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City Pub Group (The) (CPC)

  Print   

Wednesday 27 April, 2022

City Pub Group (The)

Preliminary Results

RNS Number : 4478J
City Pub Group PLC (The)
27 April 2022
 

The City Pub Group PLC

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

FINAL RESULTS FOR THE YEAR ENDED 26 DECEMBER 2021

The City Pub Group is pleased to announce its audited results for the 52 weeks ended 26 December 2021. The Group currently operates a predominately freehold estate of 41 pubs, with the Oyster House in Mumbles opening this week. We have a further three development sites in London, Southern England and Wales.

Since the last statement in September 2021, the business has emerged fully from the COVID-19 lockdowns in 2021 and Omicron over the 2021 festive season and into 2022. All our 40 pubs have reopened and most of the estate is now trading normally.

By November last year, following the lifting of restrictions, we were trading ahead of 2019's level demonstrating demand and the recovery of our business but that growing momentum reversed with the outbreak of Omicron in December 2021. Encouragingly, trading for the last 9 weeks is 98% of 2019, on a like for like basis. We are now confident that 2022 trading across the portfolio will exceed 2019 by the end of the second quarter.

Financial highlights

 

 

 

 

 

 

 

Post IFRS 16

Pre IFRS 16

Post IFRS 16

Pre IFRS 16

 

 

52 weeks to

52 weeks to

52 weeks to

52 weeks to

Change

 

26.12.21

26.12.21

27.12.20

27.12.20

Pre IFRS 16

 

£m

£m

£m

£m

%

Revenue

35.4

35.4

25.8

25.8

37%

Adjusted EBITDA

5.9

3.8

1.2

(0.8)

N/A

Adjusted Profit/(loss) before tax

0.9

1.0

(5.4)

(5.1)

N/A

 

* 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
.

· Intention to recommence dividends in September with the Interim Results

Balance sheet and estate valuation

· Following the disposal of 6 pubs following the year end the Company has current net debt of c.£2.0m and £35m banking facilities

· Estate valued at 145p or £150 million (excluding lotting premium)

 

Estate enhancement and development

· The Hoste, Georgian Townhouse, Bath Brewhouse, and Daly's have been enhanced with either capacity gains through investment in outside seating or being refurbished

· Significant progress on the development sites with Tivoli, Cliftonville Hotel and the Nest opening during the summer and planning now received for our new concept Damson and Wilde

Mosaic acquisition

· Increased stake from 25% to 36% at a total investment of £4.1m. Intention to acquire remaining shares not owned in 2023

· 10 high quality pubs which will complement existing estate

Outlook

· Strongest balance sheet since inception

· Some impact from industry challenges particularly energy and food costs. Short term effect on margin as decision to hold prices.

· Trading in the last 9 weeks of 2022 is 98% of 2019 and we're confident that trade will revert to 2019 levels in the second half.

· Well positioned to take advantage of acquisition opportunities when they arise.

 

Clive Watson, Chairman of City Pub Group said:

"Following the reversal over the festive season, trading is now beginning to build in momentum and we look forward to an uninterrupted summers' trading.

We are emerging from the pandemic in the strongest financial position that we have ever been in and therefore have signalled our intention to recommence dividends in the autumn.

We have a very strong platform from which to grow and much to look forward to despite the inflationary headwinds our development sites are coming on stream, Mosaic will be fully acquired next year adding ten high quality pubs, our new concept will begin trading and we can take full advantage of, adhering to our strict criteria, freehold acquisition opportunities that arise."

 

  27 April 2022

 

Enquiries:

City Pub Group  
Clive Watson, Executive Chairman
Holly Elliott, CFO

 

Today: via Instinctif

Instinctif Partners   
Matthew Smallwood

 

+44 (0) 20 7457 2020

              
                Peel Hunt

              
              George Sellar
            

+44 (0)78 9520 5644

 

Liberum (Nomad & Broker )    Chris Clarke
Edward Thomas

+44 (0) 20 3100 2000

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

 

 

 

CHAIRMAN'S STATEMENT

 

Since my last statement in September 2021, the business has emerged fully from the COVID-19 lockdowns and Omicron over the 2021 festive season and early 2022. All our 40 pubs have reopened and most of the estate is now trading normally.

Our focus is on growing our premium business of high quality, predominantly freehold pubs in great cities and market towns of Southern England and Wales. We will do this by driving sales in our core estate, as well as continuing our expansion. Our central marketing structure is giving us better visibility of how to further build future sales which together with the City Club App enables us to enhance improved customer loyalty. We are benefitting from more a streamlined business and the significant savings achieved.

Staff morale has considerably improved since our last report helped by increased communication within the Group and the way we cared for our staff during the pandemic.

By November last year, following the lifting of restrictions, we were trading ahead of 2019's level demonstrating demand and the recovery of our business but that growing momentum reversed with the outbreak of Omicron in December 2021.Encouragingly, trading for the last 8 weeks of 2022 is at around 98% of 2019. We are now confident that 2022 trading across the portfolio will exceed 2019 by the end of the second quarter.

Trading Estate

The Group currently operates 41 trading sites and a further 3 development sites. Another 3 are at the heads of agreement stage.

In order to maintain and continuously improve the quality of our estate we have made the following investments:

· The Hoste, Burnham Market, Norfolk - an further 18 rooms are in the process of being refurbished and an outside seating area for 60 added

· Georgian Townhouse, Norwich - Further premiumisation of the site has taken place together with enhancement of the outside trading area, including the addition of an all-weather terrace with 60 covers and a retractable roof

· Bath Brew House, Bath - the outside sitting area for over 80 seats has been covered creating extra weather proof trading space

· Phene, Chelsea - garden significantly upgraded to take advantage of the summer months

· Daly's Wine Bar and Temple Brew House on the Strand were our last pubs to be reopened, fully refurbished after 2 years of closure

Investments being implemented:

· Cliftonville Hotel, Cromer, to be reopened having been refurbished, in time for summer holidays, with potential extra outside seating of circa 100 covers

· Most recently, on 25th April, the Oyster House, Mumbles, opened and we are very confident that with a good summer we will achieve high levels of trade and benefit from the16 luxury hotel rooms to rival any in the region

· The Tivoli, Cambridge has taken us over 2 years to develop due to COVID delays. Following significant investment we anticipate it becoming one of our trophy sites. This opens in May 22.

