gearing policy of approximately 30% of asset value and will also utilise cash generated from the existing estate to  fund acquisitions.

Board

With the amalgamation of CPCE and CPCW, Rupert Clark and Alex Derrick were appointed Joint Group Managing Directors responsible for the day-to-day operations of the Group.

 As Executive Chairman I am responsible for managing the Board, the growth of the Group and exploring further acquisition opportunities.

On listing, Richard Prickett was appointed Senior Independent Director with James Watson stepping down after 5 years as a Board member. We thank James for his contribution to the success of the business.

In January this year Neil Griffiths became our second independent Director. Neil, formerly Chief

Operations Officer of Punch Plc, replaced David Bruce who was one of the Co-Founders of the Group. The Board is immensely grateful to David for his energy, insight and guidance as we went from start up to trading on AIM.

Dividend

The Board's intention is to have a progressive dividend policy  increasing future dividends in line with underlying performance of the Group.

The Board recommends a final dividend of 2.25p per share (2016 1.50p) representing a 50% increase on the prior year. If approved, at the Company's AGM, the dividend will be paid on 30 June to shareholders on the share register as of 31 May 2018. As previously, a scrip dividend alternative will be available to those shareholders who wish to receive their dividends in shares. I will be electing to subscribe for the scrip dividend for the entirety of my holding.

Employee Profit Share

With retention of staff becoming increasingly important, the Board believes that the Group is at the forefront of the industry in rewarding its employees. In 2015 the Board put in place an innovative Profit Share Scheme so that all employees could share in the Company's success.

As a result of the Employee Profit Share Scheme, employees who had been with the Group since 1 January 2017 were each paid £750 representing an increase of over 30% on last year's payment. By sharing up to 3% of the Group's EBITDA less bank interest we continue to build and retain a motivated and incentivised workforce.

Annual General Meeting

The AGM will be held at Temple Brew House at 11am on Monday 14 May 2018.

Current Trading & Outlook

For the first 14 weeks of the year, total sales were up 22% on prior year with 34 sites open and trading. The snow in the first quarter adversely impacted trading for a short period, however with key sporting events, particularly the World Cup football tournament in June, the opening of the pubs already earmarked for 2018 and a strong acquisition pipeline, we are confident of delivering continued strong progress and meeting expectations for the year as a whole.

The last six months have seen us complete the initial part of our journey and start our second stage. In common with all in the hospitality industry, there are challenges such as rising employee costs, business rates increase and uncertainty around Brexit. Increasing sales, scale and efficiency will mitigate the bulk of these.

The Board is confident that with its strong trading estate and balance sheet we are well placed to take advantage and will benefit from weakening acquisition prices as we expand our portfolio. 

I would like to take this opportunity to thank everyone: employees, advisors, suppliers, banks and my co-directors for their contributions in enabling this Group to thrive thus far. The City Pub Group has the opportunity to continue to grow and prosper and build on the solid foundations already in place.

Clive Watson

Chairman

The City Pub Group plc

 

BUSINESS REVIEW

Financial Performance

		2017								2016
		Revenue		Operating profit		EBITDA		(Loss)/profit before tax		Revenue		Operating profit		EBITDA		Profit before tax
		£m		£m		£m		£m		£m		£m		£m		£m
Reported		37.4		0.7		2.7		(0.2)		27.8		1.6		3.1		0.6
Share option charge		-		0.2		0.2		0.2		-		0.3		0.3		0.3
Exceptional items		-		3.2		3.2		3.2		-		0.7		0.7		0.7
Adjusted		37.4		4.1		6.1		3.2		27.8		2.6		4.1		1.6

The Group has a strong financial position as a cash generative business with a high quality, mainly freehold asset base. The bank debt has been repaid leaving the ratio of net debt to pro forma EBITDA of nil (2016: 3.3 times).

We have grown our revenue by 35% on the prior year with the majority of  growth coming from the eight new pubs opened in the year along with the strong like for like trading of the existing estate. Our adjusted operating profit before separately disclosed exceptional items grew by 62% to £4.1 million (2016: £2.6 million).

Adjusted EBITDA increased by 51% to £6.1 million (2016: £4.1 million) reflecting the performance of the larger estate. There was an increase in depreciation of 28% on the prior period. Net finance costs before separately disclosed exceptional items are in line with prior year at £1.0 million. 

The Group generated cash from operating activities of £4.0 million (2016: £4.2 million). In line with our acquisition strategy, we invested £17.3 million on the acquisition and opening of eight pubs during the year, including the subsequent refurbishments. The new sites were - The Grapes in Oxford, The Petersfield in Cambridge, The Three Crowns in Shoreditch, The Old Fire House in Exeter, The Red Lion in Histon, The Waterman in Cambridge, Aragon House in Parson's Green and what will be a vegan pub also in Parson's Green. 

The Group has £30 million of available long term facilities, available until June 2021. The Group had repaid all the bank debt following the equity raise at the time of the IPO. There is a further £6.4 million of cash held on the statement of financial position at year end. 

Separately disclosed exceptional items before tax of £3.2 million comprised £0.45 million impairment provision on a Bristol site, £0.9 million of pre-opening costs expensed and £1.8 million of costs related to the IPO. Before separately disclosed exceptional items and share option charge, adjusted profit before tax was therefore £3.2 million (2016: £1.6 million).

