viewCity Pub Group Plc

City Pub Group froths higher as it swings to profit in first full year as listed company

CPC swung to a profit of £2.0mln in 2018 helped by a 22% rise in revenue, and that strong performance has continued into 2019

bow street tavern
CPC has 44 pubs in its portfolio but it wants to add at least another 20 over the next 18 months

City Pub Group PLC (LON:CPC) was the toast of the City once again on Tuesday after the premium pubs operator swung to a profit in its first full year as a public company.

Revenue jumped 22% in the year ended 30 December to £45.7mln (2017: £37.4mln), with much of the growth driven by the opening of eleven new pubs during the year.

READ: Investors toast CPC after bumper Christmas trading

Even when those new additions are stripped out, like-for-like sales still managed to eke out growth of 1.6%.

The rise in revenue helped the company, which was co-founded by Clive Watson, the dad of Made in Chelsea stars Tiffany and Lucy, to post a profit of £2.0mln for 2018, compared with a loss of £0.7mln in the prior year.

As a result of the strong performance, bosses decided to up the total dividend by a fifth to 2.75p (2017: 2.25p).

Off to a strong start in 2019

“Our strategic expansion has continued at pace with the opening of eleven new pubs in 2018 bringing the total to 44,” said executive chairman Watson.

“Our performance has been driven by both organic growth and the new pubs coming on stream.

“We continue to seek new sites to add to our portfolio and we have already earmarked six new pub openings for this year and are on course to meet our target of doubling the size of the estate to around 65-70 pubs by mid-2021.”

He concluded: “We are positioned to meet the number of well-trailed headwinds, not least the challenges brought through Brexit, and to take advantage of the softening market for acquisitions with our robust balance sheet and strong cash generation.”

The strong performance has continued into 2019, with sales up 36% in the first 14 weeks of the year.

Five new sites – in London, Reading, Cambridge, Exeter and Bath – are all due to open later this year, while another in Paddington has already opened. CPC has exchanged on two more pubs in Bath and Burnham.

Liberum impressed

“The group enjoyed a strong inaugural year, opening 11 pubs, which combined with 1.6% LFL growth and margin improvement helped to deliver 22% revenue growth, 28% adj EBITDA growth and 42% adj EPS growth,” read a note to clients.

“Since year-end, the group has exchanged on two large sites, the Nest and the Hoste (announced today), which along with the 4 development sites in the estate drives a 6.1%/13.0% upgrade to our EBITDA forecast for 2019/20 and an increase in our target price to 280p.

“The valuation is undemanding considering the growth, strength of balance sheet and pipeline development.”

Alongside the 280p price target, analysts repeated their ‘buy’ recommendation for the stock.

CPC shares rose 5.2% to 234p in early deals on Tuesday.

Quick facts: City Pub Group Plc

Price: 58 GBX

Market: AIM
Market Cap: £60.18 m

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