· The Nest, Bath - it has finally been granted planning for its large outside beer garden and licensed for the extended hours. We anticipate it opening in early August

· Planning consent has now been granted for the Café Rouge site in Bury St Edmunds - our new All-Day Trading concept is being launched here - it is being named Damson & Wilde. Featuring an all-day menu, a premium drinks offer, great coffee and high service levels we expect to develop this to capitalise on the best aspects of high street offers. Once proven and implemented, we anticipate replicating the all day format in other pubs which will further help to premiumise them. If Damson & Wilde proves to be a success, we will look at expanding this concept but will not be sucked into paying high rents on the High Street which have increased considerably in the last few months.

 

 

Post balance sheet date events - Disposals/Mosaic

In March this year we announced the disposal of 6 sites predominantly on the South coast for the consideration of approximately £17m. The board felt that they could reinvest this money into higher growth assets and also use it to increase our stake in the Mosaic Pubs, which has 10 high quality pubs of which 8 are freehold. Mosaic has a strong London and Birmingham presence and we've recently increased our stake from 25% to 36% at a total cost of c. £4.1m. We will make an offer for the outstanding shares in Mosaic by the middle of next year at which point we will be able to consolidate their trading estate with our own. The Mosaic estate will complement our existing pub estate and will help drive further growth in 2023.

 

Financial Highlights

Summary for the year ended 26 December 2021:

• Revenue up 37% to £35.4 million (2020: £25.8 million)

• Adjusted EBITDA* of £3.8 million (2020: £(0.8) million)

• Adjusted profit/(loss) before tax** of £1.0 million (2020: £(5.1) million)

• Reported profit/(loss) of £(2.9) million (2020: £(6.5) million)

Key Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

Post IFRS 16

Pre IFRS 16

Post IFRS 16

Pre IFRS 16

 

 

52 weeks to

52 weeks to

52 weeks to

52 weeks to

Change

 

26.12.21

26.12.21

27.12.20

27.12.20

Pre IFRS 16

 

£m

£m

£m

£m

%

Revenue

35.4

35.4

25.8

25.8

37%

Adjusted EBITDA

5.9

3.8

1.2

(0.8)

N/A

Adjusted Profit/(loss) before tax

0.9

1.0

(5.4)

(5.1)

N/A

 

* 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

Currently, we have net debt of circa £2m resulting in a very strong balance sheet. We have credit facilities of £35m, therefore the company is well placed to acquire assets at the right time, at the right price.

Consequently we have no requirement for the £5m CLBLS which we took out last year and this facility has now been cancelled.

Estate Valuation

The trading portfolio of pubs has been revalued and the total sum of gross trading assets equates to £150m (this excludes the recent pub disposals). Within the valuation, 17 of the larger pubs were independently valued, accounting for 65% of the gross trading value. Net Asset Value, excluding any lotting premium which would be undoubtedly achieved for an estate of quality premium assets, is circa 145p per share.

Board Changes

Holly Elliott joined the company on 29 November 2021 as Chief Financial Officer, having previously worked at Five Guys and Caffé Nero. Holly has vast experience in the hospitality industry and has joined to help the Company improve its systems, financial controls, and to assist with the expansion of the business.

Tarquin Williams left the business at the end of February 2022 after serving as CFO for over 6 years. Tarquin was heavily involved in the Group's flotation on AIM in November 2017 and assisted in steering it through difficult COVID period. The board would like to thank Tarquin for his contribution and wish him all the best for the future.

 

ESG

Last year we established an ESG committee chaired by Emma Fox, an independent Non-Executive Director. Throughout 2021, we have made progress in developing our strategy to ensure that we operate as a more responsible business, primed to play a positive role in society. We have launched a significant and thorough review of our current operations and introduced robust data collection processes to fully understand our impact on the environment and the communities in which we operate. We are taking our responsibilities seriously and want to get ESG right.

This year we have reported against the recommendations of the TCFD for the first time and prepared standalone ESG and TCFD Reports to communicate our ESG journey to our stakeholders. We are continuously improving and implementing measures and new procedures across our estate which will help continue reduce our carbon footprint.

Our policies will be outlined in our published report and accounts. I would like to thank Emma and the committee for their immense contribution it's been a challenging and rewarding year.

 

Dividends

The Group is now in strong financial position and the Board believes that shareholders should be rewarded for supporting the business through the last couple of very challenging years. The Board therefore plans to reintroduce dividends on a progressive basis with the current intention being that this will accompany the interim results in September.

 

Industry Issues

The Group has come through the challenges of COVID and the action that it took during the pandemic is seeing it emerge a better, stronger business albeit facing well publicised macro-economic challenges including inflation, issues arising from Brexit and more recently the impact from the war in Ukraine.

The Group benefits from a 3-year supply agreement with our major beer suppliers agreed in December 2021. This agreement helps mitigate some of the inflationary pressures that our industry faces and means that we will in real terms be paying less for larger parts of our liquor supplies.

Energy costs have soared, and we have hedged our future exposure but the cost to the business in this financial year is in excess of £1m.

Food price inflation is also high as well as building material and labour costs.

There is no quick term solution to inflation. The Board feels it's inappropriate and counterproductive to keep increasing prices that we charge customers, and therefore margins will be impacted in the short term. We would rather delight our customers than price ourselves anti competitively.

 

 

Outlook

The Group is in a very strong financial position, and it continues to review and seek acquisition opportunities to create value. The Board believes this is the best way to drive shareholder value. Large parts of our estate are trading well but there are still some pubs that need focus to re-establish normalised levels of trading.

We have worked hard to forge a strong culture within the business which is helping to retain key employees at retail and head office level. As part of a deliberate plan, many have share options to incentivise them for the future.

The estate is high quality with 220 letting rooms and we anticipate benefiting from the continued popularity of staycations. Room sales are expected to be, this year, over 10% of the overall sales compared to 6% in 2019. With our coastal investments such as the Hoste in Burnham Market, Oyster House in Mumbles and Cliftonville in Cromer we are well positioned to take advantage of this market.

The board remains ambitious and with the planned Mosaic acquisition next year and new opportunities arising from the dislocation in the marketplace, our ambition is to have 65-70 quality pubs open by the end of next year.

There are undoubtedly major challenges such us inflation, but with a high intensity retailing approach, we believe we can overcome these challenges over the next 12 months, taking advantage of our balance sheet, one of the strongest in the hospitality industry. We have a very strong platform to build on.

I would like to thank all my Directors, all our staff, our Advisers, our Bankers, Barclays Bank Plc, suppliers and Shareholders for all their help in in getting us to this stage. I am confident that the better times will return and that in the meantime we can continue to weather the storm and continue to improve on Group's fortunes.