Tax has been provided for at a rate of 19.25% (2016: 20.0%) on adjusted profits. A full analysis of the tax charge for the year is set out in note 7. 

 

THE CITY PUB GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE 53 WEEK PERIOD TO 31 December 2017

			2017			2016
	Notes		£			£
Revenue	4		37,403,515			27,762,513
Costs of sales			(9,657,731)			(7,529,656)
Gross profit			27,745,784			20,232,857
Administrative expenses			(27,019,242)			(18,680,490)
Operating profit			726,542			1,552,367
Reconciliation to adjusted EBITDA*
Operating profit			726,542			1,552,367
Depreciation and amortisation	5		1,963,891			1,528,660
Share option charge	25		258,195			310,479
Exceptional items	8		3,200,643			691,185
* Adjusted earnings before exceptional items, share option charge, interest, taxation, depreciation and amortisation			6,149,271			4,082,691
Finance costs	6		(986,560)			(971,415)
(Loss)/profit before tax	5		(260,018)			580,952
Tax expense	7		(456,423)			(196,680)
(Loss)/profit for the period and total comprehensive income			(716,441)			384,272
Earnings per share
Basic (loss)/earnings per share (p)	10		(2.45)			1.49
Diluted (loss)/earnings per share (p)	10		(2.45)			1.44

 

THE CITY PUB GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE 53 WEEK PERIOD TO 31 December 2017

			2017		2016
Assets	Notes		£		£
Non-current
Intangible assets	11		2,524,681		1,359,713
Property, plant and equipment	12		67,947,419		50,426,116
Total non-current assets			70,472,100		51,785,829
Current
Inventories	14		553,909		466,319
Trade and other receivables	15		1,652,888		1,182,942
Cash and cash equivalents			6,414,854		1,264,586
Total current assets			8,621,651		2,913,847
Total assets			79,093,751		54,699,676
Liabilities
Current liabilities
Trade and other payables	16		(6,147,068)		(4,633,119)
Borrowings	18		(244,707)		(294,396)
Total current liabilities			(6,391,775)		(4,927,515)
Non-current
Borrowings	18		-		(18,004,917)
Other payables	17		(310,000)		(24,978)
Deferred tax liabilities	21		(1,081,823)		(534,097)
Total non-current liabilities			(1,391,823)		(18,563,992)
Total liabilities			(7,783,598)		(23,491,507)
Net assets			71,310,153		31,208,169
Equity
Share capital	22		28,233,667		12,934,904
Share premium	22		31,276,189		97,000
Convertible preference share (CPS)	22		-		5,532,076
Other reserve	22		92,042		90,000
Share-based payment reserve	22		326,364		798,079
Retained earnings	22		11,381,891		11,756,110
Total equity			71,310,153		31,208,169

 

THE CITY PUB GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE 53 WEEK PERIOD ENDED 31 December 2017

	Notes		Share capital		Share premium		Convertible preference share ("CPS")		Other reserve		Share-based payment reserve		Retained earnings		Total
Balance at 28 December 2015			12,910,404		-		4,188,716		-		487,600		11,371,838		28,958,558
Employee share-based compensation	25		-		-		-		-		310,479		-		310,479
Issue of convertible preference shares treated as equity	22		-		-		1,343,360		-		-		-		1,343,360
Issue of share capital on private placement	22		24,500		97,000		-		90,000		-		-		211,500
Transactions with owners			24,500		97,000		1,343,360		90,000		310,479		-		1,865,339
Profit for the period			-		-		-		-		-		384,272		384,272
Total comprehensive income for the period			-		-		-		-		-		384,272		384,272
Balance at 25 December 2016			12,934,904		97,000		5,532,076		90,000		798,079		11,756,110		31,208,169
Employee share-based compensation	25		-		-		-		-		258,195		-		258,195
Issue of new shares prior to exchange for shares in subsidiary	22		69,114		-		-		146,948		-		-		216,062
Reclassification of CPS debt on conversion of equity	22		-		(144,906)		4,734,378		(144,906)		-		-		4,444,566
Re-designation of CPS into ordinary shares	22		3,208,268		7,058,186		(10,266,454)		-		-		-		-
Issue of new shares	22		11,455,256		24,904,784		-		-		-		-		36,360,040
Bonus issue of B Shares	22		588,000		(588,000)		-		-		-		-		-
Purchase of own shares	22		(21,875)		(50,875)		-		-		-		-		(72,750)
Share options exercised	25		-		-		-		-		(729,910)		729,910		-
Dividends	9		-		-		-		-		-		(387,688)		(387,688)
Transactions with owners			15,298,763		31,179,189		(5,532,076)		2,042		(471,715)		342,222		40,818,425
Loss for the period			-		-		-		-		-		(716,441)		(716,441)
Total comprehensive income for the period			-		-		-		-		-		(716,441)		(716,441)
Balance at 31 December 2017			28,233,667		31,276,189		-		92,042		326,364		11,381,891		71,310,153

 

THE CITY PUB GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE 53 WEEK PERIOD ENDED 31 December 2017

