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City Pub Group (The) - Final Results

RNS Number : 7527P
City Pub Group PLC (The)
12 June 2020
 

The City Pub Group PLC

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

FINAL RESULTS FOR THE YEAR ENDED 29 DECEMBER 2019

The City Pub Group is pleased to announce its audited results for the 52 weeks ended 29 December 2019. The Group owns and operates a predominately freehold estate of 48 wet-led pubs in London, Southern England and Wales.

2019 Results Highlights:

·    Further significant growth in trading activity in 2019 with focus on acquiring higher turnover pubs and accommodation capability rising from 54 rooms at the end of 2018 to 172 at year end

·    Revenue up 31% to £60.0 million (2018: £45.7 million)

·    Like for like sales increased by 1.7% year on year, against a tough comparable period following the World Cup and long, hot summer in 2018

·    Significant increase in adjusted EBITDA* up 15.4% to £9.1million (2018: £7.9 million), despite a temporary reduction in margin

·    Adjusted profit before tax** up 4% to £5.3 million (2018: £5.1 million)

·    Reported profit of £1.3 million (2018: 2.0 million)

·    Year-end net debt of £31.0 million

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

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

2020

·    2020 began well, but growth plans immediately curtailed by COVID-19 and closure of estate in March

·    Decisive action secured appropriate liquidity well into 2021 and the long-term future of the Company: £35 million RCF and £15 million accordion option agreed; £22 million of equity raised from existing and new shareholders by way of a Placing and Open Offer which has reduced bank borrowing by two thirds

·    Measures immediately taken to reduce cost base included: staff furloughed, Director pay cuts, Government assistance secured where possible, supplier discounts, insurance policy claims and successful negotiations with landlords

·    Business reset and streamlined with more robust centralised systems in place

·    In excellent shape to re-open estate and take advantage of growth opportunities that present themselves in a post COVID-19 era

 

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

"We are excited about the prospect of reopening, not least because we have an excellent team who are keen to get back to work and keen to show hospitality to customers again. However, we will do it cautiously and above all safely.

We will reopen with a reset, more efficient, streamlined business, reduced capital expenditure and our focus on the existing estate. We have a strong balance sheet not only to endure and prosper again, but also to take advantage of opportunities that arise.

12 June 2020

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

 

Enquiries:

 

City Pub Group                                                      

Clive Watson, Chairman

Tarquin Williams, CFO

 

Via Instinctif

Instinctif Partners

Matthew Smallwood

Jack Devoy

 

+44 (0) 20 7457 2005/0207 427 1445

Liberum (Nomad & Broker)                       

Chris Clarke

Edward Thomas

Clayton Bush

 

+44 (0) 20 3100 2000

 

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

 

 

 

 

 

 

 

 

Chairman's Statement 2019

 

2019 saw further significant growth in the Group's trading activities. We continued to expand our pub estate, focusing on bigger sites, in most cases with outside trading areas. We increased the number of letting rooms across the Group from 54 at the end of 2018, to 172 in 2019, and targeted cities where we already have a presence, e.g. Cambridge, Bath, Exeter, as well as acquiring high-quality existing trading units such as The Hoste Arms in North Norfolk.

 

At the time of the IPO in November 2017, we said we would double the size of our trading estate of 33 sites by mid-2021. During 2019 this strategy was revised to focus more on high-turnover sites which could generate higher levels of unit EBITDA. This revised strategy continues to be the Board's approach. With a strengthened balance sheet following our recent fundraising, we are well placed to take advantage of attractive opportunities whilst maintaining discipline.

 

2019 was a year of tough comparatives given England's success in the 2018 World Cup and the long, hot summer in that year. The Group also found the last quarter of 2019 challenging as trade was affected by Brexit uncertainties, the general election, poor weather conditions and also the re-opening of the two Jam Tree sites towards the end of November, which resulted in the loss of important Christmas trade.

 

2020 began well, but with the onset of COVID 19 our growth plans were immediately curtailed. It has been almost three months since the enforced closure of our pubs and I have been incredibly impressed by the way our team members have adapted and worked collectively. Crises often bring out the best in people and our team were quick to react and adapt to the situation. Protecting our people has always been our top priority and I can report that morale remains high amongst our employees and I am confident that we have a very motivated team that is keen to return to running pubs, providing hospitality and serving customers. This will enable us to manage the recovery from closure effectively when restrictions are lifted.

 

Trading estate

 

The Group began 2019 with 44 trading pubs and 3 development sites. We now operate 48 pubs with a further 4 sites in development.

 

In addition, the number of bedrooms, an area of opportunity delivering incremental and high margin income, has risen to 172 and we anticipate operating around 200 by the end of 2021. This was enhanced by the opening and acquisition of pubs with rooms during the course of 2019, such as Pride of Paddington (12), The Hoste (53), Aragon House (15) and Market House (24). We also acquired a property adjacent to the Georgian Townhouse in Norwich, which increased their room letting capacity from 22 to 36.

 

Construction work was stopped on the Turk's Head in Exeter due to COVID-19 but will resume once the Board considers it safe to do so. It is hoped with the current situation allowing construction work to recommence that this site will be ready to trade by October 2020.  

 

Early-stage development of the former Tivoli site in Cambridge had also been undertaken and the Board intends to restart construction on this site to enable a pre-summer 2021 opening. The site will benefit from an open-roof trading area as well as 3 other trading floors.

 

A site in Bath, formerly known as The Nest, will begin construction work to also facilitate a pre-summer 2021 opening. This site benefits from a large outside trading area overlooking the city of Bath.

 

The Group has also exchanged contracts to build a 16-bedroom trading unit in Mumbles near Swansea. Construction on this site is anticipated to start in spring of 2021 and scheduled to open at the beginning of 2022.

 

Our proven strategy of developing clusters of pubs in targeted cities of England and Wales will continue. By building up clusters, we improve local expertise and create career prospects for our staff, both of which benefit the business enormously.

 

Our pubs are largely located in Cathedral cities.  We now have 18 trading sites in London, 3 in Brighton, 9 in Cambridge and other clusters in cities such as Bristol, Winchester, Exeter and Oxford. We will seek to acquire pubs in those areas where we are already trading, as well as identifying additional cathedral cities across the southern half of England where we can build presence.

 

 

Acquisitions / Openings in 2019:

 

·   Pride of Paddington: a leasehold acquired in February 2019 located in a prime position next to Paddington station.  We envisage significant growth potential with the opening of Crossrail. The site also benefits from accommodation through its hostel and letting rooms.

 

·    The Hoste Arms, Burnham Market, North Norfolk: an iconic 53-bedroom site with spa, cinema and gym. It is a prominent and popular location only a 45-minute drive from Norwich where we also operate the Georgian Town House which offers 36 bedrooms. These two sites complement each other well in terms of marketing, suppliers, staff and other operational activity. 