 

Clive Watson

Executive Chairman

26 April 2022

 

 

 

Consolidated statement of profit or loss

for the 52 week period ended 26 December 2021 (2020: for the 52 week period ended 27 December 2020)

 

 

 

Notes

2021

£'000

2020

£'000

Revenue

35,364

25,815

Cost of sales

 

(8,273)

(6,280)

Gross profit

27,091

19,535

Other operating income

4a

5,084

5,391

Administrative expenses

 

(35,126)

(31,423)

Operating loss

(2,951)

(6,497)

 

 

 

 

Reconciliation to adjusted EBITDA*

 

 

 

Operating loss

 

(2,951)

(6,497)

 

 

 

 

Depreciation

5

4,881

5,494

Share option charge

28

703

397

Exceptional items

8

3,288

1,814

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

 

5,921
 

1,208

 

 

 

Share of losses of associate

15

(78)

-

Other financial items

15

943

-

Finance costs

6

(1,041)

(1,137)

Loss before tax

(3,127)

(7,634)

Tax credit

7

259

1,171

Loss for the period

 

(2,868)

(6,463)

 

 

 

 

Earnings per share

 

 

Basic earnings per share (p)

10

(2.76)

(7.15)

Diluted earnings per share (p)

10

n/a

n/a

 

All activities comprise continuing operations.

 

The notes form part of these financial statements.

 

 

 

Consolidated statement of comprehensive income

for the 52 week period ended 26 December 2021 (2020: for the 52 week period ended 27 December 2020)


 

 

Notes

2021

£'000

2020

£'000

 

 

 

Loss for the period

 

(2,868)

(6,463)

 

 

 

 

Other Comprehensive income

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

Changes in the fair value of equity investments at fair value through other comprehensive income

14

18

-

Income tax relating to these items

 

(3)

-

Other comprehensive income for the period, net of tax

 

15

-

 

 

 

 

Total comprehensive income for the period

(2,853)

(6,463)

 

 

 

 

 

 

All of the total comprehensive income for the period is attributable to the owners of The City Pub Group plc and all arise from continuing operations.

 

The notes form part of these financial statements.

 

 

 

Consolidated statement of financial position

as at 26 December 2021 (2020: as at 27 December 2020)

 

 

 

Notes

2021

£'000

Restated

2020

£'000

Assets

 

 

Non-current

 

 

 

Intangible assets

11

2,250

3,282

Property, plant and equipment

12

107,367

108,573

Right-of-use assets

13

17,875

19,565

Deferred tax assets

23

1,018

503

Financial assets at fair value through OCI

14

254

1,309

Investments in associates

15

4,248

-

Total non-current assets

 

133,012

133,232

Current

 

 

Inventories

17

1,048

703

Trade and other receivables

18

3,331

3,064

Cash and cash equivalents

 

12,510

12,331

Total current assets

 

16,889

16,098

Total assets

 

149,901

149,330

Liabilities

 

 

Current liabilities

 

 

 

Trade and other payables

19

(12,214)

(8,430)

Financial liabilities - lease liabilities

13

(1,912)

(2,103)

Total current liabilities

 

(14,126)

(10,533)

Non-current

 

 

Borrowings

20

(24,750)

(24,801)

Financial liabilities - lease liabilities

13

(16,473)

(17,750)

Deferred tax liabilities

23

(2,464)

(2,181)

Total non-current liabilities

 

(43,687)

(44,732)

Total liabilities

 

(57,813)

(55,265)

Net assets

 

92,088

94,065

Equity

 

 

Share capital

24

31,276

31,275

Share premium

24

59,475

59,303

Own shares (JSOP)

24

(3,272)

(3,272)

Other reserve

25

2,184

1,466

Retained earnings

24

2,425

5,293

Total equity

 

92,088

94,065

 

The notes form part of these accounts.

 

Approved by the Board and authorised for issue on 26 April 2022.

 

 

Clive Watson  Holly Elliott

Chairman                                Chief Financial Officer

 

Company No. 07814568
 

Company statement of financial position

as at 26 December 2021 (2020: as at 27 December 2020)

 

 

Notes

2021

£'000

Restated

2020

£'000

Assets

 

 

Non-current

 

 

 

Intangible assets

11

2,250

3,282

Property, plant and equipment

12

107,367

108,573

Right-of-use assets

13

17,875

19,565

Deferred tax assets

23

1,018

503

Financial assets at fair value through OCI

14

71

1,309

Investments in associates

15

4,248

-

Investments in subsidiaries

16

801

1,067

Total non-current assets

 

133,630

134,299

Current

 

 

Inventories

17

1,048

703

Trade and other receivables

18

3,496

3,064

Cash and cash equivalents

 

12,510

12,331

Total current assets

 

17,054

16,098

Total assets

 

150,684

150,397

Liabilities

 

 

Current liabilities

 

 

 

Trade and other payables

19

(13,015)

(9,497)

Financial liabilities - lease liabilities

13

(1,912)

(2,103)

Total current liabilities

 

(14,927)

(11,600)

Non-current

 

 

Borrowings

20

(24,750)

(24,801)

Financial liabilities - lease liabilities

13

(16,473)

(17,750)

Deferred tax liabilities

23

(2,461)

(2,181)

Total non-current liabilities

 

(43,684)

(44,732)

Total liabilities

 

(58,611)

(56,332)

Net assets

 

92,073

94,065

Equity

 

 

Share capital

24

31,276

31,275

Share premium

24

59,475

59,303

Own shares (JSOP)

24

(3,272)

(3,272)

Share-based payment reserve

24

2,077

1,374

Retained earnings

24

2,517

5,385

Total equity

 

92,073

94,065

 

The loss for the financial period of the Parent Company, The City Pub Group plc was £2,868,000 (2020: loss £3,678,000). The notes form part of these accounts. Approved by the Board and authorised for issue on 26 April 2022.

 

 

Clive Watson  Holly Elliott

Chairman                                Chief Financial Officer

 

Company No. 07814568

 

 

Consolidated statement of changes in equity

for the 52 week period ended 26 December 2021

 

 

Notes

Share

capital

Share

premium

Own

shares

(JSOP)

Other

Reserves
(note 25)

Retained

earnings

Total

Balance at 29 December 2019

30,812

38,570

(3,272)

1,069

11,756

78,935

 

 

 

 

 

 

 

 

Employee share-based compensation

28

-

-

-

397

-

397

Issue of new shares

24

463

20,733

-

-

-

21,196

Transactions with owners

 

463

20,733

-

397

-

21,593

 

 

 

 

 

 

 

Loss for the period

 

-

-

-

-

(6,463)

(6,463)

Total comprehensive income
for the period

 

-

-

-

-

(6,463)

(6,463)

 

 

 

 

 

 

 

 

Balance at 27 December 2020

 

31,275

59,303

(3,272)

1,466

5,293

94,065

 

 

 

 

 

 

 

Employee share-based compensation

28

-

-

-

703

-

703

Issue of new shares

24

1

172

-

-

-

173

Transactions with owners

 

1

172

-

703

-

876

 

 

 

 

 

 

 

Loss for the period

 

-

-

-

-

(2,868)

(2,868)

Other comprehensive income

 

-

-

-

15

-

15

Total comprehensive income
for the period

 

-

-

-

15

(2,868)

 

(2,853)

 

 

 

 

 

 

 

 

 

Balance at 26 December 2021

 

31,276

59,475

(3,272)

2,184

2,425

92,088

 

The notes form part of these accounts.

