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

 INTERIM RESULTS FOR THE 26 WEEK PERIOD ENDED 27 JUNE 2021

The City Pub Group, the owner and operator of a predominantly freehold estate of 50 pubs and development sites, located in some of the finest cities and market towns in the UK, announces its unaudited results for the 26 weeks ended 27 June 2021.

Trading since reopening

·     Trading on an upward trajectory with sales since the reopening of indoor trading on 17 May at above 90% of 2019 levels, with further improved trade in city centre sites since the beginning of September as return to work gathers pace

·     2 new sites acquired signalling confidence in expansion

·    Accommodation performed strongly over the summer benefitting from "staycations"

H1 at EBIDTA break-even (Pre-IFRS16), despite majority of period under COVID-19 restrictions

· Revenue of £8.9 million (H1 2020: £12.1 million)

· Adjusted EBITDA* of £(0.0) million (H1 2020: (£1.2) million)

· Adjusted profit / (loss) before tax** of £(2.0) million (H1 2020: £(3.5) million)

A better, stronger business

·    Continued focus on cost reduction is improving profitability

·     Identified cost reductions being realised and relentless focus on further efficiencies

o  Supply chain streamlined

o  Reduced menu complexity

o  Central contracts re-negotiated

o  Pre-booked business enables better labour scheduling

·    Extensive refurbishments undertaken at six properties, further works to begin at the Phene, London, Bath Brew House, Bath and Pontcanna Inn, Cardiff

·    Increased freehold mix

·    Experienced and ambitious management team and a more diverse Board

·    A strong balance sheet with ample liquidity of £18m

 * Pre-IFRS16 Adjusted earnings before exceptional items, share option charge, interest, taxation, depreciation and amortisation.
** Pre-IFRS16 Adjusted profit / (loss) before tax is the profit / (loss) before tax, share option charge and exceptional items.
 

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

"We have traded well since May and are emerging strongly with a streamlined and more profitable business.  We have continued to implement a relentless focus on cost control and we are capturing cost savings identified and negotiated over the last year.

We are emerging from the pandemic in a good shape, well prepared for the challenges facing our industry.

We have maintained and enhanced a number of our pubs and benefitted during staycation summer from our estate of more than 200 letting rooms.

With our good trading and strong balance sheet we have begun to look to expand again recently making two significant acquisitions.  Our ambition is for the estate to be in excess of a 100 pubs.

We have the right team, a business that is in great shape, a very high quality bespoke largely freehold estate and plenty of opportunity to grow our business"

23 September 2021

The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No.596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. By the publication of this Announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. 

Enquiries:

CHAIRMAN'S STATEMENT

Since my last statement in May 2021, the business has traded well as it emerges strongly following the Covid-19 lockdowns. In April we reopened 22 of our pubs which had large outside trading areas and in May a further 16 sites were opened when we were able to welcome customers inside. I believe the Company has dealt with this extraordinary situation in a very professional fashion and the business is in much better shape now than prior to the pandemic and even since we last reported.

In recent months the management team has continued to focus on cost reduction, improving systems, establishing a central marketing structure, growing the City Club App, and ensuring the trading estate is fit for business. Your directors continue to work on maintaining and enhancing staff morale, helped by improving levels of communication and supporting staff during the pandemic and thereafter.

Trading is on an upward trend and since 17 May sales are above 90% of 2019 levels. Since the beginning of September, the return to work has gathered pace and this has helped increase trade in our city centre sites.

Trading Estate

The Group currently operates 46 trading sites and a further 4 development sites.

We have undertaken refurbishments at the following pubs/hotels to maintain and further enhance the quality of the estate:

·      The Hoste, Burnham Market

·      Brighton Beach Club, Brighton

·      Georgian Townhouse, Norwich

·      Cock and Bottle, Notting Hill

·      Inn on the Beach, Hayling Island

·      Lighthouse, Battersea

Further works will be undertaken at the Phene, Chelsea, the Bath Brew House, Bath and the Pontcanna Inn, Cardiff.

In all cases where we have refurbished/extended our pubs we have seen a noticeable uplift in trade. The Hoste and the Georgian Townhouse in Norfolk have seen significant uplifts in trade over the summer. The Inn on the Beach and Brighton Beach Club have increased their number of covers which has benefited trade and in due course, we will carry out similar schemes at other suitable pubs in our estate to further improve our outside trading areas to trade longer throughout the year.