 

·    Aragon House, Parsons Green: a large site located on the edge of Parsons Green in south west London, which opened to the public in June 2019. The pub offers a large beer garden and 15 boutique letting rooms.

 

·    Market House, Reading: a former bank that has been transformed into a pub with 24 bedrooms. The business trades across four floors and offers customers a beer garden and roof terrace. The site opened in July 2019.  

 

·    Island, Kensal Green: a freehold acquired in July 2019. This site is leased out to another operator who runs this site as a tenanted pub.

 

Disposals:

 

·   The Grapes, Oxford: this site was sold in February 2019.

 

 

Financial Highlights

 

Summary for the year ended 29 December 2019:

·    Revenue up 31% to £60.0 million (2018: £45.7 million)

·    Like for like sales up 1.7%

·    Adjusted EBITDA* up 15.4% to £9.1 million (2018: £7.9 million)

·    Adjusted profit before tax** up 4% to £5.3 million (2018: £5.1 million)

·    Reported profit of £1.3 million (2018: £2.0 million)

 

 

The Board is pleased with the significant increase in the Group's adjusted EBITDA.  Operating margins temporarily decreased from 17.2% to 15.1% reflecting the unwinding of the annual profit share scheme alongside the introduction of a well-received weekly based scheme, and the implementation of a regional-based operational structure developed to manage more efficiently the increasing scale of our estate. This temporary decline in operating margin performance will be reversed when we return to normal trading, partly as a result of the one-off nature of the causes, but also by further streamlining of many of the cost bases in the pubs and at head office. The proportion of room sales in the sales mix will also drive operating margin improvement.

 

The Directors have taken the prudent step to write down £1.9m across a number of pubs as a property impairment charge.

 

During the year, we invested £3.4 million into refurbishing and maintaining the existing estate.

 

 

 

COVID-19 and Equity fundraising

 

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

 

The Board acted decisively to secure appropriate liquidity for the business to endure a prolonged period of closure should that be mandated. £15m of new shares were placed with institutional shareholders and approximately a further £7m was raised from existing shareholders in an open offer. This has enabled the business to reduce its bank borrowings by two thirds and as a result has significantly strengthened the Group's balance sheet.

 

The Board would like to put on record its appreciation for the support it achieved from new and existing shareholders who have helped secure the Company's long term future, as well as the advice received from its Nomad, Brokers and Professional Advisors.

 

The Board has committed to run the business on a very tight rein and the following actions have been taken to minimise running costs during closure, whilst maintaining the Company's essential needs:

 

-      Pub and head office costs have been reduced to the minimum

-      98% of staff have been furloughed on the Government's Job Retention Scheme

-     Directors' pay has been cut by 50% until pubs reopen and there have been other head office salary sacrifices in addition to this

-      Retail, Hospitality and Leisure Grants have been applied for where applicable

-      Negotiated, where possible, early settlement discounts from suppliers, but at the same time ensured that smaller suppliers are paid in full

-     Entered into negotiations with landlords with regards to rent holidays, rent deferrals and changes in terms of the lease. In some cases, where the Group can do so, leases will be reverted to the landlords

-     Pursuing claims under our insurance policies where the Company benefits from a loss of trade clause in the event of an outbreak of a notifiable disease

 

COVID-19 has created immense challenges for our sector but as a result of the Board's quick actions to strengthen the balance sheet through the share placing and decisive actions on cutting costs, the Board believes the Group has significantly mitigated the devastating effect that COVID-19 has had on the pub sector and that it has sufficient financial liquidity to see the Company through to well into 2021.

 

 

Bank Facilities

 

In July 2019, the board entered into a new 5-year banking arrangement with its existing providers, Barclays Bank plc. The Board now has a £35m revolving credit facility with a £15m accordion option. The proceeds from the share placing have been utilised to reduce our bank borrowings by two thirds.

 

Simultaneously with the share placing, Barclays agreed to waive covenant testing until Q4 2020. Barclays remain very supportive of the Group and the Board would like to put on records their thanks for their quick decision-making process.

 

Barclays have now agreed to replace the Group's existing financial covenants under its RCF with a Minimum Liquidity Test, requiring cash or facility headroom in the sum of £8m, to be tested quarterly until and including 30 June 2021, after which date the financial covenant tests as currently documented will recommence.

 

The Board has not opted to revalue its property and fixed assets and the book value of the portfolio on a normalised trading basis is £150m. Current net debt stands at £13m and, with freeholds making up around 90% of the book value, the Company has a very strong asset-backed balance sheet. 

 

 

Organisation

 

COVID-19 has given the Board time to evaluate how the Group can run its operations more effectively. Traditionally, the Group has run its pubs as independent units where a lot of the local decision making was taken at site level. With the changes in technology, especially in relation to digital marketing and online bookings, now is the time to change how the Group manages its day-to-day retail operations.

 

The Board is currently in the process of introducing a central sales and marketing function. Online sales and telephone sales will now be run centrally at head office and marketing of key events such as Valentine's Day, Six Nations rugby, Easter, Christmas and other events will be done centrally. Pubs will still be able to market local events themselves to maintain individuality and focus.

 

By adopting a central sales and marketing approach, the Group will be able to use its database more effectively over the next 3 months, and will also improve the functionality of its City Club app. The Group will work closely with key brands, existing and new, to continue its premium offering.

 

There will be little additional cost, as much of this functionality sales and marketing has previously been done regionally.

 

This will free up time for the retail operations, enabling them to focus more on execution of the offer with a more streamlined, but premiumised, offer. The Group also expects to see savings elsewhere in systems, finance, unit employee costs and other regional costs.

 

It is the Board's belief that there is unutilised capacity within its current estate which can be utilised more effectively when we return to normal trading conditions.

 

Other measures which are being implemented include zero-budget policies, streamlining the Company's supply chain, and renegotiating construction costs, particularly on the equipment side.

 

COVID-19 has given the Group a one-off opportunity to re-set the way the business is run. Pubs will continue to be operated on an individual basis but with the support of a more robust central system. This will enable the Group to raise the bar for its retailing standards across the estate.

 

Dividends

 

The Board believes that future acquisitions should be funded out of the free cash flows generated by the Group's operations and not through increased debt. Therefore, the Board does not recommend a dividend for this year and is unlikely to resume dividend payments until trading is back to optimum levels.

 

AGM

 

 

Outlook

 

COVID-19 has caused significant disruption to our growth plans and may change the dynamics of the sector going forward. The length of time we have had to be closed has caused challenge not only financially, but also for our people. We are grateful for the Government support, particularly most recently the extension to CJRS through to October. We are encouraged by the Government's recent statement that the first tentative steps, outside only and with social distancing, may come into effect from 4 July. However, it could be a while until there is full recovery and we have already prepared for the possibility of a second wave.