 

 

Company statement of changes in equity

for the 52 week period ended 26 December 2021

 

 

Notes

Share

capital

Share

premium

Own

shares

(JSOP)

Share-based payment reserve

Retained

earnings

Total

Balance at 29 December 2019

 

30,812

38,570

(3,272)

977

9,063

76,150

 

 

 

 

 

 

 

Employee share-based compensation

28

-

-

-

397

-

397

Issue of new shares

24

463

20,733

-

-

-

21,196

Transactions with owners

 

463

20,733

-

397

-

21,593

 

 

 

 

 

 

 

Loss for the period

 

-

-

-

-

(3,678)

(3,678)

Total comprehensive income for the period

 

-

-

-

-

(3,678)

(3,678)

 

 

 

 

 

 

 

 

Balance at 27 December 2020

 

31,275

59,303

(3,272)

1,374

5,385

94,065

 

 

 

 

 

 

 

Employee share-based compensation

28

-

-

-

703

-

703

Issue of new shares

24

1

172

-

-

-

173

Transactions with owners

 

1

172

-

703

-

876

 

 

 

 

 

 

 

Loss for the period

 

-

-

-

-

(2,868)

(2,868)

Total comprehensive income for the period

 

-

-

-

-

(2,868)

(2,868)

 

 

 

 

 

 

 

 

Balance at 26 December 2021

 

31,276

59,475

(3,272)

2,077

2,517

92,073

 

The notes form part of these accounts.

 

 

Consolidated statement of cash flows

for the 52 week period ended 26 December 2021 (2020: for the 52 week period ended 27 December 2020)

 

 

Notes

2021

£'000

2020

£'000

Cash flows from operating activities

 

 

Loss for the period

 

(2,868)

(6,463)

Taxation

7

(259)

(1,171)

Finance costs

6

1,041

1,137

Result from equity accounted investment

15

78

-

Other financial items

15

(943)

-

Operating loss

(2,951)

(6,497)

Adjustments for:

 

 

 

Depreciation

5

4,881

5,494

Gain on disposal of property, plant & equipment

 

125

-

Share-based payment charge

28

703

397

Impairment

12

3,690

933

Change in inventories

 

(345)

517

Change in trade and other receivables

 

(571)

1,055

Change in trade and other payables

 

3,800

(258)

Cash generated from operations

9,332

1,641

Tax (paid) received

 

651

(341)

Net cash generated from operating activities

 

9,983

1,300

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

12

(5,493)

(2,304)

Acquisition of new property sites

 

(1,600)

-

Purchase of investments and associates

14&15

(2,309)

(1,309)

Proceeds from disposal of property, plant and equipment

 

2,163

821

Net cash used in investing activities

 

(7,239)

(2,792)

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of share capital

24

73

21,196

Repayment of borrowings

 

(91)

(7,544)

Principal element of lease payments

 

(1,416)

(1,347)

Interest paid (includes implied interest under IFRS16)

6

(1,131)

(1,251)

Net cash used in/from financing activities

 

(2,565)

11,054

 

 

 

Net change in cash and cash equivalents

 

179

9,562

Cash and cash equivalents at the start of the period

 

12,331

2,769

Cash and cash equivalents at the end of the period

 

12,510

12,331

 

The notes form part of these accounts.

 

 

 

Company statement of cash flows

for the 52 week period ended 26 December 2021 (2020: for the 52 week period ended 27 December 2020)

 

 

Notes

2021

£'000

2020

£'000

Cash flows from operating activities

 

 

Loss for the period

 

(2,868)

(3,678)

Taxation

 

(259)

(1,171)

Finance costs

 

1,041

1,137

Result from equity accounted investment

15

78

-

Other financial items

15

(943)

-

Operating loss

(2,951)

(3,712)

Adjustments for:

 

 

 

Depreciation

5

4,881

5,494

Realised gain on final hive-up dividend

 

-

(2,785)

Gain on disposal of property, plant and equipment

 

125

-

Share-based payment charge

28

703

397

Impairment

 

3,690

933

Change in inventories

 

(345)

517

Change in trade and other receivables

 

(735)

1,055

Change in trade and other payables

 

3,800

(258)

Cash generated from operations

9,168

1,641

Tax paid

 

651

(341)

Net cash generated from operating activities

 

9,819

1,300

 

 

 

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

12

(5,493)

(2,304)

Acquisition of new property sites

 

(1,600)

-

Purchase of investments and associates

14&15

(2,145)

(1,309)

Proceeds from disposal of property, plant and equipment

12

2,163

821

Net cash used in investing activities

 

(7,075)

(2,792)

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from issue of share capital

 

73

21,196

Repayment of borrowings

 

(91)

(7,544)

Principal element of lease payments

 

(1,416)

(1,347)

Interest paid

 

(1,131)

(1,251)

Net cash used in/from financing activities

 

(2,565)

11,054

 

 

 

Net change in cash and cash equivalents

 

179

9,562

Cash and cash equivalents at the start of the period

 

12,331

2,769

Cash and cash equivalents at the end of the period

 

12,510

12,331

 

The notes form part of these accounts.

 

 

 

Notes to the financial statements

for the 52 week period ended 26 December 2021 (2020: for the 52 week period ended 27 December 2020)

 

1   Company information

The financial statements of The City Pub Group plc (as consolidated "the Group") for the 52 week period ended 26 December 2021 were authorised for issue in accordance with a resolution of the directors on 26 April 2022. 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 29.

 

Exemption from audit

For the period ended 26 December 2021 the subsidiaries (see note 16) are exempt from audit under section 480 of the Companies Act 2006.

 

2   Significant accounting policies

2.1   Basis of preparation

This preliminary announcement does not constitute the Group's full financial statements for the 52 week period ended 26 December 2021. The auditors have reported on the Group's statutory accounts for the 52 week period ended 26 December 2021 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 52 week period ended 26 December 2021 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 52 week period ended 26 December 2021.

 

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 applied for the first time in the current financial statements

The Group has applied the following Standards and Amendments for the first time for their annual reporting period commencing 28 December 2020:

 

· IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)

· IFRS 3 Business Combinations (Amendment - Definition of Business)

· Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 8; and

· Revised Conceptual Framework for Financial Reporting.

