City Pub Group (The) – Interim Results

The City Pub Group is pleased to announce its unaudited results for the 26 weeks ended 1 July 2018. The Group operates a predominately freehold estate of 42 wet-led pubs in London, Southern England and Wales.

Highlights:

·     Sales up 24% to £20.0 million (2017: £16.1 million)

·     Adjusted EBITDA* up 25% to £3.0 million (2017: £2.4 million)

·     Adjusted profit before tax** up 73% to £1.6 million (2017: £0.9 million)

·     Reported profit/(loss) after tax of £0.76 million (2017: (£0.05) million)

·     11 weeks trading since July 1 has seen sales up 24%

* 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.

CHAIRMAN'S STATEMENT

The Group has continued to make strong progress and build momentum in the first six months of the 2018 financial year. Following admission to AIM in November 2017, our ambition was to double the size of the estate by mid-2021 to 65-70 pubs. With 42 pubs now trading and a further 4 sites in development we are ahead of plan.

During the first half sales were up 24% to £20.0 million (2017: £16.1 million), adjusted EBITDA* up 25% to £3.0 million (2017: £2.4 million) and operating margins continued their upward trend. Adjusted profit before tax** was up 73% to £1.6 million (2017: £0.9 million). Reported profit/(loss) after tax was £0.76 million (2017: (£0.05) million).

These results have been achieved through acquisitions and investments made in 2017 and organic growth across the rest of the estate. The Company benefited from the good weather across the summer and our wet-led sport pubs from the World Cup.

As we have continued to acquire new sites the Group has taken advantage of economies of scale driving an improved financial performance. 

The Board is pleased with the significant increase in the Group's adjusted EBITDA performance. Operating (EBITDA) margins have increased from 15.0% to 15.1% (restrained by higher PLC costs as a result of the AIM listing). Margins are anticipated to increase further as the central overhead base becomes more efficient.

The City Pub Group has grown from a start-up in 2011 to an estate of 42 pubs operating today through selective acquisition of predominately single sites. These are then refurbished, their offer targeted specifically to their local marketplace and managed by well incentivised operators who have a passion for delivering a consistent, high quality experience for customers.

The Group has a strong balance sheet and low gearing with current borrowings of only £14 million, which roughly equates to the value of our freehold backed sites that are currently closed and being developed. Net debt to EBITDA is around 2 times and this is anticipated to reduce significantly once the 4 development sites are open and trading. The Group has in place a £30 million revolving credit facility expiring in July 2021. We are currently reviewing options for increasing and extending the length of our banking facilities.

City Pub Group maintains a strong pipeline of target acquisitions, further sites are in the hands of solicitors and others are currently being negotiated. Once completed, and with the new development sites coming on stream, the trading estate is expected to increase to around 50 pubs by mid-2019.

Trading Estate

The Group operates 42 high quality predominately drinks-led pubs and we are continuing to grow through selective acquisitions. Since the start of the financial year, the Company has opened 9 pubs, an acceleration from the previous year. Following acquisition, The City Pub Group invests and refurbishes its sites to improve performance and deliver strong returns.

Employee Profit Share

Our staff are our most important asset and retaining them is central to fulfilling our ambitions for the business. This is why we have a strong rewards programme including our industry leading Profit Share Scheme which enables all employees to share in the Company's success. Not only does this ensure we minimise staff churn, but we believe the success of the business demonstrates that it also gives our team members an additional performance incentive. 

The overall profit share payment represents 3% of the Group's EBITDA less bank interest and this is shared equally among all employees who have been with the business for at least a year. In 2019, it is the Board's intention to pay this on a semi-annual basis.

Dividend

As is normal for the Group, the Board is not declaring an interim dividend and will declare dividends annually. The Company's policy is to progressively increase dividends with the Group's profitability. As last year, a scrip dividend alternative will also be available to shareholders.

Current Trading & Outlook

For the 11 weeks trading since 1st July, sales are up 24% against last year primarily driven by the increase in the number of trading pubs. Our strategy over the last two years has seen the business grow from 24 sites to over 40. Whilst delivering this growth, the Company has faced the challenges of rising employee costs, business rate increases and the increasing uncertainty surrounding Brexit. The Company has delivered and managed its growth despite these headwinds.

We have some great pubs and an experienced head office team which remain ambitious and determined to ensure the City Pub Group develops further as a leading independent pub retailer.

With new openings earmarked for the remainder of the second half of the year, we remain confident of continuing our strong progress, meeting market expectations and benefitting from attractive acquisition opportunities.

Clive Watson

Chairman

20 September 2018

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