 

Given the continued uncertainty around timing of a full re-opening and customer behaviour, the Group is not in a position to provide financial guidance at this stage. We will continue to be agile and adapt as necessary, but with challenge comes opportunity and it is the Board's primary resolution to ensure that when trading does commence, the Group's pub estate will be match-fit for purpose and our people will return full of vigour and enthusiasm.

 

We will reopen with a more efficient, streamlined operation, reduced capital expenditure and our focus being on increasing utilisation of the current estate. The Group benefits from having a strong, asset backed balance sheet, low fixed costs as a percentage of historic sales and liquidity that will allow us to endure. Improvement in the effectiveness of our sales and marketing team together with our strategy to further premiumise our pubs will strengthen our position in the sector.

 

I would like to thank the Group's staff, Directors, suppliers, advisors, bankers and our shareholders for all their support since lockdown. In the last 30 years, I have faced several major sector challenges but nothing like COVID-19. However, I do believe that there is light at the end of the tunnel, and I am confident that the City Pub Group is well financed, well run and will take its opportunities to emerge as a force within our sector.

 

 

 

 

 

 

 

 

Consolidated statement of comprehensive income

for the 52 week period ended 29 December 2019

 

Notes

2019

£'000

2018

£'000

Revenue

4

60,028

45,674

Cost of sales

 

(15,165)

(11,621)

Gross profit

 

44,863

34,053

Administrative expenses

 

(42,339)

(31,244)

Operating profit

 

2,524

2,809

 

 

 

 

   Reconciliation to adjusted EBITDA*

 

 

 

   Operating profit

 

2,524

2,809

 

 

 

 

   Depreciation

5

3,407

2,552

   Share option charge

25

274

377

   Exceptional items

8

2,861

2,121

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

 

9,066

7,859

 

 

 

 

 

 

 

 

Finance costs

6

(321)

 (190)

Profit before tax

 

2,203

2,619

Tax expense

7

(891)

 (654)

Profit for the period and total comprehensive income

 

1,312

1,965

 

 

 

 

Earnings per share

 

 

 

Basic earnings per share (p)

10

2.20

3.44

Diluted earnings per share (p)

10

2.19

3.41

 

All activities comprise continuing operations.

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

 

Consolidated statement of financial position

as at 29 December 2019

 

Notes

2019

£'000

2018

£'000

Assets

 

 

 

Non-current

 

 

 

Intangible assets

11

4,136

3,794

Property, plant and equipment

12

110,914

90,020

Total non-current assets

 

115,050

93,814

Current

 

 

 

Inventories

14

1,220

960

Trade and other receivables

15

3,406

2,542

Cash and cash equivalents

 

2,769

2,853

Total current assets

 

7,395

6,355

Total assets

 

122,445

100,169

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

16

(9,027)

(8,494)

Borrowings

18

-

-

Total current liabilities

 

(9,027)

(8,494)

Non-current

 

 

 

Borrowings

18

(32,310)

(11,600)

Other payables

17

(50)

-

Deferred tax liabilities

21

(2,123)

(1,537)

Total non-current liabilities

 

(34,483)

(13,137)

Total liabilities

 

(43,510)

 (21,631)

Net assets

 

78,935

78,538

Equity

 

 

 

Share capital

22

30,812

30,651

Share premium

22

38,570

38,287

Own shares (JSOP)

22

(3,272)

 (3,272)

Other reserve

22

92

92

Share-based payment reserve

22

977

703

Retained earnings

22

11,756

12,077

Total equity

 

78,935

78,538

 

The notes form part of these accounts.

Approved by the Board and authorised for issue on 11 June 2020.

Clive Watson                                                                                   Tarquin Williams

Chairman                                                                                         Chief Financial Officer

Company No. 07814568

 

Consolidated statement of changes in equity

for the 52 week period ended 29 December 2019

 

Notes

Share

capital

Share

premium

Own shares

(JSOP)

Other

reserve

Share-

based

payment

reserve

Retained

earnings

Total

Balance at 31 December 2017

 

28,234

31,276

-

92

326

11,382

71,310

 

 

 

 

 

 

 

 

 

Employee share-based compensation

25

-

-

-

-

377

-

377

Issue of new shares

22

1,455

4,701

-

-

-

-

6,156

Purchase of JSOP shares

22

962

2,310

(3,272)

-

-

-

-

Dividends

9

-

-

-

-

-

(1,270)

(1,270)

Transactions with owners

 

2,417

7,011

(3,272)

-

377

(1,270)

5,263

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

-

-

-

1,965

1,965

Total comprehensive income for the period

 

-

-

-

-

-

1,965

1,965

 

 

 

 

 

 

 

 

 

Balance at 30 December 2018

 

30,651

38,287

(3,272)

92

703

12,077

78,538

 

 

 

 

 

 

 

 

 

Employee share-based compensation

25

-

-

-

-

274

-

274

Issue of new shares

22

161

283

-

-

-

-

444

Dividends

9

-

-

-

-

-

(1,633)

(1,633)

Transactions with owners

 

161

283

-

-

274

(1,633)

(915)

 

 

 

 

 

 

 

 

 

Profit for the period

 

-

-

-

-

-

1,312

1,312

Total comprehensive income for the period

 

-

-

-

-

-

1,312

1,312

 

 

 

 

 

 

 

 

 

Balance at 29 December 2019

 

30,812

38,570

(3,272)

92

977

11,756

78,935

 

The notes form part of these accounts.

 

 

 

 

Consolidated statement of cash flows

for the 52 week period ended 29 December 2019

 

Notes

2019

£'000

2018

£'000

Cash flows from operating activities

 

 

 

Profit for the period

 

1,312

1,965

Taxation

7

891

654

Finance costs

6

321

190

Operating profit

 

2,524

2,809

Adjustments for:

 

 

 

Depreciation

5

3,407

2,552

Gain on disposal of property, plant & equipment

 

(1)

-

Share-based payment charge

25

274

377

Impairment

12

1,914

480

Change in inventories

 

(260)

(405)

Change in trade and other receivables

 

(778)

(992)

Change in trade and other payables

 

(43)

2,152

Cash generated from operations

 

7,037

6,973

Tax paid

 

(601)

(535)

Net cash from operating activities

 

6,436

6,438

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

12

(14,949)

(11,430)

Acquisition of new property sites

26

(10,532)

(14,361)

Proceeds from disposal of property, plant and equipment

 

50

-

Net cash used in investing activities

 

(25,431)

(25,791)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of share capital

22

218

5,973

Repayment of borrowings

 

-

(245)

Dividends paid

9

(1,406)

(1,087)

Proceeds from new borrowings

18

20,695

11,600

Interest paid

6

(596)

(449)

Net cash from financing activities

 

18,911

15,792

 

 

 

 

Net change in cash and cash equivalents

 

(84)

(3,561)

Cash and cash equivalents at the start of the period

 

2,853

6,414

Cash and cash equivalents at the end of the period

 

2,769

2,853

 

The notes form part of these accounts.