I am pleased to say that we have opened the Turks Head in Exeter City centre, a Brew House benefiting from an outside terrace and 6 letting rooms. We will also be opening our site in Mumbles, Swansea at the start of 2022, which has 16 letting rooms, a large ground floor trading area and a first-floor terrace. Our site in Bath, overlooking the City, has now been granted planning consents and we anticipate this site being opened by Easter 2022.

Refurbishment work has commenced at the former Tivoli site in Cambridge. It will trade over 3 floors with a large outside terrace area for 80 customers. Opening is anticipated around Easter 2022.

The Group's bespoke estate of predominately freehold, high-quality managed pubs is unique in the sector. Our pubs are located in some of the finest cities and market towns in England and Wales. City workers and students are starting to arrive back which should give a further boost to trade. We now have over 200 letting rooms across the estate and our occupancy levels during the course of summer were significantly higher than in 2019, partly helped by "staycations" but also by better marketing which has improved Revenue per available room. Accommodation revenue now accounts for more than 10% of overall sales, thereby improving the quality of the sales mix.

Return to Expansion

As separately announced today, I am pleased to report that we have acquired the Cliftonville Hotel in Cromer, Norfolk. This freehold asset has 30 sea facing bedrooms and 3 substantial trading areas. The hotel is 100m from the beach and 200m from the town. The Cliftonville Hotel was built in the late Victorian era and has a history of royal connections dating back to the Edwardian era. It is a Grade II listed building and an iconic site. The total consideration was £1.7 million of which £1.6 million is payable in cash and £100k in shares. The cash element will be funded from the Group's existing resources.

We have also just acquired a former Café Rouge site in Bury St Edmunds in the heart of this historic market town. The site consists of a sizeable ground floor area and a large outside trading area. We anticipate opening this site in the first quarter of 2022. These acquisitions demonstrate our desire for trading from historic building in great locations.

As previously announced, we acquired a 49% stake in Barts Pub Ltd which owns the iconic KPH site based in Ladbroke Grove. We operate the pub under management contract and have an option to buy a freehold at a fixed price next year.

We also acquired the freehold of the Roundhouse, Wandsworth, for £1.15 million which has previously operated on a leasehold basis in June 2021.

Disposals

We completed disposal of the Punt Yard in Cambridge and Tell Your Friends in Parsons Green is in the process of being exchanged. We have also disposed of a freehold investment in the Island, Kensal Rise, London, to the tenant who had the option to buy the freehold, and we received £2.2 million in cash with an additional amount of £300k payable over 4 years.

We are in negotiations on two further leaseholds to be returned to the landlord and on other leases we are negotiating to reduce the annual rental payment.

As a result, we are successfully reshaping the portfolio with nearly 70% of estate being freehold, reduced rent liabilities and a significant increase in number of letting rooms across the estate, thereby increasing the overall quality.

Financial Highlights

Summary for the 26 weeks ended 27 June 2021:

• Revenue down 27% to £8.9 million (2020: £12.1 million)

• Adjusted EBITDA* of £(0.0) million (2020: £(1.2) million)

• Adjusted profit/(loss) before tax** of £(2.0) million (2020: £(3.5) million)

• Reported profit/(loss) of £(1.3) million (2020: £(3.5) million)

* Pre-IFRS16 Adjusted earnings before exceptional items, share option charge, interest, taxation, depreciation and amortisation.
** Pre-IFRS16 Adjusted profit / (loss) before tax is the profit / (loss) before tax, share option charge and exceptional items.

Bank Facilities

We have a revolving credit facility (RCF) of £35m with Barclays of which we have drawn £25m. We also have an additional £5m CLBLS facility which has not been drawn.

The Group is in a strong liquidity position with £15m of unused facilities. We have over £11m of cash deposits, resulting in a net debt position of approximately £14m.This gives us sufficient liquidity to not only maintain stability of the Group, but also to seek further acquisition opportunities as they present themselves.

Barclays have waived the RCF's existing financial covenants through to June 2022. They have been replaced with a Minimum Liquidity Test (MLT) in the sum of £8m and a monthly minimum EBITDA test. We have significant headroom on both of these tests.

Retail and Operational Improvements

The Group continues to implement further improvements:

1.   Supply chain has been streamlined to reduce complexity and improve operating margin.

2.   Food menus continue to evolve and improve whilst at the same time being simplified thereby reducing the labour cost of the kitchen staff.