 

The Amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

 

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.

 

· Interest Rate Benchmark Reform Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

· Property, Plant and Equipment: Proceeds before intended use - Amendments to IAS 16

· Reference to the Conceptual Framework - Amendments to IFRS 3

· Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 37

· Annual Improvements to IFRS Standards 2018-2020

· Classification of Liabilities as Current or Non-current - Amendments to IAS 1

· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

· Definition of Accounting Estimates - Amendments to IAS 8

· Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to IAS 12

 

The Directors are currently evaluating the impact of the adoption of all other standards, amendments and interpretations but do not expect them to have a material impact on the Group operation or results.

 

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

The Group agreed a £35m revolving credit facility (RCF) with Barclays Bank plc in July 2019 with an accordion option of another £15m. This facility has been extended to July 2024. There is also an undrawn £5m CLBILS facility available. At year end we had £25m of debt, and £15m of net debt, with £10m undrawn on our RCF, £15m of accordion and £5m of CLBILS available. We have since cancelled the CIBLS facility.

 

Barclays replaced The City Pub Group plc's RCF's existing financial covenants with a Minimum Liquidity Test in the sum of £8m plus an additional Minimum EBITDA Test to be tested on a monthly basis. We have significant headroom between our forecasts and the requirements in the Minimum EBITDA Test. After June 2022 the financial covenant tests as currently documented will recommence. The forecasts for the business show substantial headroom.

 

Post year end, the group has recently sold six pubs for £17.1m. This effectively reduces debt to zero. The Group is now EBITDA and cashflow generative, with funding only required for new acquisitions.

 

During 2020, we reduced Pub and head office costs to the minimum and have kept a tight grip on these costs post reopening. We applied for Grants where applicable. We have been in negotiations with landlords with regards to rent holidays, rent deferrals and changes in terms of some leases.

 

Although there are cost pressures with wage inflation, rising energy prices and upward pressure on commodities, we've taken the time during covid to renegotiate and lock in procurement contracts, streamlining staffing and implementing energy reducing initiatives.

 

When making our assessment of going concern, our assumptions have assumed all covid restrictions continue to be removed. We have assumed that trading reverts to pre COVID-19 levels. While trading restrictions remain a risk, it is considered that the likelihood of them returning is now considered remote and so is not considered to present a material going concern risk to the group at the date of approval of the financial statements.

 

Based on the current financial projections to the end of December 2023 and having considered the facilities available, together with potential sensitivities to changes in levels of trade the Board is confident that the Group have adequate resources to continue in operational existence for the foreseeable future, while also meeting its loan covenant requirements as they presently stand. 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 21. 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) 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.

 

Financial assets at fair value through other comprehensive income (FVOCI)

The Group accounts for financial assets at FVOCI if the assets meet the following conditions:

 

· they are held under a business model whose objective it is "hold to collect" the associated cash flows and

· the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

The Group has opted to classify financial assets which are investments in equity instruments as financial assets at fair value through other comprehensive income.

 

Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset.

 

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 21.

 

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 24, 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.

 

2.16Investments in associates

Investments in associates are accounted for using the equity method, unless associates are held indirectly through a venture capital organization (or similar entity), in which case they are measured at fair value through profit or loss.

 

The carrying amount of the investment in associates is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies of the Group.

 

Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group's interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment. When an investment in an associate is held indirectly via an investment manager it is measured at fair value through profit or loss.

 

2.17 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.

 

2.18 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.

 

2.19 Leases

For any new contracts entered into on or after 30 December 2019, the Group considers whether a contract is, or contains a lease. A lease is defined as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

 

· the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group

· the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract

· the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.

 

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

· fixed payments (including in-substance fixed payments), less any lease incentives receivable;

· variable lease payments that are based on an index or a rate;

· amounts expected to be payable by the lessee under residual value guarantees;

· the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and

· payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

 

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

 

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available. If that rate cannot be readily determined, which is generally the case for leases in the Group, the Group's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

 

To determine the incremental borrowing rate, the Group:

 

· where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third-party financing was received

· uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third-party financing, and

· makes adjustments specific to the lease, e.g. term, country, currency and security.

 

Where the Group is exposed to potential future increases in variable lease payments based on an index or rate, these are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

 

 

Subsequent to initial measurement, lease payments are allocated between principal, which reduces the liability, and finance cost. The finance cost is charged to the statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

Right-of-use assets are measured at cost comprising the following:

 

· the amount of the initial measurement of lease liability;

· any lease payments made at or before the commencement date less any lease incentives received;

· any initial direct costs; and

· restoration costs.

 

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life. The Group also assesses the right-of-use asset for impairment when such indicators exist.

 

The Group has elected to account for short-term leases and leases of low value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

 

The right-of-use assets and lease liabilities have been disclosed separately on the face of the Statement of Financial Position, within Non-current assets and across Current & Non-current liabilities respectively.

 

2.20 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.

 

2.21 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.

 

2.22 Government grants

The Group has received Government grants for the first time during the period ended 27 December 2020, mainly in relation to the Coronavirus Job Retention Scheme provided by the Government in response to COVID-19's impact on our business. The Group has elected to account for these grants as other operating income, rather than to off-set the Government grants within administrative expenses, so that the gross impact is disclosed on the face of the Statement of Comprehensive Income.

 

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 16.

 

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, choosing a suitable discount rate and growth rate. Full details are supplied in note 11, together with an analysis of the key assumptions.

 

The determination of any impairment of property, plant & equipment (including the right of use assets) also requires estimation of fair value and value in use. As with goodwill, this requires estimation of future cash flows and selection of a suitable discount rate, together with assessment of the market values of properties (if applicable). Goodwill was allocated to the carrying value of property, plant & equipment for the purposes of the impairment review, with further details around key assumptions provided in note 11 (such assumptions are also relevant to the carrying value of property, plant & equipment are detailed in note 12).

 

The calculation of lease liabilities requires the Group to determine an incremental borrowing rate ("IBR") to discount future minimum lease payments. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group 'would have to pay', which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.

 

The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as to the inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable life of options granted and the time of exercise of those options. Expectations around employee retention and meeting of performance criteria have also been considered. The model used by the Group is the Black-Scholes valuation model and the inputs are detailed in note 28.

 

The assessment of the probability of future taxable profits on which deferred tax assets can be utilised is based on the Group's latest approved budget forecasts, which is adjustment for significant non-taxable income and expenditure. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in respect of the period for which future profits can be confidently foreseen.

 

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.

