City Pub Group Plc - Trading Statement
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City Pub Group PLC
( "City Pub group" or "the Group")
Positioned to emerge strongly
The City Pub Group, the owner and operator of 48 premium pubs across Southern England and Wales and a further 4 development sites, announces its year end update for the 52-week period to 27 December 2020.
· Actions to enhance and improve the business during the pandemic will enable the Group to rapidly take advantage of pent-up consumer demand and opportunities that will undoubtedly emerge
· Management team enhanced with the appointment of Toby Smith as Chief Operating Officer
· Cash burn reduced to c.£300k per month (excluding all Government grants, with the exception of furlough)
· Reorganisation of supplier base and streamlined retail offer completed and ready for reopening
· Ample liquidity into 2022 with £5m of further liquidity credit approved from the Group's bankers under CLBILS
· Rapid return to cash generation and profitability expected upon reopening, driven by enhanced operational model
· Establishment of new ESG committee and commitment to strengthen independence and diversity of the board
The Group generated revenue of £25.7m in 2020, compared to £60.0m in 2019, representing a 57% decrease. The reduction was a result of the closures and restrictions on our pub estate for large parts of 2020.
Following the most recent lockdown, the primary priorities have been to ensure that cash burn was reduced to the minimum and that the Group is well positioned to emerge strongly once restrictions are lifted. The Board has been focused on the following key areas:
· Staff costs - With the exception of 8 employees, all staff are furloughed.
· Directors - Having sacrificed 50% of their salary between March and June, and 25% between July and October, the directors are deferring 25% of their salary from 1 January 2021 until the pubs reopen. This deferral will only be paid once the Group is generating consistent levels of positive cashflow.
· Other costs - Whether in head office or at our venues, virtually all costs have now been reduced and many contracts, including lockdown clauses, have been renegotiated for the long-term. This exercise will significantly lower the Group's cost base when the pubs finally reopen.
· Capex - Capex has been effectively suspended, except for minor essential remedial works and a £300k upgrade at The Hoste Arms, North Norfolk, to increase the trading area on the ground floor and enhance 10 remaining hotel bedrooms. The Hoste Arms performed exceptionally well over the summer and autumn periods and it is important that we improve and invest in the Group's strongest and most valuable assets where appropriate.
· Landlords - Considerable progress has been made with our landlords and, on the whole, they have been willing to reach sensible compromises. In a number of cases we now have minimal rents in the event of a continued lockdown and have negotiated rent concessions across a large number of our leasehold properties. T he Group will continue to consider whether it should permanently surrender its liabilities on certain leases.
· Insurance - The ruling by the Supreme Court regarding Covid-19 insurance claims for those in the hospitality sector is welcomed by the Board. The process for pursuing claims under our policy has been initiated and the Board will update shareholders with progress once settlement has been reached.
The Board would like to record how encouraging it has been that the Group has had the support of key stakeholders such as suppliers and landlords in order to reach sensible compromises. The above measures have significantly reduced the Group's cash burn which is currently running at c. £300k per month, excluding all Government grants with the exception of furlough, which will further reduce the cash burn.
In March 2020, the Group raised £22m of gross proceeds from an equity fundraise. Of this amount, £10m was utilised to reduce bank borrowings and the remainder remains on deposit to help maintain liquidity which is sufficient, if necessary, to last well into 2022. Current net debt is £14m. The Group has also negotiated a further £5m government-backed loan. This will provide further liquidity and enable the Group to be on an even stronger financial footing when pubs are permitted to reopen.
The Group strengthened its management team towards the end of 2020 with the appointment of Toby Smith as Chief Operating Officer. This will result in continued focus on improving operational performance.
Throughout last year, the supply chain and retail offer were streamlined and the future focus is to optimise the capacity of the existing pub estate. The Board is confident that this will be achieved quickly when pubs reopen. Beyond this, it remains the Group's long-term commitment to expand the estate and further enhance its premium position. The Executive team have vast industry experience, are committed to the long-term ambitions of the Group and determined to return to generating increasing levels of Group EBITDA.
The Board is also pleased to announce that it has established a new committee, which will oversee the Group's ESG policy. Clive Watson, Executive Chairman, will Chair this committee and progress in this area will be outlined in the Company's annual report for the year ended 27 December 2020.
The Group is also actively looking to strengthen the independence and diversity of its Board. An announcement in this regard is expected to be made no later than the publication of the Group's annual results.
Clive Watson, Chairman of City Pub Group said:
"2020 has been a very challenging year, but decisions made since March 2020 with regards to the fundraising, cost control, streamlining of the business, and strengthening of the Board has resulted in a very strong balance sheet, good levels of liquidity, a strengthening of our business model, a more focussed proposition and most importantly, pure determination to go out there and do the business once the pubs reopen. We have the right people in the key roles, whether in the pubs or head office and a fantastic estate to trade from. I look forward to a time when I can announce to shareholders that we are on the acquisition trail again, but this will only be considered once we are hitting high levels of optimisation from our existing capacity."