 

Notes to the financial statements

for the 52 week period ended 29 December 2019

1      Company information

        The financial statements of The City Pub Group plc (as consolidated "the Group") for the 52 week period ended 29 December 2019 were authorised for issue in accordance with a resolution of the directors on 11 June 2020. 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 29 December 2019 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), Gresham Collective Limited (Company No. 01508725), BNB Leisure Limited (Company No. 02450551), Flamequire Limited (Company No. 01834157), Randall and Zacharia Limited (Company No. 08465216) and Chapel 1877 Limited (Company 04545416) thus entitling them to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies.

2      Significant accounting policies

2.1   Basis of preparation

This preliminary announcement does not constitute the Group's full financial statements for the year ended 29 December 2019. The auditors have reported on the Group's statutory accounts for the year ended 29 December 2019 under s495 of the Companies Act 2006, which do not contain statements under s498(2) or s498(3) of the Companies Act 2006 and are unqualified. The statutory accounts for the year ended 29 December 2019 will be filed with the Registrar of companies in due course.

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

IFRS is subject to amendment and interpretation by the IASB and the IFRS Interpretations Committee, and there is an on-going process of review and endorsement by the European Commission. These accounting policies comply with each IFRS that is mandatory for accounting periods ending on 29 December 2019.

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

2.2   Statement of Compliance

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

2.3   New and Revised Standards

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

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

·      IFRIC 23 "Uncertainty over Income Tax Treatments" (effective 1 January 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" (effective 1 January 2019 and not yet endorsed by the EU)

        IFRS 16, "Leases"

        IFRS 16 will be effective for the annual period beginning on 30 December 2020 and adoption of the standard will impact the treatment of leases currently treated as operating leases, by bringing lease liabilities and an associated asset into the statement of financial position. The biggest impact relates to property leases for the Group's Leasehold property sites and Head Office. Based on the provisional assessment of the new standard, the Group expects the following impact to the period ending 27 December 2020: recognition of a right-of-use asset of between £18.5m to £22.5m and lease liabilities, to be split between current and non-current, of between £18.5m to £22.5m. In addition, the Group expects reduced lease operating expenses in the region of £2.0m to £2.2m, offset by increased depreciation and interest charges in the region of £2.1m to £2.5m, thereby increasing EBITDA. Profit before tax will be lower in the initial years, after transition, as a result of the effective interest unwind on reducing liabilities rather than having a straight-line expense under IAS17. Cash flows from lease payments for qualifying leases will now be presented as financing cash flows instead of operating cash flows without changing any timing of cash flows.

2.4   Predecessor value method

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

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

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

 

2.5   Going concern

In July 2019, the Group agreed a new £35m revolving credit facility with Barclays bank plc and an accordion option of another £15m all on improved terms. This is initially a 3-year deal, but with the options to extend for two additional years, so potentially taking the facility out to July 2024.

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

The Board acted decisively to secure the appropriate liquidity for the business to endure a prolonged period of closure should that be mandated. £15m of new shares were placed with Institutional Shareholders and a further £7m was raised from existing shareholders in an open offer with total funds raised of £22m pre expenses, which was received in April 2020. This has enabled the business to reduce its net debt by two thirds and as a result has significantly strengthened the Group's balance sheet.

Simultaneously with the share placing Barclays agreed to waive covenant testing until Q4 2020. Barclays remain very supportive of the Group.

Barclays have now agreed to replace The City Pub Group plc's RCF's existing financial covenants with a Minimum Liquidity Test in the sum of £8m to be tested quarterly until and including 30 June 2021, after which date the financial covenant tests as currently documented will recommence.

During the fundraising process, the Board assured shareholders that it would run the business on a very tight rein and would take actions to minimise running costs during closure whilst maintaining the company's essential needs.

We have reduced Pub and head office costs to the minimum. Some 99% of staff have been furloughed on the governments Job Retention Scheme. The Directors' pay has been cut by 50% until pubs reopen and other head office salaries have been reduced. We have applied for Grants where applicable. At the current time, we have not looked to access funds via the Government's Coronavirus Large Business Interruption Loan Scheme (CLBILS), but this is an option that remains available. The Group have negotiated settlement discounts from some larger suppliers, but at the same time ensured that smaller suppliers are paid in full. We are in negotiations with landlords with regards to rent holidays, rent deferrals and changes in terms of some leases. The Group is pursuing claims under our insurance policies where the Company benefits from a loss of trade clause in the event of an outbreak of a notifiable disease.

COVID-19 has created immense challenges to our sector but as a result of the Board's quick actions to strengthen the balance sheet through share placing and decisive actions on cutting costs - variable or fixed -, the Board believes the Group has significantly mitigated the devastating effect that COVID-19 has had on the pub sector and that it has sufficient financial liquidity to see the Company through to well into 2021.  

We have performed a number of scenarios to consider the potential impact of COVID-19 on the Group's results. In preparing our forecasts, we have assumed that the pubs would be fully closed for a period of over 4 months and that some pubs would be able to reopen from 1st August. We have not assumed that there will be additional closures due to a second wave of the Coronavirus. We anticipate that it may take considerable time before trade is back to the pre-COVID19 levels.

Based on the current financial projections to 30 June 2021 and having considered the facilities available, the Board is confident that the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Board consider it appropriate for the Group to adopt the going concern basis in preparing its financial statements.

2.6   Revenue

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

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

2.7   Cost of sales

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

2.8   Operating profit

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

2.9   Exceptional items

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

2.10 Finance income and expense

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

 

 

2.11 Taxation and deferred taxation

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

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

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

2.12 Financial instruments

        Recognition, initial measurement and derecognition

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

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

        Classification and subsequent measurement of financial assets

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

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

        Management determines the classification of financial assets at initial recognition. The Group's policy with regard to financial risk management is set out in note 19. Generally, the Group does not acquire financial assets for the purpose of selling in the short term and does not have any financial assets measured at fair value through the income statement (FVPL) or at fair value through other comprehensive income (FVOCI) in either the current or prior year.

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

        Financial assets held at amortised cost

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

        Impairment of financial assets

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

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

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

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

        The nature of the Group's trade and other receivables are such that the expected credit loss is immaterial in the current and prior year, therefore no additional disclosures are considered necessary within the credit risk section of note 19.

        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. There have been no changes to what the Group considers to be capital since the prior year.

        Share repurchases

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

2.13 Business combinations and goodwill

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

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

2.14 Property, plant and equipment

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

        Freehold properties                                      To residual value over fifty years straight line

        Leasehold properties                                    Straight line over the length of the lease

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

        Computer equipment                                    Between two and five years straight line

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

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

2.15 Investments in subsidiaries

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

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

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

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

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

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

2.17 Inventories

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

2.18 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.