 

2021

£'000

2020

£'000

Revenue

35,364

25,815

Cost of sales

(8,273)

(6,280)

Gross profit

27,091

19,535

Other operating income before adjusting items (note 4(a))

4,084

5,391

Operating expenses:

 

 

Operating expenses before adjusting items

(25,254)

(23,718)

Adjusted EBITDA

5,921

1,208

Depreciation

(4,881)

(5,494)

Share option charge

(703)

(397)

Exceptional items - operating expenses

(4,288)

(1,814)

Total operating expenses

(35,126)

(31,423)

Exceptional items - other operating income (note 4(a))

1,000

-

Operating loss

(2,951)

(6,497)

 

(a)  Other operating income

During 2020 the Group has received Government grants for the first time, 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.

 

2021

£'000

2020

£'000

Coronavirus Job Retention Scheme

2,972

5,141

Other government grants

1,112

250

Insurance claim (exceptional item note 8)

1,000

-

Total other operating income

5,084

5,391

5  Loss on ordinary activities before taxation

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

 

2021

£'000

2020

£'000

Costs of inventories recognised as an expense

5,502

6,376

Staff costs (note 26)

18,691

17,133

Depreciation

4,881

5,494

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

65

60

Exceptional items (note 8)

3,288

1,814

Operating leases - land and buildings

(266)

(351)

 

Rent concessions relating to COVID-19 of £178,000 (2020: £450,000) have been recognised within this balance for 2021.

 

6  Interest payable and similar charges

 

2021

£'000

2020

£'000

On bank loans and overdrafts

475

551

Interest and finance charges for lease liabilities

656

699

Interest expense capitalised within property, plant & equipment

(90)

(113)

Total finance cost

1,041

1,137

 

During the period £90,000 of interest was capitalised (2020: £113,000).

 

7  Tax charge on loss on ordinary activities

(a)  Analysis of tax charge for the period

The tax charge for the Group is based on the loss for the period and represents:

 

 

2021

£'000

2020

£'000

Current income tax:

 

 

Current income tax charge

-

(572)

Adjustments in respect of previous period

(24)

(154)

Total current income tax

(24)

(726)

Deferred tax:

 

 

Origination and reversal of temporary differences (note 23)

280

58

Adjustment to deferred tax asset on tax losses (note 23)

(515)

(503)

Total deferred tax

(235)

(445)

Total tax

(259)

(1,171)

 

 

 

(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% (2020: 19.00%). The differences are explained as follows:

 

2021

£'000

2020

£'000

Loss on ordinary activities before tax

(3,127)

(7,634)

 

 

 

Loss on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom of 19.00% (2020: 19.00%)

(594)

 

(1,450)

Effect of:

 

 

Temporary differences

265

446

Items not deductible for tax purposes

95

(5)

Adjustment in respect of previous periods

(24)

(154)

Share options tax deduction

(1)

(8)

Total tax credit

(259)

(1,171)

 

The deferred tax asset included in the balance sheet of £1,018,000 (2020: £503,000) relates principally to the carry forward of tax losses. The Directors have recognised a deferred tax asset in respect of carried forward trading tax losses as, based on current estimates, the Group is forecast to make sufficient trading profit over the next 3 years, against which these losses can be offset.

 

8  Exceptional items

 

2021

£'000

2020

£'000

Pre opening costs

37

14

Impairment of pub sites

3,690

933

Inventory impairments

-

662

Insurance claim

(1,000)

-

Other non recurring items

561

205

 

3,288

1,814

 

Exceptional items for both financial years presented are included within administrative expenditure in the Statement of Comprehensive Income.

 

9  Dividends

Dividends paid during the reporting period

The Board did not declare a dividend due the Covid pandemic (2020: £nil)

 

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 (2020: nil).

 

10  Loss per share

 

2021

£'000

2020

£'000

Loss for the period attributable to Shareholders

(2,868)

(6,463)

 

 

 

Loss per share:

 

 

Basic loss per share (p)

(2.76)

(7.15)

Diluted earnings per share (p)

n/a

n/a

 

 

 

Weighted average number of shares:

Number of shares

Number of shares

Weighted average shares for basic EPS

103,795,354

90,451,692

Effect of share options in issue

n/a

n/a

Weighted average shares for diluted earnings per share

n/a

n/a

 

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.

 

For the 52 week period ended 26 December 2021 and 27 December 2020, the Group recorded a loss. As a result, share options in issue for this period are considered to be antidliutive and therefore no diluted loss per share has been presented.

 

 

11  Goodwill

Group and Company

 

 

2021

£'000

 

Restated

2020

£'000

Cost brought forward

 

 

4,196

4,196

Additions

 

 

50

-

At end of period

 

 

4,246

4,196

Amortisation/impairment brought forward

 

 

(914)

(60)

Impairment provided during the period

 

 

(1,082)

(854)

At end of period

 

 

(1,996)

(914)

 

 

 

 

 

Net book value at end of period

 

 

2,250

3,282

Net book value at start of period

 

 

3,282

4,136

 

The carrying value of goodwill included within the Group and Company statement of financial position is £2,250,000 (2020 restated: £3,282,000), which is allocated to the cash-generating unit ("CGU") of groupings of public houses as follows:

 

 

 

 

2021

£'000

Restated
2020

£'000

Freehold

 

 

1,374

2,396

Leasehold

 

 

876

886

 

 

 

2,250

3,282

 

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. During the period ended 26 December 2021 impairments have been made against a number of sites, as described further in note 12, with impairments at three sites resulting in reductions to goodwill.

 

The fair value less costs to sell is calculated based on the market value of the associated property.

 

For the 52 week period ended 26 December 2021, the cash-generating unit recoverable amount was determined based on value-in-use calculations, using cash flow projections based on one year budgets, (modified as appropriate for the impact of COVID-19 and the expected return to normal trading conditions), 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 and trading following the re-opening of sites during 2021.

 

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 and uncertainty of future cash flows related to COVID-19.

 

Lowering the discount rate by 1% from 10% to 9% would have the effect of reducing the impairment charge by £78k to £3,612k. An increase in the discount rate to 11% would result in the impairment charge increasing by £170k to £3,860k.

 

Lowering the long term growth rate used from 2% to 1% would result in an increase in the impairment charge of £69k to £3,759k. A higher growth rate of 3% would result in the impairment charge reducing by an immaterial amount.

 

The assumptions and outlined changes in impairment charge noted in the above sensitivities are relevant to the combined carrying value of goodwill and property plant & equipment, and are stated before any allocation between the two asset classes.

 

 

As outlined further in note 33, a prior period restatement has been made to the 2020 comparatives to transfer £514,000 of impairment from property, plant and equipment (the fixtures, fittings and computers category) to goodwill.