			2017		2016
	Notes		£		£
Cash flows from operating activities
(Loss)/profit for the period			(716,441)		384,272
Taxation	7		456,423		196,680
Finance costs	6		986,560		971,415
Operating profit			726,542		1,552,367
Adjustments for:
Depreciation and amortisation	5		1,963,891		1,528,660
Share-based payment charge	25		258,195		310,479
Impairment	12		450,000		-
Change in inventories			(87,590)		(132,209)
Change in trade and other receivables			(366,233)		(358,361)
Change in trade and other payables			1,252,254		1,287,921
Cash generated from operations			4,197,059		4,188,857
Tax paid			(150,832)		21,843
Net cash from operating activities			4,046,227		4,210,700
Cash flows from investing activities
Purchase of property, plant and equipment	12		(7,610,731)		(10,306,748)
Acquisition of new property sites	26		(11,454,000)		(8,800,000)
Net cash used in investing activities			(19,064,731)		(19,106,748)
Cash flows from financing activities
Proceeds from issue of share capital			34,678,775		2,447,030
Repayment of borrowings			(13,610,040)		(1,100,000)
Dividends paid	9		(227,092)		-
Purchase of own shares			(72,750)		-
Proceeds from new borrowings			-		13,560,351
Interest paid	6		(600,121)		(677,021)
Net cash from financing activities			20,168,772		14,230,360
Net change in cash and cash equivalents			5,150,268		(665,688)
Cash and cash equivalents at the start of the period			1,264,586		1,930,274
Cash and cash equivalents at the end of the period			6,414,854		1,264,586

 

THE CITY PUB GROUP PLC

NOTES

FOR THE 53 WEEK PERIOD ENDED 31 December 2017

1       Company information

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 28.

Exemption from audit

For the period ended 31 December 2017 The City Pub Group plc has provided a guarantee in respect of all liabilities due by its subsidiary The City Pub (West) Limited (Company No. 07814571) and Flamequire Limited (Company No. 01834157) thus entitling them to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies.

2        Basis of preparation

2.1     Basis of preparation

The figures for the 53 week period ended 31 December 2017 have been extracted from the audited statutory financial statements for the period on which the auditors have issued an unqualified opinion. The financial information attached has been prepared in accordance with the recognition and measurement requirements of international financial reporting standards (IFRS) as adopted by the EU and international financial reporting interpretations committee (IFRIC) interpretations issued and effective at the time of preparing those financial statements. The accounting policies applied in the period ended 31 December 2017 are consistent with those applied in the financial statements for the period ended 25 December 2016 having noted the predecessor value method of accounting has been adopted to account for the business combination of the Group.

The financial information for the period ended 31 December 2017 does not constitute statutory financial information as defined in Section 434 of the Companies Act

2006 and does not contain all of the information required to be disclosed in a full set of IFRS financial statements. This announcement was approved by the Board of Directors and authorised for issue on 12 April 2018. The auditor's report on the financial statements for 31 December 2017 was unqualified, and did not include reference to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain a statement under either Section 498 (2) or 498 (3) of the Companies Act 2006.

2.2    New and Revised Standards

IFRS in issue but not applied in the annual financial statements

The following IFRS and IFRIC Interpretations have been issued but have not been applied by the Group in preparing the annual 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.

·     IFRS 9, 'Financial instruments', effective date 1 January 2018

·     IFRS 15, 'Revenue from Contracts with Customers', effective date 1 January 2018

·     IFRS 16, 'Leases', effective date 1 January 2019

·     Disclosure Initiative: Amendments to IAS 7: Statement of Cash Flows (effective: 1 January 2017)

·     Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses (effective: 1 January 2017).

·     IFRIC 22, 'Foreign Currency Transactions and Advance Consideration (effective: 1 January 2018 and not yet endorsed by the EU).

·     "Amendments to IFRS 2 Classification and Measurement of Share Based Payment Transactions", "Amendments to IAS 40 Investment Property and Annual Improvements to IFRS Standards 2014 -2016 Cycle" (Mandatory in 2018 and not endorsed by the EU)

·     "Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts" (Endorsed by the EU and mandatory in 2018)

·     IFRIC 23 "Uncertainty over Income Tax Treatments" (Mandatory in 2019 and not yet endorsed by the EU)

·      "Amendments to IFRS 9: Prepayment Features with Negative Compensation", "Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures", "Annual Improvements to IFRS Standards 2015-2017 Cycle" and "Amendments to IAS19 - Plan Amendment, Curtailment or Settlement" (Mandatory in 2019 and not yet endorsed by the EU)

·     IFRS 17 "Insurance Contracts" (Mandatory in 2021 and not yet endorsed by the EU)

The above standards are yet to be subject to a detailed review. IFRS 9 will impact both the measurement and disclosure of financial instruments, IFRS 15 is not considered to have a material impact on revenue recognition and related disclosures, given the nature of retail pub sales to the public. IFRS 16 will impact the treatment of leases currently treated as operating leases, but beyond this, it is not practicable to provide a reasonable estimate of the effect of IFRS 16 until a detailed review has been completed.

2.3     Predecessor value method

During the period 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.

The share capital and convertible preference shares issued to effect the merger (accounted for under the predecessor value method) had a nominal value of £6,530,316 and £5,133,227 respectively (representing £6,455,202 in respect of shares as at 28 December 2015 and £75,144 subsequent to that date; representing £2,094,358 in respect of the equity element of the CPS as at 28 December 2015 and £3,038,869 subsequent to that date).  This results in enlarged share capital and convertible preference share balances for the group of £12,910,404 and £4,188,716 as at 28 December 2015.  Replacement share options issued have also been accounted for under the predecessor value method.