2.19 Share-based employee remuneration

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

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

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

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

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

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

2.20 Investment in own shares (JSOP)

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

 

3      Significant judgements and estimates

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

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

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

        Judgement is required when accounting for hive ups that are operationally enacted and that determines when control has passed. See note 13.

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

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

        The assessment of fair values for the assets and liabilities recognised in the financial statements on the acquisition of a business and additional consideration, and the date that control is obtained, require significant judgement and estimation. 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 and depreciation) and operating profit.

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

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

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

 

 

2019

£'000

2018

£'000

 

Revenue

60,028

45,674

 

Cost of sales

(15,165)

(11,621)

 

Gross profit

44,863

34,053

 

Operating expenses:

 

 

 

• Operating expenses before adjusting items

(35,663)

(26,194)

 

   Adjusted EBITDA

9,066

7,859

 

• Depreciation

3,407

(2,552)

 

• Share option charge

274

(377)

 

• Exceptional items

2,861

(2,121)

 

Total operating expenses

(42,339)

(31,244)

 

Operating profit

2,524

2,809

 

 

5      Profit on ordinary activities before taxation

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

 

 

2019

£'000

2018

£'000

 

Costs of inventories recognised as an expense

15,632

12,288

 

Staff costs (note 23)

22,363

16,613

 

Depreciation

3,407

2,552

 

Fees payable to the company's auditor for the audit of the company's
financial statements

67

56

 

Fees payable to the company's auditor for the audit of the group financial statement

11

11

 

Tax compliance

9

12

 

Tax advisory services

24

8

 

Exceptional costs (note 8)

2,861

2,121

 

Operating leases - land and buildings

2,056

1,572

 

 

6      Interest payable and similar charges

 

 

2019

£'000

2018

£'000

 

On bank loans and overdrafts

596

449

 

Interest expense capitalised within property, plant & equipment

(275)

(259)

 

Total finance cost

321

190

 

        During the period £275,000 of interest was capitalised (2018: £259,000).

7      Tax charge on 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:

 

 

2019

£'000

2018

£'000

 

Current income tax:

 

 

 

Current income tax charge

608

604

 

Adjustments in respect of previous period

40

(81)

 

Total current income tax

648

523

 

Deferred tax:

 

 

 

Origination and reversal of temporary differences

243

131

 

Adjustments in respect of deferred tax of previous period

-

-

 

Total deferred tax

243

131

 

Total tax

891

654

 

        (b)  Factors affecting total tax for the period

       The tax assessed for the period differs from the standard rate of corporation tax in the United Kingdom 19.00% (2018: 19.00%). The differences are explained as follows:

 

 

 

2019

£'000

2018

£'000

 

Profit on ordinary activities before tax

2,203

2,619

 

 

 

 

 

Profit on ordinary activities multiplied by standard rate
of corporation tax in the United Kingdom of 19.00% (2018: 19.00%)

419

498

 

Effect of:

 

 

 

Fixed asset differences

415

66

 

Items not deductible for tax purposes

61

171

 

Adjustment in respect of previous periods

40

(81)

 

Share options tax deduction

(44)

-

 

Total tax charge

891

654

 

 

 

8      Exceptional items

 

 

2019

£'000

2018

£'000

 

Pre opening costs

777

1,455

 

Impairment of pub sites

1,914

480

 

Other non recurring items

170

186

 

 

2,861

2,121

 

       

9      Dividends

        Dividends paid during the reporting period

        The Board declared a dividend of 2.75p (2018: 2.25p) per 50p Ordinary share for shareholders on the share register as at 31 May 2019, which was approved at the Annual General Meeting and paid on 1 July 2019. The Group received valid elections for the scrip dividend alternative in respect of 8,255,345 ordinary share of 50 pence each, which lead to a total of 103,777 new ordinary shares being allotted by the Company to shareholders who elected to receive the scrip dividend alternative.

        Dividends not recognised at the end of the reporting period

        Since the year end, the Directors are not proposing a dividend due to the COVID-19 pandemic (2018: 2.75p).

 

10    Earnings per share

 

 

2019

£'000

2018

£'000

 

Earnings for the period attributable to Shareholders

1,312

1,965

 

 

 

 

 

Earnings per share:

 

 

 

Basic earnings per share (p)

2.20

 3.44

 

Diluted earnings per share (p)

2.19

3.41

 

 

 

Weighted average number of shares:

Number of shares

Number of shares

 

Weighted average shares for basic EPS

59,523,815

 57,216,344

 

Effect of share options in issue

456,481

476,688

 

Weighted average shares for diluted earnings per share

59,980,296

57,693,032

 

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

 

11    Goodwill

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Cost brought forward

3,854

2,525

2,021

1,102

 

Additions

343

1,329

343

919

 

Disposal

(1)

-

-

-

 

Transfer of business - hive up

-

-

1,832

-

 

At end of period

4,196

3,854

4,196

2,021

 

Amortisation/impairment brought forward

(60)

-

(60)

-

 

Provided during the period

-

(60)

-

(60)

 

At end of period

(60)

(60)

(60)

(60)

 

 

 

 

 

 

 

Net book value at end of period

4,136

3,794

4,136

1,961

 

Net book value at start of period

3,794

2,525

1,961

1,102

 

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

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Freehold

2,396

2,396

2,396

968

 

Leasehold

1,740

1,398

1,740

993

 

 

4,136

3,794

4,136

1,961

 

        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.

        For the 52 week period ended 29 December 2019, 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 in performance, as assessed by the directors, would not cause the carrying amount of the CGU to exceed its recoverable amount.

 

12    Property, plant and equipment

 

Group

Freehold &

leasehold property

£'000

Fixtures, fittings

and computers

£'000

Total

£'000

 

Cost

 

 

 

 

At 31 December 2017

59,588

15,839

 75,427

 

Additions

7,381

4,308

11,689

 

Acquisitions (Note 26)

11,718

1,638

13,356

 

At 30 December 2018

78,687

21,785

100,472

 

Additions

8,377

6,998

15,375

 

Acquisitions (Note 26)

10,319

638

10,957

 

Disposals

(91)

(64)

(155)

 

At 29 December 2019

97,292

29,357

126,649

 

 

 

 

 

 

Depreciation

 

 

 

 

At 31 December 2017

 1,432

 6,048

 7,480

 

Provided during the period

 349

2,203

2,552

 

Impairment

420

-

420

 

At 30 December 2018

 2,201

8,251

10,452

 

Provided during the period

643

2,764

3,407

 

Impairment

1,802

112

1,914

 

Disposals

(19)

(19)

(38)

 

At 29 December 2019

4,627

11,108

15,735

 

 

 

 

 

 

Net book value

 

 

 

 

At 29 December 2019

92,665

18,249

110,914

 

At 30 December 2018

76,486

13,534

90,020

 

At 31 December 2017

58,156

9,791

 67,947

 

        During the period ended 29 December 2019 the group has made a provision for impairment against a number of sites totalling £1,914,000. The value in use represents a Level 3 fair value measurement, with the assets being held at their recoverable amount of £2,545,000.