 

12  Property, plant and equipment

Group and Company

Freehold &

leasehold

property

£'000

Fixtures,

fittings and

 computers

£'000

Total

£'000

Cost

 

 

 

At 29 December 2019

97,292

29,357

126,649

Additions

311

2,107

2,418

Disposals

(821)

-

(821)

At 27 December 2020

96,782

31,464

128,246

Additions

1,405

4,178

5,583

Acquisitions

1,600

50

1,650

Disposals

(3,175)

(745)

(3,920)

At 26 December 2021

96,612

34,947

131,559

 

 

 

 

Depreciation

 

 

 

At 29 December 2019

4,627

11,108

15,735

Provided during the period

747

3,112

3,859

Impairment (restated)

-

79

79

At 27 December 2020 (restated)

5,374

14,299

19,673

Provided during the period

587

2,703

3,290

Impairment

967

1,582

2,549

Disposals

(921)

(399)

(1,320)

At 26 December 2021

6,007

18,185

24,192

 

 

 

 

Net book value

 

 

 

At 26 December 2021

90,605

16,762

107,367

At 27 December 2020 (restated)

91,408

17,165

108,573

At 29 December 2019

92,665

18,249

110,914

 

During the period ended 26 December 2021 the group made a provision for impairment against a number of sites totalling £3,690,000, split £1,082,000 against goodwill, £967,000 against freehold & leasehold property, £1,582,000 against fixtures and fittings and £59,000 against right of use assets.

 

The assumptions and sensitivities relating to the Group's impairment review laid out in note 11 are also relevant to this note.

 

During the period ended 27 December 2020 the group made a provision for impairment against a number of sites totalling £933,000, split £340,000 against goodwill and £593,000 against fixtures and fittings. During the period ended 26 December 2021 management identified that £514,000 of the prior year impairment of fixtures and fittings should have been made against goodwill and therefore a prior year adjustment has been made to restate the amounts of goodwill and fixtures and fittings accordingly.

 

During the period ended 26 December 2021 the group capitalised £90,000 (2020: £113,000) of interest within the Freehold & Leasehold property asset.

 

13  Leases

Group and Company

This note provides information for leases where the Group is a lessee. The Group enters into property leases for certain of its pub sites. The lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

 

(i)  amounts recognised in the consolidated statement of financial position

The consolidated statement of financial position shows the following amounts relating to leases:

Group and Company

2021

£'000

2020

£'000

Right-of-use assets

 

 

Net book value at start of period

19,565

21,042

Additions

1,192

158

Disposals

(1,232)

-

Impairment

(59)

-

Depreciation

(1,591)

(1,635)

Total

17,875

19,565

 

 

 

Lease liabilities

 

 

Current

1,912

2,103

Non-current

16,473

17,750

Total

18,385

19,853

 

Additions to the right-of-use assets during the 2020 financial year were £1,192,000 (2020: £158,000). Following the publication on the amendment to IFRS 16 in relation to rent concessions, the Group has applied the practical expedient in all cases where relevant conditions were met. These concessions totalled a credit to the income statement for the period of £178,000 (2020: £450,000). Changes in leases which do not fulfil the criteria of the practical expedient have been treated as additions or disposals in line with normal IFRS 16 accounting.

 

The assumptions and sensitivities relating to the Group's impairment review laid out in note 11 are also relevant to this note. The impairment review resulted in the impairment of the right-of-use assets relating to one site.

 

(ii)  amounts recognised in the consolidated statement of comprehensive income

The consolidated statement of comprehensive income shows the following amounts relating to leases:

 

Group and Company

2021

£'000

2020

£'000

Depreciation charge

 

 

Leasehold Properties

1,591

1,635

 

 

 

Interest expense (included in finance cost)

656

699

 

The total cash outflow for leases in 2021 was £2,071,000 (2020: £2,046,000), see note 21.

 

 

 

14  Financial assets at fair value through Other Comprehensive income

 

Group
2021

£'000

Group
2020

£'000

Company
2021

£'000

Company
2020

£'000

At start of period

1,309

-

1,309

-

Additions

916

1,309

751

1,309

Transfer to Associates (note 15)

(1,239)

-

(1,239)

-

Disposals/repayments

(750)

-

(750)

-

Revaluations

18

-

-

-

At end of period

254

1,309

71

1,309

 

The Company acquired an initial 14% stake in the Mosaic Companies in September 2020 for £1.2m. During the year ended 26 December 2021 the group increased its stake to 24% in certain companies within the Mosaic Pub and Dining Group, through the acquisition of existing shares in The Galaxy (City) Pub Company Limited, The Pioneer (City) Pub Company Limited and The Sovereign (City) Pub Company Limited (the "Mosaic Companies") for a total cash consideration of approximately 1.2m. This additional investment resulted in the Mosaic companies becoming Associate investments and therefore the original stake acquired in the prior period was transferred to Associates - see note 15. 

 

During the year the group made additional smaller strategic equity investments, which have been designated as fair value through other comprehensive income. Investments, totalling £165k, were made through a subsidiary company rather than being held directly by the parent company.

 

15  Investments in associates

Group and Company

2021

£'000

2020

£'000

Additions in the period

2,144

-

Transfer from financial assets at fair value through other comprehensive income (note 14)

1,239

-

Revaluations through profit and loss

943

-

 

 

 

Aggregate amounts of the group's share of:

 

 

Loss from continuing operations

(78)

-

Other comprehensive income

-

-

Total comprehensive income

(78)

-

 

 

 

Aggregate carrying amount of associates

4,248

-

 

During the year ended 26 December 2021 the Group announced that it had acquired a 49% stake in Barts Pub Ltd, owner of the iconic Kensington Park Hotel ("KPH") in Ladbroke Grove, for 0.75m. The Group also acquired a 25% stake in Bupp Ltd for £0.2m.

 

The KPH is a leasehold pub located 200 metres from Ladbroke Grove tube station. It has large trading areas on the ground and first floors, benefits from seven hotel letting rooms and has potential for a further four letting rooms on the top floor. Ladbroke Grove is a prime residential area in London and the Company trades very successfully at the Cock & Bottle, Notting Hill, which is located close by. The Group has recognised its share of the associates operating losses during the period since ownership.

 

As noted in note 15, during the period the Group's interest in the Mosaic Companies exceeded 20% and is therefore deemed to give rise to the power to the Group to exert significant influence. As such, the Directors consider the Mosaic Companies to have become associates and the investment has been reclassified as such.

 

The Mosaic Companies own ten prominent pubs, predominantly in London and Birmingham, of which eight are freehold. Mosaic has a strong balance sheet with over 3m in cash deposits and a very strong freehold asset-backing.