As a common control combination, the transaction is outside the scope of IFRS 3 ('Business Combinations') and the Directors have therefore considered the nature of the transaction, which is eligible for Merger Relief under the Companies Act and decided that the predecessor value method would be most appropriate for preparing the annual 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 has arisen on the combination. The comparative period has been restated as if the combination had taken place at the beginning of the comparative period, as the Directors consider this to give the user the most meaningful information to assess the performance of the Group.

The use of the predecessor value method has given 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.

2.4     Going concern

The Directors consider it appropriate to prepare the annual financial statements on a going concern basis.  Cash flow forecasts have been produced to June 2019 that indicate the Company has sufficient headroom to meet its liabilities as they fall due for the foreseeable future.  The Company has repaid its borrowings with its bankers, Barclays Bank during the year.  

2.5     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.

2.6     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.

2.7     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.

2.8     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 and non-recurring costs, which are not expected to recur. Costs associated with the IPO have been recorded within non-recurring costs.

2.9     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 recognised on an effective interest rate basis, resulting from the financial liability being recognised on an amortised cost basis, including commitment fees. Finance expense also includes the accrued dividends on the convertible preference shares ("CPS").

2.10   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 annual 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.

2.11   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 financial assets are classified into the following categories upon initial recognition:                                     

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Trade and other receivables

Trade and other receivables do not carry any interest and are recognised at their original invoiced amounts, less an allowance for any amounts that are not considered collectible. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit or loss within 'cost of sales'. When a trade or other receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against 'cost of sales' in the profit or loss.

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 22, the Group considers its capital to comprise its ordinary share capital, share premium and accumulated retained earnings plus its preference shares which are classified as a financial liability in the statement of financial position. There have been no changes to what the Group considers to be capital since the prior year.

Convertible Preference Shares

The Group's convertible preference shares are reported under equity and non-current liabilities, as apportioned on recognition. The corresponding dividends on preference shares are charged as interest in the Income Statement, with any accrued interest recorded as a current liability. Preference shares carry interest at fixed rates. On conversion the equity and non-current liabilities are extinguished in exchange for ordinary shares, with the initial costs of raising the capital incurred on issue being off-set against the share premium. The preference shares have all been converted in the current period.

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.

2.12   Business combinations and goodwill

Other than the group reorganisation that took place prior to Listing, business combinations, which include sites that are operating as a going concern at acquisition, 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 positionas 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.

2.13   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.

2.14   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 received from post-acquisition profits. Distributions received in excess of post-acquisition profits are deducted from the cost of the investment.

            2.15   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.

            2.16   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.

            2.17   Leasing

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.

            2.18   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.

3          Significant estimates and judgements

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

The selection of the predecessor value method, rather than the acquisition method, for accounting for the common control combination was a significant judgement for the directors. The predecessor value method was considered to better reflect the nature of the common control combination, which met the requirements for Merger Relief under the Companies Act 2006, and is considered to give users of the annual financial statements better comparability for assessing the performance of the combined businesses.

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 and choosing a suitable discount rate. Full details are supplied in note 11, together with an analysis of the key assumptions.

The assessment of fair values for the assets and liabilities recognised in the annual financial statements on the acquisition of a business and additional consideration, and the date that control is obtained, require significant judgement and estimate. Management assess fair values, particularly for property, plant and equipment, with reference to current market prices. See note 26 for business combinations and property purchases made in the year.

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, depreciation and amortisation) 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.

				2017			2016
				£			£
	Revenue			37,403,515			27,762,513
	Cost of sales			(9,657,731)			(7,529,656)
	Gross profit			27,745,784			20,232,857
	Operating expenses:
	- operating expenses before adjusting items			(21,596,513)			(16,150,166)
	Adjusted EBITDA			6,149,271			4,082,691
	- Depreciation and amortisation			(1,963,891)			(1,528,660)
	- Share option charge			(258,195)			(310,479)
	- exceptional items			(3,200,643)			(691,185)
	Total operating expenses			(27,019,242)			(18,680,490)
	Operating profit			726,542			1,552,367

5          (Loss)/profit on ordinary activities before taxation

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

		2017		2016
		£		£
Costs of inventories recognised as an expense		10,412,084		7,963,682
Staff costs (note 23)		14,003,402		10,848,862
Depreciation		1,963,891		1,528,660
Fees payable to the company's auditor for the audit of the company's financial statements		52,500		65,000
Fees payable to the company's auditor for the audit of the group financial statement		10,000		-
Tax compliance		15,661		10,225
Tax advisory services		56,948		27,302
Corporate finance services		185,988		-
Exceptional costs (note 8)		3,200,643		691,185
Operating leases - land and buildings		1,256,182		962,350

6    Interest payable and similar charges      

		2017		2016
		£		£
On bank loans and overdrafts		417,952		380,067
On CPS and other loans		323,901		296,952
Accrued dividend on CPS		244,707		294,396
		986,560		971,415

During the period, no interest was capitalised; (2016: £nil).

The accrued dividend on the CPS was paid in January 2018.