        During the period ended 30 December 2018 the group has made a provision for impairment against a Pub Site in Cambridge, due to poor performance and it has been reduced to its value in use (using assumptions as outlined in note 11). The value in use represents a Level 3 fair value measurement, with the asset being held at its recoverable amount of £340,000. In addition, the group has made a provision for impairment against the Grapes in Oxford, which was written down to its recoverable amount, with its disposal completed on 25th February 2019.

        During the period ended 29 December 2019 the group capitalised £275,000 (2018: £259,010) of interest within the Freehold & Leasehold property asset.

 

 

Company

Freehold &

leasehold property

£'000

Fixtures, fittings

and computers

£'000

Total

£'000

 

Cost

 

 

 

 

At 31 December 2017

32,811

10,401

43,212

 

Additions

2,758

2,122

4,880

 

Acquisitions (Note 26)

4,157

434

4,591

 

At 30 December 2018

39,726

12,957

52,683

 

Additions

2,898

4,887

7,785

 

Acquisitions (Note 26)

10,319

638

10,957

 

Disposals

(91)

(64)

(155)

 

Transferred on hive-up of business

44,440

10,939

55,379

 

At 29 December 2019

97,292

29,357

126,649

 

 

 

 

 

 

Depreciation

 

 

 

 

At 31 December 2017

656

3,711

4,367

 

Provided during the period

256

1,252

1,508

 

Impairment

420

-

420

 

At 30 December 2018

1,332

4,963

6,295

 

Provided during the period

505

2,159

2,664

 

Impairment

1,802

112

1,914

 

Disposals

(19)

(19)

(38)

 

Transferred on hive-up of business

1,007

3,893

4,900

 

At 29 December 2019

4,627

11,108

15,735

 

 

 

 

 

 

Net book value

 

 

 

 

At 29 December 2019

92,665

18,249

110,914

 

At 30 December 2018

38,394

7,994

46,388

 

At 31 December 2017

32,155

6,690

38,845

 

 

 

13    Investments in subsidiaries

 

Company

2019

£'000

2018

£'000

 

At start of period

12,063

11,913

 

Additions

407

400

 

Transferred on hive up of business

263

-

 

Disposal on liquidation of subsidiaries

(3)

(250)

 

At end of period

12,730

12,063

 

        During the year the Company acquired 100% of the share capital of BNB Leisure Limited and Gresham Collective Limited as part of Pub acquisitions - see note 26.

        During the year the group liquidated one subsidiary held by the Company at the beginning of the year, being The Inn On The Beach Limited.

        During the year the Company hived up the trade and assets of its subsidiary The City Pub Company (West) Limited via an intercompany transfer, which included the transfer of investments previously held by The City Pub Company (West) Limited.

        The Company had the following subsidiary undertakings as at 29 December 2019:

 

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

 

BNB Leisure Limited

Ordinary

England and Wales

100%

Dormant

 

Gresham Collective Ltd

Ordinary

England and Wales

100%

Dormant

 

Randall & Zacharia Limited

Ordinary

England and Wales

100%

Dormant

 

Chapel 1877 Ltd

Ordinary

England and Wales

100%

Dormant

 

Flamequire Limited

Ordinary

England and Wales

100%

Dormant

 

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

       

14    Inventories

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Finished goods and goods for resale

1,220

960

1,220

479

 

 

15    Trade and other receivables

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Trade receivables

462

209

462

106

 

Other receivables

1,218

813

1,218

529

 

Amounts due from group undertakings

-

-

-

18,336

 

Prepayments and accrued income

1,726

1,520

1,726

888

 

 

3,406

2,542

3,406

19,859

 

16    Current trade and other payables

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Trade payables

3,392

3,467

3,392

1,734

 

Corporation taxation

300

252

300

-

 

Other taxation and social security

2,406

1,778

2,406

1,584

 

Amounts due to group undertakings

-

-

15,515

400

 

Accruals

1,488

1,701

1,488

934

 

Other payables (note 17)

1,441

1,296

1,441

433

 

 

9,027

8,494

24,542

5,085

 

 

17    Non-current other payables

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Deferred consideration

50

-

50

-

 

        Deferred consideration has arisen in relation to the acquisition of both The Hoste and The Pride of Paddington, see note 26, of this deferred consideration £50,000 was due after more than one year and £375,000 was due within one year and included within other payables as at 29 December 2019 (2018: £310,000 of deferred consideration included within current other payables in relation to the Old Fire House).

 

 

18    Borrowings and financial liabilities

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Non-current borrowings and financial liabilities:

 

 

 

 

 

Bank loans

32,310

11,600

32,310

7,100

 

 

32,310

11,600

32,310

7,100

 

        At 29 December 2019 a revolving credit facility of £32,500,000 (2018: £11,600,000) was outstanding, net of capitalised arrangement fees, Barclays Bank PLC had a fixed charge over certain freehold property as security in respect of this loan. Interest was charged at LIBOR plus a margin, which varied dependent on the ratio of net debt to EBITDA. The revolving credit facility is repayable in July 2022, but can be extended for an additional 2 years.

        Reconciliation of liabilities arising from financing activities

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

 

 

Long-term

Borrowings

£'000

Short-term

Borrowings

£'000

Total

£'000

 

At 1 January 2019

11,600

-

11,600

 

Cash flows:

 

 

 

 

Proceeds

20,695

-

20,695

 

Non-cash items:

 

 

 

 

Amortisation of loan arrangement fees

15

-

15

 

At 29 December 2019

32,310

-

32,310

 

 

 

Long-term

Borrowings

£'000

Short-term

Borrowings

£'000

Total

£'000

 

At 1 January 2018

-

245

245

 

Cash flows:

 

 

 

 

Proceeds

11,600

-

11,600

 

Repayments

-

(245)

(245)

 

Non-cash items:

-

-

-

 

At 30 December 2018

11,600

-

11,600

       
The short-term borrowings brought forward comprised the accrued dividend on Convertible Preference Shares, paid in January 2018.