3.   City Club App continues to develop and grow with 140k new users and we are starting to collaborate with reward partners to make the membership more attractive.

4.   We continue the ongoing negotiations of key central contracts including liquor supply deals.

5.   Much better management of utility costs to reduce carbon emissions and waste.

6.   More focus on pre-booked business helped by improved marketing and bookings teams.

7.   Better communication between the head office and the pubs so decisions made can be swiftly executed.

These improvements have been essential to enhance the way we run the business but at the same time pubs are still encouraged to be innovative and run their own local events, their own social media, and to have regional variations on the liquor and food menus. We want to retain the entrepreneurial culture which can help us improve the optimisations of the existing business and be well placed to expand the number of pubs operated, thus drive the overall performance.

Board Changes

John Roberts, Co-Founder of the business in 2011 and a Non-Executive director since that time, has agreed to stand down as a director of the Company in order to take on executive duties, particularly in relation to the growing number of brew pubs within the Group. The Turks Head recently opened in Exeter as a brew pub and we believe we can expand the range of their activities. While stepping off the board, John will remain a director of a trading subsidiary. I would like to thank John for helping us develop the business from the beginning as a start-up in 2011 through listing on AIM in 2017 and its development since. The Board is pleased that John will be continuing his involvement with the Group through his new role and are confident that our brew pubs will continue to expand under his experienced stewardship.

ESG

We recently established an ESG committee, chaired by Emma Fox. We have launched a significant and thorough review to ensure that we emerge as a more responsible business, primed to play a positive role in the industry's recovery. We are now implementing procedures across the pubs which will help reduce our carbon footprint and waste, engage more with local communities so that they can utilise our pubs, and promote diversity across the Group. We are taking our responsibilities seriously and want to get it right as we do understand that those that succeed in this area will have competitive advantage.

Dividends

The Board has decided to utilise short-term positive cash flow generated to either invest in new opportunities or reduce its bank borrowings. However, when there is a return to normal trading conditions and the cash position is even stronger, the Group will consider a resumption of dividend payments. It is important to stress it will not however resume dividends while it continues to receive state aid such as business rates relief, VAT reductions and grants or has access to its CLBLS, a condition of which is that dividends are not paid.

COVID-19 / Industry Issues

There have been a number of well publicised issues which have impacted the pub industry. We have not experienced any major supply issues of goods. However, the lead time in doing pub refurbishments has extended due to disruptions in supply of equipment, furniture etc. and we are factoring this in when taking on new acquisitions which require refurbishment.

There have been staff shortages as a result of many people during COVID going back to the EU and not returning. There have also been people who have left the industry. Also, a number of staff, especially in July and August, have been asked not to go into work as they've been identified as close contacts by Track and Trace. Whilst this is very frustrating, we believe that the end of the furlough scheme in September will increase the pool of labour able to work in our industry and the returning students should also help with staffing.

It would seem sensible for, and we call upon the Government to, introduce a 2-3 year working visa to European nationals so that people can come to the UK, work, study and return home extolling the virtues of the British pub. This, we believe, will also encourage much needed tourism, which is essential in helping our sector to get back on its feet.

Outlook

The Group is emerging strongly from the pandemic with a better and more efficient business. We are trading well and have improved the quality of our estate in terms of its freehold mix and the quality of the assets. We continue to make operational improvements at Head Office and upgrade our pubs through well-costed and returns enhancing refurbishments.

We have retained a core of very loyal employees across Head Office and at site, with many of our key employees owning share options to help drive performance and retention.

Trading is on an upward trend and since 17 May sales are above 90% of 2019 levels. Since the beginning of September, the return to work has gathered pace and this has helped increase trade in our city centre sites. A number of marketing activities are in place to ensure that students frequent our pubs.

The increased emphasis on bedrooms has reaped significant reward over the course of the summer, and whilst the staycation boom will not last in perpetuity there has definitely been a reintroduction on a broad scale to the traditional British seaside holiday, which can only be beneficial to us and offers a great alternative to carbon-conscious customers opting for a fly-free holiday. Our new opening programme is very exciting and demonstrates that we are now back on the expansion trajectory.

We remain ambitious. We seek to grow the number of pubs to more than 100. We have brought together a very high quality and very experienced Head Office team to achieve this. We have reduced costs substantially to improve profitability and our reshaped trading estate will deliver higher quality earnings.