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 profit for the period and represents:

		2017		2016
Current income tax:		£		£
Current income tax charge		335,014		35,498
Adjustments in respect of previous period		44,114		(21,843)
Total current income tax		379,128		13,655
Deferred tax:
Origination and reversal of temporary differences		85,229		192,364
Adjustments in respect of deferred tax of previous period		(7,934)		(400)
Change in corporation tax rate		-		(8,939)
Total deferred tax		77,295		183,025
Total tax		456,423		196,680

(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 19.25% (2016: 20.00%). The differences are explained as follows:

		2017		2016
		£		£
(Loss)/profit on ordinary activities before tax		(260,018)		580,952
(Loss)/profit on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.25% (2016: 20.0%)		(50,054)		116,190
Effect of:
Fixed asset differences		53,187		(26,732)
Items not deductible for tax purposes		598,830		184,754
Adjustment in respect of previous periods		44,114		(21,843)
Adjustment in respect of previous periods - deferred tax		(7,934)		(400)
Share options tax deduction		(181,720)		-
Change in corporation tax rate		-		(55,289)
Total tax charge		456,423		196,680

8     Exceptional items

		2017		2016
		£		£
Pre opening costs		852,718		574,688
Impairment of a pub site		450,000		-
Other non recurring items		1,897,925		116,497
		3,200,643		691,185

            Other non-recurring items include IPO costs expensed totalling £1,841,190 for the period ended 31 December 2017.

9     Dividends

Dividends paid during the reporting period

The Board declared its maiden dividend of 1.5p per share 50p Ordinary share for shareholders on the share register as at 31 May 2017, which was approved at the Annual General Meeting and paid on 30 June 2017. The dividend per share was the same for The City Pub Company (West) Limited and in total the dividend was £387,688.

Dividends not recognised at the end of the reporting period

Since the year end, the Directors have proposed the payment of a dividend in respect of the full financial year of 2.25p per fully paid Ordinary share (2016: 1.5p). The aggregate amount of the proposed dividend expected to be paid out of retained earnings at 30 June 2018, but not recognised as a liability at the year end, is £1,270,515 (2016: £387,688).

10     Earnings per share

		2017		2016
		£		£
(Loss)/earnings for the period attributable to Shareholders
		(716,441)		384,272
(Loss)/earnings per share:
Basic (loss)/earnings per share (p)		(2.45)		1.49
Diluted (loss)/earnings per share (p)		(2.45)		1.44
Weighted average number of shares:		Number of shares		Number of shares
Weighted average shares for basic EPS		29,189,803		25,820,809
Effect of share options in issue		n/a		886,428
Weighted average shares for diluted earnings per share		n/a		26,707,237

 

11     Goodwill

		Group		Group
		2017		2016
		£		£
Cost brought forward		1,359,713		1,359,713
Additions		1,164,968		-
At end of period		2,524,681		1,359,713
Amortisation/impairment brought forward		-		-
Provided during the period		-		-
Disposal		-		-
At end of period		-		-
Net book value at end of period		2,524,681		1,359,713
Net book value at start of period		1,359,713		1,359,713

The carrying value of goodwill included within the Group statement of financial position is £2,524,681 (Company: £1,102,295), which is allocated to the cash-generating unit ("CGU") of groupings of public houses as follows:

		Group		Group
		2017		2016
		£		£
Freehold		2,072,198		1,037,231
Leasehold		452,483		322,482
		2,524,681		1,359,713

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.

The fair value less costs to sell is calculated based on the market value of the associated property and the discounted operating cash flows based on management's forecasts.

For the 53 week period ended 31 December 2017, the cash-generating unit recoverable amount was determined based on value-in-use calculations, using cash flow projections based on one year budgets, 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 10%). 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.

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.

The calculations show that a reasonably possible change, as assessed by the directors, would not cause the carrying amount of the CGU to exceed its recoverable amount.
 

12     Property, plant and equipment

		Freehold & leasehold property		Fixtures, fittings and computers
Group
						Total
Cost		£		£		£
At 28 December 2015		28,302,765		8,085,317		36,388,082
Additions		6,521,782		3,782,292		10,304,074
Acquisitions		8,800,000		-		8,800,000
At 25 December 2016		43,624,547		11,867,609		55,492,156
Additions		4,654,086		2,956,645		7,610,731
Acquisitions (Note 26)		11,309,465		1,014,998		12,324,463
At 31 December 2017		59,588,098		15,839,252		75,427,350
Depreciation
At 28 December 2015		1,052,447		2,484,933		3,537,380
Provided during the period		205,275		1,323,385		1,528,660
Reclassification		(338,937)		338,937		-
At 25 December 2016		918,785		4,147,255		5,066,040
Provided during the period		276,296		1,687,595		1,963,891
Impairment		237,000		213,000		450,000
At 31 December 2017		1,432,081		6,047,850		7,479,931
Net book value
At 31 December 2017		58,156,017		9,791,402		67,947,419
At 25 December 2016		42,705,762		7,720,354		50,426,116
At 28 December 2015		27,250,318		5,600,384		32,850,702

During the period ended 31 December 2017 the group has made a provision for impairment against a Pub Site in Bristol, due to poor performance and it has been reduced to its fair value less costs to sell. The fair value less costs to sell represents a Level 3 fair value measurement, with the asset being held at its recoverable amount of £200,000.

 

13     Investments in subsidiaries

	2017	2016
Company	£	£
At start of period	250,153	250,153
Additions	11,663,543	-
At 31 December 2017	11,913,696	250,153

During the year the Company entered into a Scheme of Arrangement to acquire 100% of the Ordinary Shares, 100% of the Ordinary B Shares and 100% of the Convertible Preference Shares of The City Pub Company (West) Limited in exchange for the issue of the same number and type of new shares by the Company, see note 22 for further information.