 

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

 

 

 

Long-term

Borrowings

£'000

Short-term

Borrowings

£'000

Total

£'000

 

At 1 January 2019

7,100

-

7,100

 

Cash flows:

 

 

 

 

Proceeds

10,298

-

10,298

 

Transferred on hive up of business

14,897

-

14,897

 

Non-cash items:

 

 

 

 

Amortisation of loan arrangement fees

15

-

15

 

At 29 December 2019

32,310

-

32,310

 

 

 

Long-term

Borrowings

£'000

Short-term

Borrowings

£'000

Total

£'000

 

At 1 January 2018

-

122

122

 

Cash flows:

 

 

 

 

Proceeds

7,100

-

7,100

 

Repayments

-

(122)

(122)

 

Non-cash items:

-

-

-

 

At 30 December 2018

7,100

-

7,100

 

The short-term borrowings brought forward comprised the accrued dividend on Convertible Preference Shares, paid in January 2018.

 

 

19    Financial instruments and risk management

        Financial instruments by category:

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Financial assets - loans and receivables

 

 

 

 

 

Trade and other receivables

1,680

1,022

1,680

635

 

Amounts due from group undertakings

-

-

-

18,336

 

Cash and cash equivalents

2,769

2,853

2,769

2,246

 

 

4,449

3,875

4,449

21,217

 

       

 

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

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Non-current

 

 

 

 

 

Borrowings

32,310

11,600

32,310

7,100

 

Other payables

50

-

50

-

 

 

32,360

11,600

32,360

7,100

 

Current

 

 

 

 

 

Current borrowings

-

-

-

-

 

Trade and other payables

4,833

4,762

4,833

2,167

 

Amounts due to group undertakings

-

-

15,515

400

 

 

4,833

4,762

20,348

2,567

 

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

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

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

 

Cash at bank and short-term deposits

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

A1

2,637

2,723

2,637

2,188

 

Not rated

132

130

132

58

 

 

2,769

2,853

2,769

2,246

 

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

        Not rated balances relate to petty cash amounts.

        Market risk - cash flow interest rate risk

        The Group had outstanding borrowing of £32,500,000 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 29 December 2019, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group's cash at bank and short-term deposits is considered immaterial.

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

 

 

 

Profit for the year

 

Equity

 

 

+1%

-1%

+1%

-1%

 

29 December 2019

(285)

285

(285)

285

 

30 December 2018

(168)

168

(168)

168

 

        Credit risk

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

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

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

        Liquidity risk

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

 

Group

Less than

1 year

£'000

Between

1 and 2 years

£'000

Between

2 and 5 years

£'000

Over 5 years

£'000

 

As at 29 December 2019:

 

 

 

 

 

Borrowings

-

-

32,310

-

 

Trade and other payables

4,833

50

-

-

 

 

 

 

 

 

 

As at 30 December 2018:

 

 

 

 

 

Borrowings

-

-

11,600

-

 

Trade and other payables

4,762

-

-

-

 

 

 

Company

Less than

1 year

£'000

                               Between

1 and 2 years

£'000

Between

2 and 5 years

£'000

Over 5 years

£'000

 

As at 29 December 2019:

 

 

 

 

 

Borrowings

-

-

32,310

-

 

Trade and other payables

20,348

50

-

-

 

 

 

 

 

 

 

As at 30 December 2018:

 

 

 

 

 

Borrowings

-

-

7,100

-

 

Trade and other payables

2,567

-

-

-

 

 

        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 31 December 2017, 30 December 2018 or 29 December 2019.

 

 

21    Deferred tax

 

 

Group

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Provision for deferred tax

 

 

 

 

 

Accelerated capital allowances

986

743

986

343

 

Arising on acquisition

1,137

794

1,137

324

 

 

2,123

1,537

2,123

667

 

 

 

 

 

 

 

Provision at the start of the period

1,537

1,082

667

308

 

Arising on acquisition

343

324

343

324

 

Transferred on hive up of business

-

-

870

-

 

Deferred tax charge for the period

243

131

243

35

 

Provision at the end of the period

2,123

1,537

2,123

667

 

 

 

22    Share capital

 

 

2019

£'000

2018

£'000

 

Allotted called up and fully paid

 

 

 

61,623,791 Ordinary shares of 50 pence each: (2018: 61,302,514)

30,812

30,651

 

        During the year, between the 30 May 2019 and 8 October 2019, the Company issued a total of 217,500 new shares to satisfy the exercise of share options. The 217,500 new ordinary shares of 50 pence per share all related to options that had an exercise price of 100.0 pence per share, with the excess over nominal value credited to the share premium account.

        On 1 July 2019 103,777 new ordinary shares of 50 pence per share were issued as part of the scrip dividend alternative, with an issue price of 218.7 pence per share, with the premium credited to the share premium account.

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

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

 

 

 

Ordinary shares

Number

 

At 31 December 2017

 56,467,333

 

Issue of new ordinary shares to own shares (JSOP)

1,925,000

 

Issue of new ordinary shares for Scrip dividend

86,816

 

Issue of new ordinary shares on Placing

2,823,365

 

At 30 December 2018

 61,302,514

 

Issue of new ordinary shares for Scrip dividend

103,777

 

Issue of new ordinary shares on exercise of share options

217,500

 

At 29 December 2019

61,623,791

 

        Own shares held (JSOP)

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

        The JSOP purchases shares in the Company to satisfy the Company's obligations under its JSOP performance share plan. No shares (2018: 1,925,000) in the Company were purchased during the period at a cost of £nil (2018: £3,272,500).

        At 29 December 2019 the JSOP held 1,925,000 ordinary shares in The City Pub Group plc (2018: 1,925,000).

        At 29 December 2019 awards over 1,925,000 (2018: 1,925,000) ordinary shares The City Pub Group plc, made under the terms of the performance share plan, were outstanding.

        Nature and purpose of reserves

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

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

        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:

 

 

2019

2018

 

Management and Administration

98

80

 

Operation of Public Houses

1,111

832

 

 

1,209

912

 

        Employment costs (including Directors)

 

 

 

2019

£'000

2018

£'000

 

Wages and salaries

20,772

15,204

 

Social security costs

1,318

1,032

 

Share options

273

377

 

 

22,363

16,613

 

 

 

 

 

 

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

Taxable Benefits

Pension/Other

JSOP/EMI

Total

 

2019

£000

2018

£000

2019

£000

2018

£000

2019

£000

2018

£000

2019

£000

2018

£000

2019

£000

2018

£000

 

Clive Watson

145

130

21

4

7

4

-

40

173

178

 

Alex Derrick

145

130

13

6

7

4

-

40

165

180

 

Rupert Clark

145

130

9

9

7

4

-

40

161

184

 

Tarquin Williams

130

115

2

2

6

4

-

40

138

160

 

Richard Prickett

47

40

-

-

-

-

-

-

47

40

 

John Roberts

33

30

-

-

50

41

-

-

83

71

 

Neil Griffiths

42

29

-

-

-

-

-

-

42

29

 

Total

687

604

45

21

77

57

-

160

809

842

                               

        Emoluments in respect of the Directors are as follows:

 

 

2019

£'000

2018

£'000

 

Remuneration for qualifying services

809

842

 

        The highest paid Director in the period received remuneration of £173,000; (2018: £184,000). Four directors had equity settled share options in issue at the period end (2018: Four). Additional information on Directors' remuneration is given within the Corporate Governance Report.