Each and everyone involved with the Group has played their part in helping us to emerge strongly and in optimal shape to take advantage of the opportunities ahead. Our employees have been brilliant and the Board would like to put on record its thanks. We have a strong balance sheet, a new pipeline of acquisitions and a great platform to trade the pubs from. Most importantly we have the ambition to make sure the City Pub Group is a strong player in the evolving pub market.

I look forward to updating you with further strong progress in our January trading update.

Clive Watson

Executive Chairman

23 September 2021

Consolidated Statement of Comprehensive Income

For the 26 weeks ended 27 June 2021

All activities comprise continuing operations. There are no recognised gains or losses other than those passing through the statement of comprehensive income.

The accompanying notes are an integral part of these interim financial statements.

Consolidated Statement of Financial Position

As at 27 June 2021

* - see note 7 for explanation of restatement.

The accompanying notes are an integral part of these interim financial statements.

Consolidated Statement of Changes in Equity

For the 26 weeks ended 27 June 2021

The accompanying notes are an integral part of these interim financial statements.

Consolidated Statement of Cashflows

For the 26 weeks ended 27 June 2021

The accompanying notes are an integral part of these interim financial statements.

Notes to the Financial Statements

For the 26 weeks ended 27 June 2021

1       Basis of preparation

This interim report was approved by the board on 22 September 2021. The interim financial statements are unaudited and are not the Group's statutory accounts as defined in section 434 of the Companies Act 2006.

The consolidated interim financial statements have been prepared under IFRS as adopted by the European Union and on the basis of the accounting policies set out in the statutory accounts of The City Pub Group plc, for the period ended 27 December 2020. The financial statements have not been prepared (and are not required to be prepared) in accordance with IAS 34: 'Interim Financial Reporting'. They do not include any of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the period ended 27 December 2020.

Statutory accounts for the period ended 27 December 2020 have been delivered to the Registrar of Companies. These accounts contain an unqualified audit report under Section 495 of the Companies Act 2006, which did not make any statements under Section 498 of the Companies Act 2006.

The interim report is presented in Great British Pounds and all values are rounded to the nearest thousand pounds, except where otherwise indicated.

This interim report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

2        Other operating income

During the interim period the Group has continued to receive Government grants, mainly in relation to the Furlough Scheme

provided by the Government in response to COVID-19's impact on our business. Further analysis of other operating income

is set out below.

3        Exceptional items

For the purposes of this interim announcement and annual report and accounts, Exceptional items are highlighted as part of the use of alternative non-Generally Accepted Accounting Practice ('non-GAAP') financial measures which are not defined within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and as such, these measures are important and should be considered alongside the IFRS measures.

The insurance claim is recognised within other operating income and all the other exceptional items are recorded within administrative expenses line in the statement of comprehensive income.

4        Tax credit on loss on ordinary activities

The taxation credit is calculated by applying the Directors' best estimate of the annual effective tax rate to the loss for the period. All items of taxation are reflected through the Statement of Comprehensive Income.

5        Loss per share

6        Dividends

The Directors did not propose a dividend in relation to the year ended 27 December 2020 due to the Coronavirus pandemic (2019: nil).

7        Property, plant and equipment

During the period ended 27 December 2020 the group made a provision for impairment against a number of sites totalling £593,000, however £514,000 of this impairment should have been processed against goodwill rather than fixtures and fittings, therefore a correction has been processed to the 27 December 2020 figures. This restatement has no impact on the result for the current year, on earnings per share, on net assets or on the retained earnings reserve brought forward.

8        Right-of-use assets

The disposal during the period relates to the Roundhouse Pub, where the Group acquired the Freehold and therefore no ongoing ROU asset required.

9        Share capital

In May 2021 the Group issued 22,500 £0.01 shares at a price of £1.00 per share in relation to the exercise of share options. The premium on the shares issued was credited to the share premium account.

10      Events after the reporting period

-       Disposal of the Island, Kensal Green during July 2021.

-       Disposal of the Punt Yard during August 2021.

-       Opening of our new site, the Turks Head in Exeter during September 2021.

-       Completed on the acquisition of a freehold 30-bedroom pub / hotel in north Norfolk.

-       Completed on a new leasehold site in Bury St Edmunds.

-       Exchanged on the disposal of Tell Your Friends, London.