The Company had the following subsidiary undertakings as at 31 December 2017:

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%	Management and operation of public houses
The Fat Pheasant Pub Company Limited	Ordinary	England and Wales	100%	Dormant
Ace High Enterprises Limited	Ordinary	England and Wales	100%	Dormant
Flamequire Limited*	Ordinary	England and Wales	100%	Dormant
Inn on the Beach Limited*	Ordinary	England and Wales	100%	Dormant

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

* These companies are held indirectly through the Company's 100% subsidiary The City Pub Company (West) Limited.

14     Inventories

		Group		Group
		2017		2016
		£		£
Finished goods and goods for resale		553,909		466,319

 

15     Trade and other receivables

		Group		Group
		2017		2016
		£		£
Trade receivables		133,520		106,057
Other receivables		510,946		406,160
Amounts due from group undertakings		-		-
Prepayments and accrued income		1,008,422		670,725
		1,652,888		1,182,942

16     Current trade and other payables

		Group				Group
		2017				2016
		£				£
Trade payables		2,216,492				2,541,494
Corporation taxation		367,506				35,498
Other taxation and social security		1,563,842				914,719
Amounts due to group undertakings		-				-
Accruals		1,441,726				918,607
Other payables (note 17)		557,502				222,801
		6,147,068				4,633,119

17     Non-current other payables

		Group		Group
		2017		2016
		£		£
Trail commissions		-		24,978
Deferred consideration		310,000		-
		310,000		24,978

Deferred consideration has arisen in relation to the acquisition of the Old Fire House, see note 26, with the £155,000 due within one year included within other payables.

 

18     Borrowings and financial liabilities

		Group				Group
		2017				2016
		£				£
Current borrowings and financial liabilities:
CPS dividend payable		244,707				294,396
		244,707				294,396
Non-current borrowings and financial liabilities:
Bank loans		-				13,560,351
Debt element of the CPS		-				4,444,566
		-				18,004,917

At 31 December 2017 a bank loan of £nil (2016: £13,700,000) was outstanding, as the loans were repaid during the year. In 2016 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 loan was repayable in June 2021.  More details of the terms of the Convertible Preference Shares are disclosed in note 22.

The accrued dividend on the CPS was paid in January 2018.

19     Financial instruments and risk management

Financial instruments by category:

		Group		Group
		2017		2016
		£		£
Financial assets - loans and receivables
Trade and other receivables		644,466		512,217
Amounts due from group undertakings		-		-
Cash and cash equivalents		6,414,854		1,264,586
		7,059,320		1,776,803

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

 

		Group		Group
		2017		2016
Financial liabilities - held at amortised cost		£		£
Non-current
Borrowings		-		18,004,917
Other payables		310,000		24,978
		310,000		18,029,895
Current
Current borrowings		244,707		294,396
Trade and other payables		2,773,994		2,764,295
Amounts due to group undertakings		-		-
		3,018,701		3,058,691

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 Groups'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.

		Group		Group
		2017		2016
		£		£
Cash at bank and short-term deposits
A1		6,336,686		1,203,698
Not rated		78,168		60,888
		6,414,854		1,264,586

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 no outstanding borrowing at year end as disclosed in note 18. These were loans taken out with Barclays to facilitate the purchase of additional 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 31 December 2017, 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.

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		Between 1 and 2 years		Between 2 and 5 years		Over 5 years
As at 31 December 2017:
Borrowings		244,707		-		-		-
Trade and other payables		2,773,994		310,000		-		-
As at 25 December 2016:
Borrowings		294,396		-		13,560,351		4,444,566
Trade and other payables		2,764,295		24,978		-		-

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.

20     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 29 December 2015, 25 December 2016 or 31 December 2017.

 

21     Deferred tax

			Group			Group
			2017			2016
	Provision for deferred tax		£			£
	Accelerated capital allowances		611,392			534,097
	Arising on acquisition		470,431			-
			1,081,823			534,097
	Provision at the start of the period		534,097			351,072
	Arising on acquisition		470,431			-
	Deferred tax charge for the period		77,295			183,025
	Provision at 25 December 2017		1,081,823			534,097

22     Share capital

		2017		2016
		£		£
Allotted called up and fully paid
56,467,333 Ordinary shares of 50 pence each: (2016: 25,845,809)		28,233,667		12,922,904
Nil Ordinary B shares of 1 pence each: (2016: 1,200,000)		-		12,000
Nil CPS of 50 pence each: (2016: 20,532,906)		-		10,266,453

The prior period share capital is equal to the enlarged share capital, in accordance with accounting for the common control combination using the predecessor value method.

During the period from the beginning of the year to 25 October 2017 the Company issued 156,977 ordinary shares of £0.50 at £1.60 per share, with the premium credited to the share premium account. During which time The City Pub Company (West) Limited issued 138,227 Ordinary shares of £0.50 each.at £1.60 per share net of trail commissions of £5,102. The Company then purchased back 12,500 shares for £1.82 and 31,250 shares for £1.60, in order to ensure that the issued share capital of the Company matched that of The City Pub Company (West) Limited, which was a company under common control.