 

25    Share-based payments

        The Group provides share-based payments to employees in the form of a Company Share Ownership Plan (CSOP), started in 2016, and a Joint Share Ownership Plan ("JSOP") started in 2018. The Company uses the Black-Scholes valuation model to value both types of share-based payment plan and the resulting value is amortised through the consolidated income statement over the vesting period of the share-based payments.

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

        During the period ended 29 December 2019 no options were granted under the CSOP scheme (2018: 922,500) and no awards were made under the JSOP scheme (2018: 1,925,000). A share-based payment charge of £274,000 (2018: £377,000) has been reflected in the consolidated statement of comprehensive income.

 

       

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

 

 

2019

Number of

 Awards

2019

Weighted

 average

 exercise

 price

£

2018

Number of

 Awards

2018

Weighted

 average

 exercise

 price

£

 

Outstanding at start of period

3,785,000

1.69

1,042,500

1.00

 

Granted

-

-

2,847,500

1.94

 

Exercised

(217,500)

1.00

-

-

 

Expired

(235,000)

1.48

(105,000)

(1.70)

 

Outstanding at 29 December 2019

3,332,500

1.75

3,785,000

1.69

 

 

 

 

 

 

 

Exercisable at 29 December 2019

735,000

1.00

-

-

 

        The weighted average remaining contractual life of options outstanding at the end of the period is 3.58 years (2018: 4.98 years).

 

26    Business combinations

        During the period the Group acquired two new sites through business combinations, the fair values of the assets and liabilities acquired, and the nature of the consideration, are outlined within the table below. The Group has included additional disclosure of the significant acquisitions that were included within the current year business combinations.

        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

2019

£'000

Company

2019

£'000

 

Provisional fair value:

 

 

 

Property, plant and equipment acquired

10,957

10,957

 

Deferred tax liability

(343)

(343)

 

Goodwill

343

343

 

Total

10,957

10,957

 

 

 

 

 

Satisfied by:

 

 

 

Cash

9,840

9,840

 

Deferred consideration

1,117

1,117

 

Total

10,957

10,957

 

 

 

 

 

BNB Leisure Ltd
(The Hoste)

Gresham Collective Ltd
(Pride of Paddington)

 

Provisional fair value:

 

 

 

 

Property, plant and equipment acquired

 

8,957

2,000

 

Deferred tax liability

 

-

(343)

 

Goodwill

 

-

343

 

Total

 

8,957

2,000

 

 

 

 

 

 

Satisfied by:

 

 

 

 

Cash

 

8,140

1,700

 

Deferred consideration

 

817

300

 

Total

 

8,957

2,000

 

        Since the date of acquisition, but before the end of the period, £692,000 of deferred consideration has been settled in cash, with £425,000 of deferred consideration remaining outstanding at the balance sheet date.

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

2019

£'000

Group

2018

£'000

Company

2019

£'000

Company

2018

£'000

 

Within one year

2,061

1,775

1,508

1,300

 

Between one and five years

8,242

7,099

6,031

5,199

 

After five years

17,991

16,505

13,923

12,681

 

 

28,294

25,379

21,462

19,180

 

        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:

       During the period the Company hived up the trade and assets of Gresham Collective Limited and BNB Leisure Limited for £407,000 and this amount is shown as part of the amount due to group undertakings in note 16.

       As disclosed in note 15 the Company is owed £nil (2018: £18,335,959) by its subsidiary undertakings, The City Pub Company (West) Limited. At the Group's interim period end the business of The City Pub Company (West) Limited was hived up via an intercompany transfer resulting in a significant part of the amount due to group undertakings (2018: £nil) - see note 16.

       £15,006; 2018: £11,377 was paid to Helen Watson, who is related to Clive Watson. At the period end Helen Watson was owed £nil (2018: £nil). Helen Watson has an existing £10,000 float with the group.

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

        (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 29 December 2019 and 30 December 2018.

29    Post balance sheet events

        Covid-19
Since the year-end, in January 2020 the World Health Organisation declared a health emergency following reports of an outbreak of an unknown virus.  Subsequently in March 2020 this virus was identified as Covid-19 and the World Health Organisation confirmed it as a global pandemic.  The UK Government announced the closure of all pubs and restaurants effective from 20 March, followed by complete lockdown across the country from 23 March.

The Company has put in place a number of actions to reduce cash outgoings and reducing both capital and operating expenditure to essential spend only.  This includes temporary and permanent reductions in the number of employees, salary sacrifice of staff, reduction in the salary of Directors by 50% until the pubs re-open and putting on hold all training and recruitment costs. Certain variable costs have been suspended along with other entertainment and promotional activities.

The Company is also participating in a number of relevant UK Government COVID-19 support initiatives, including the Coronavirus Job Retention Scheme for furloughed employees, the deferral of some payments to HMRC and business rates relief. In order to conserve cash the Company has also been in discussions with it's landlords with a view to achieving rent holidays and with suppliers regarding extending credit terms.  Furthermore, the Company submitted claims under relevant insurance policies for both COVID-19 and for its pubs being closed down.

        Placing and Open Offer
On 27 March the Company announced it successfully raised up to £22 million, before expenses, by way of a Placing of up to £15 million (before expenses) and Open Offer of up to £7 million (before expenses), at the Issue Price of 50 pence per share.  Given the uncertainty triggered by COVID-19 and the subsequent disruption, the Company believes the Placing and Open Offer is a prudent measure to further strengthen the Company's balance sheet, working capital and liquidity position and also, should the right opportunities arise, to expand the Company's portfolio of pubs at a time when the Directors' believe short-term acquisition prices will be reduced.

The Directors are confident that the steps which have been taken will ensure sufficient liquidity even in the event of its most pessimistic trading scenario which assumes the total closure of the entire estate for 12 months and re-opening on a phased basis.  The increased liquidity will also improve the operational execution as a result of a more streamlined business and enable the Company to plan ahead for when more normal levels of business operations return.

The Company has a strong and supportive relationship with its bank. Whilst its bank have waived key covenant tests until December 2020, its £35 million bank facility, repayable in 2022 is fully drawn and its £15 million accordion facility remains subject to credit committee approval. The Directors' believe that with the successful Placing and Open Offer, the Company will be well placed to grow the business and recover shareholder value once it's pubs reopen. In May 2020, the Company have agreed terms to acquire a pub with letting rooms in Mumbles, near Swansea.

30    Capital commitments

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


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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Quick facts: City Pub Group Plc

Price: 63

Market: AIM
Market Cap: £65.37 m
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