As at 1 November 2017 the Company then entered into a Scheme of Arrangement whereby it issued: 13,048,632 new Ordinary shares of £0.50 each; 600,000 new Ordinary B Shares of £0.01 each and 10,266,453 convertible preference shares of £0.50 each, all issued at their nominal value with no premium, in exchange for ownership of the same number and profile of shares in The City Pub Company (West) Limited. This resulted in the Company owning 100% of the Ordinary shares, Ordinary B shares and CPS of The City Pub Company (West) Limited.

On 7 November 2017 the Company issued 644,123 new Ordinary shares of £0.50 each at a price of £1.5525 per share, with the premium credited to the share premium account, as part of the consideration of the acquisition of Aragon House - see note 26.

As part of the Listing on 23 November 2017 the following share transactions occurred:

-     291,176 Ordinary shares of £0.50 were issued at a price of £1.70 per share to certain Directors in lieu of bonuses, with the premium credited to the share premium account.

-     A bonus issue of 58,800,000 new Ordinary B shares were issued to the existing holders of the Ordinary B shares, with the debit made to the share premium account.

-     1,230,000 Ordinary shares of £0.50 were issued at their exercise prices ranging from £0.50 to £1.20 - resulting in a premium of £539,000 being credited to the share premium account.

-     The 60,000,000 Ordinary B shares of £0.01 were then divided into 1,200,000 Ordinary B shares of £0.50 per share and re-designated as Ordinary Shares of £0.50.

-     the Company re-designated 20,532,906 preference shares of £0.50 each fully paid in the capital of the Company into 6,416,534 ordinary shares of £0.50 each and 705,818,600 Deferred Shares of £0.01 each on the basis of 1 ordinary share of £0.50 each with the balance remaining into deferred shares of £0.01 each for every 3.2 preference shares of £0.50 each held.

-     The Company purchased the 705,818,600 deferred shares of £0.01 each arising on the redesignation of the preference shares referred to above for an aggregate consideration of £0.01.

-     20,588,236 new Ordinary shares of £0.50 per share were issued as part of the IPO at a price of £1.70 per share. The premium, less the share issue costs totalling £1,540,124, was credited to the share premium account.

Share capital, net of issue costs has been split between equity and debt as follows:

				2017				2016
Equity Shares				£				£
Ordinary shares of 50 pence each				28,233,667				12,922,904
Ordinary B shares of 1 pence each				-				12,000
Total share capital				28,233,667				12,934,904
Convertible preference shares				-				5,532,076
Shares classified as financial liabilities
Debt element of CPS				-				4,444,566

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 B Ordinary shareholders were not entitled to any rights in relation to any dividend, but were entitled to vote upon any resolution at general meetings.

 

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

										Ordinary shares		Ordinary B shares		Convertible preference shares
										Number		Number		Number
	At 28 December 2015									25,820,809		-		15,846,906
	Issue of share capital - CPS									-		-		4,686,000
	Issue of share capital - Ordinary B shares									-		1,200,000		-
	Issue of share capital - share options exercised									25,000		-		-
	At 25 December 2016									25,845,809		1,200,000		20,532,906
	Issue of new ordinary shares prior to scheme of arrangement									295,205		-		-
	Purchase of ordinary shares prior to scheme of arrangement									(43,750)		-		-
	Issue of new ordinary shares as part of consideration for Aragon House									644,123		-		-
	Issue of new ordinary shares in lieu of Directors' bonuses									291,176		-		-
	Issue of new ordinary shares on conditional exercise of share options									1,230,000		-		-
	Net impact of bonus issue of 58,800,000 £0.01 ordinary B shares, followed by subdivision to £0.50 shares and re-designation to ordinary shares									1,200,000		(1,200,000)		-
	Net impact of re-designation of 6,416,534 CPS as Ordinary Shares and subdivision of remaining 14,116,372 CPS into 705,818,600 £0.01 deferred shares and subsequent buy back of the deferred £0.01 shares									6,416,534		-		(20,532,906)
	Issue of new ordinary shares on IPO									20,588,236		-		-
	At 31 December 2017									56,467,333		-		-

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.

Convertible Preference Shares represents the element of the financial instruments treated as equity.

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.

 

23     Staff costs

Number of employees

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

	2017		2016

Management and Administration	61		48
Operation of Public Houses	462		344
	523		392

Employment costs (including Directors)

	2017		2016
	£		£

Wages and salaries	12,882,845		9,853,586
Social security costs	862,362		684,797
Share options	258,195		310,479
	13,889,801
	14,003,402		10,848,862

24     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		Annual Bonus		IPO Bonus**		Taxable Benefits		Other*/Pension		Total
	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016	2017	2016
	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000	£000
Clive Watson	101	95	136	103	254	-	3	3	271	-	765	201
Alex Derrick	101	95	147	92	180	-	5	-	209	-	642	187
Rupert Clark	101	95	155	113	240	-	4	1	209	-	709	209
Tarquin Williams	86	80	71	21	128	-	2	1	1	-	288	102
David Bruce	43	42	41	35	56	-	-	-	-	-	140	77
John Roberts	28	27	30	35	42	-	-	-	41	41	141	103
James Watson	17	23	-	7	-	-	-	-	-	-	17	30
Richard Prickett	8	-	-	-	-	-	-	-	-	-	8	-
Total	485	457	580	406	900	-	14	5	731	41	2,710	909
** The IPO bonus was paid out 45% in cash and 55% in shares at the time of the IPO at the placing price of £1.70
* Other includes the gain on the exercise of the EMI share options at the time of the IPO.

Emoluments in respect of the Directors are as follows:

		2017		2016
		£		£
Remuneration for qualifying services		2,710,080		909,675

The highest paid Director in the period received remuneration of £765,414; (2016: £208,792).  Four directors had equity settled share options in issue at the period end (2016: Four). Additional information on Directors' remuneration is given within the Corporate Governance Report.

 

25     Share-based payments

The Group operates an equity settled share option plan known as the Enterprise Management Incentive Share Option Plan.  The Group is 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 has been 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.

There were no new share options granted in 2017. A charge of £258,195 (2016: £310,479) has been reflected in the consolidated statement of comprehensive income. A transfer has been made between the share based payment reserve and the retained earnings in respect of the EMI share options that have been exercised during the year.

There were no options granted in 2017. The fair value of options granted in the prior year and the assumptions used in the calculation are shown below:

Year of grant		2016
Exercise price (£)		1.00
Number of options granted		1,230,000
Vesting period (years)		3
Option life (years)		10
Risk free rate		4%
Volatility		50%
Fair value (£)		0.75

During the period no options were granted as summarised in the table below:

	2017 Number of  Options	2017 Weighted  average  exercise  price	2016 Number of  Options	2016 Weighted  average  exercise  price
		£		£
Outstanding at start of period	2,447,500	0.97	2,555,000	0.98
Granted	-	-	-	-
Exercised	(1,230,000)	0.95	(25,000)	0.78
Expired	(175,000)	0.99	(82,500)	1.01
Outstanding at 31 December 2017	1,042,500	1.00	2,447,500	0.97
Exercisable at 31 December 2017	-	-	760,000	0.78

 

26     Business combinations

In February 2017, the Group (through CPCE) completed on the leasehold of Grapes in Oxford for the amount of £150,000 and the leasehold of the Three Crowns, Shoreditch for £569,000.

In June the Group (through CPCE) acquired Red Lion in Cambridge for £1,450,000, comprising £1,350,000 in cash and £100,000 in shares.

The Group (through CPCW) also acquired Old Fire House in Exeter in July 2017, which started trading straight away, for consideration of £3,100,000. £2,635,000 was paid on completion, with £155,000 payable on the first anniversary of completion and the final £310,000 payable on the second anniversary.

The Group (through CPCE) completed on the acquisition of Aragon House which is a freehold pub for £7,750,000,comprising £4,750,000 in cash and deferred consideration of £3,000,000 of which  £2,000,000 was paid in cash during the period and £1,000,000 issued in shares on 7 November 2017 (see note 22).

All of the above acquisitions were part of the Group's continuing strategy to expand its pub

portfolio via selective quality acquisitions. Material acquisitions are disclosed below.

						Group
						2017
Provisional fair value:						£
Property, plant and equipment acquired						12,324,463
Deferred tax liability						(470,431)
Goodwill						1,164,968
Total						13,019,000
Satisfied by:
Cash						11,454,000
Shares						1,100,000
Deferred consideration						465,000
Total						13,019,000
		Red Lion		Aragon House		Old Fire House
Provisional fair value:
Property, plant and equipment acquired		1,225,000		7,410,464		3,100,000
Deferred tax liability		-		-		(470,431)
Goodwill		225,000		339,536		470,431
Total		1,450,000		7,750,000		3,100,000
Satisfied by:
Cash		1,350,000		6,750,000		2,635,000
Shares		100,000		1,000,000		-
Deferred consideration		-		-		465,000
Total		1,450,000		7,750,000		3,100,000

All other pub acquisitions have been accounted for as property acquisitions.

27   Financial commitments

The Group had commitments under non-cancellable operating leases in respect of land and buildings. The Group's future minimum operating lease payments are as follows:

					Group				Group
					2017				2016
					£				£
	Within one year				1,167,053				987,053
	Between one and five years				4,668,212				3,948,212
	After five years				12,816,510				12,161,995
					18,651,775				17,097,260

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

28   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:

             £10,400; 2016: £6,602 was paid to Helen Watson, who is related to Clive Watson. At the period end Helen Watson was owed £nil (2016: £nil).

During the period the Group made a contribution of £10,000 to Alex Derrick in relation to office support.

As disclosed in note 15 the Company is owed £10,687,384 (2016: £113,618 included in other receivables) by its subsidiary undertaking CPCW.

(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 24.

No key personnel other than the directors have been identified in relation to the periods ended 31 December 2017 and 25 December 2016.

29     Post balance sheet events

In January 2018 the Group completed on a former Lloyds bank site in Reading for the consideration of £2,720,000. The site will require significant investment and will start trading toward the end of 2018.

Also in January the Group completed on the Belle Vue, a freehold pub in Clapham for the consideration of £2,875,000. Following a minor refurbishment the site reopened for trading towards the end of February.

In February 2018 the Group completed on the leasehold of a site at Cambridge station. The site will be fitted out and will open as the Old Ticket Office in May 2018.

Post balance sheet events (continued)

In March 2018 the Group also exchanged and completed on a freehold site in Cardiff for the consideration of £1,075,000. This site will undergo a major refurbishment and will start trading in June 2018.

In April 2018 the Group exchanged on a freehold site in Cambridge. The consideration will be £1,400,000 and should complete towards the end of the month. The site will require significant investment before opening for trade in 2019.

30     Capital commitments

At the period end the Group and Company has no capital commitments excluding the financial commitments disclosed in note 27. 

 

END

 

 

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