 

The City Pub Group and Mosaic jointly negotiate their major liquor supply deals (draught beer, spirits, wines, soft drinks) and the Company's investment will help to cement this relationship. It is the intention of both the Company and Mosaic to assist each other in advancements in technology, especially in areas such as the City Club app.

 

Clive Watson is an investment consultant to Mosaic. Richard Prickett, Non-Executive Director of the City Pub Group, is a Non-Executive Director of The Pioneer (City) Pub Company Limited.

 

For the majority of the year, the Group held its interest in Mosaic through an independently managed investment fund and therefore, in reflection in the Group's assessment of its valuation and in accordance with IAS 28, it has been measured at a fair value through profit and loss. Prior to the period end, the Group took direct control of the investment, meaning that prospectively the investment in Mosaic will be accounted for in accordance with the equity method. The Group's share of Mosaic's profits and losses for the period after it took direct ownership is not considered material.

 

16  Investments in subsidiaries

Company

2021

£'000

2020

£'000

At start of period

1,067

12,730

Write-down of investment

(266)

(11,663)

At end of period

801

1,067

 

The investment in Flamequire was written down in the current period as an application to strike off the entity was made in December 2021, which was concluded in March 2022. During 2019 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. In 2020 there was a final dividend from The City Pub Company (West) Limited, which eliminated the amounts due to group undertakings balance (note 16) and resulted in a write down of the investments carrying value of £11,663,000.

 

The Company had the following subsidiary undertakings as at 26 December 2021:

 

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%

Dormant

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.

 

17  Inventories

Group and Company

 

 

 

2021

£'000

 

2020

£'000

Finished goods and goods for resale

 

 

1,048

703

 

During the year ended 27 December 2020 the Group (and Company) had to write off £662,000 of inventory due to the impact of the COVID-19 lockdowns in England, which has been recognised within the other non-recurring items line as part of the exceptional items in note 8. There were no such impairments required in the year ended 26 December 2021, as sites remained open.

 

 

18  Trade and other receivables

 

Group

2021

£'000

Group

2020

£'000

Company

2021

£'000

Company

2020

£'000

Trade receivables

674

235

674

235

Government grant receivables

-

379

-

379

Corporation tax receivables

170

774

170

774

Other receivables

1,216

664

1,216

664

Amounts due from group undertakings

-

-

165

-

Prepayments and accrued income

1,271

1,012

1,271

1,012

 

3,331

3,064

3,496

3,064

 

Rent deposits are included within other receivables, greater than one year. They are at £319k (2020: £358k). In addition the other receivables in 2021 include £300k of deferred consideration relating to the disposal of The Island, Kensal Rise, which is payable over 4 years.

 

 

19  Current trade and other payables

 

Group

2021

£'000

Group

2020

£'000

Company

2021

£'000

Company

2020

£'000

Trade payables

4,188

2,641

4,188

2,641

Corporation taxation

-

-

-

-

Other taxation and social security

1,498

2,828

1,498

2,828

Amounts due to group undertakings

-

-

801

1,067

Accruals

5,062

2,190

5,062

2,190

Other payables

1,466

771

1,466

771

 

12,214

8,430

13,015

9,497

 

Included within Other taxation and social security is £nil (2020: £80,000), which is due to be repaid greater than one year.

 

 

20  Borrowings and lease liabilities

Group and Company

 

 

 

2021

£'000

 

2020

£'000

Current borrowings and financial liabilities:

 

 

 

 

Lease liabilities

 

 

1,912

2,103

 

 

 

 

 

Non-current borrowings and financial liabilities:

 

 

 

 

Bank loans

 

 

24,750

24,801

Lease liabilities

 

 

16,473

17,750

 

 

 

41,223

42,551

 

At 26 December 2021 a revolving credit facility of £25,000,000 (2020: £25,000,000) 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. During the year the revolving credit facility was extended for an additional 2 years to July 2024.

 

Reconciliation of liabilities arising from financing activities

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

 

Long-term

Borrowings

£'000

Short-term

Borrowings

£'000

Total

£'000

At 28 December 2020

24,801

-

24,801

Cash flows:

 

 

 

Repayment

-

-

-

Non-cash items:

 

 

 

Amortisation of loan arrangement fees

(51)

-

(51)

At 26 December 2021

24,750

-

24,750

 

 

 

Long-term

Borrowings

£'000

Short-term

Borrowings

£'000

Total

£'000

At 30 December 2019

32,310

-

32,310

Cash flows:

 

 

 

Repayment

(7,500)

-

(7,500)

Non-cash items:

 

 

 

Amortisation of loan arrangement fees

(9)

-

(9)

At 27 December 2020

24,801

-

24,801

 

 

The changes in the Group's and Company's liabilities arising from leases can be classified as follows:

 

Long-term

Lease liabilities

£'000

Short-term

Lease liabilities

£'000

Total

£'000

At 28 December 2020

17,750

2,103

19,853

Cash flows:

 

 

 

Repayments

-

(2,071)

(2,071)

Accrued interest

-

656

656

Non-cash items:

 

 

 

Additions

1,192

-

1,192

Disposals

(1,245)

-

(1,245)

Reclassification

(1,224)

1,224

-

At 26 December 2021

16,473

1,912

18,385

 

 

Long-term

Lease liabilities

£'000

Short-term

Lease liabilities

£'000

Total

£'000

At 30 December 2019

18,959

2,083

21,042

Cash flows:

 

 

 

Repayments

-

(2,046)

(2,046)

Accrued interest

-

699

699

Non-cash items:

 

 

 

Additions

158

-

158

Reclassification

(1,367)

1,367

-

At 27 December 2020

17,750

2,103

19,853

 

 

21  Financial instruments and risk management

Financial instruments by category:

 

Group

2021

£'000

Group

2020

£'000

Company

2021

£'000

Company

2020

£'000

Financial assets - loans and receivables

 

 

 

 

Trade and other receivables

1,890

899

1,890

899

Amounts owed by group undertakings

-

-

165

-

Cash and cash equivalents

12,510

12,331

12,510

12,331

 

14,400

13,230

14,565

13,230

 

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

 

 

Group

2021

£'000

Group

2020

£'000

Company

2021

£'000

Company

2020

£'000

Non-current

 

 

 

 

Borrowings

24,750

24,801

24,750

24,801

Lease liabilities

16,473

17,750

16,473

17,750

 

41,223

42,551

41,223

42,551

Current

 

 

 

 

Current borrowings

-

-

-

-

Lease liabilities

1,912

2,103

1,912

2,103

Trade and other payables

5,654

3,412

5,654

3,412

Amounts due to group undertakings

-

-

801

1,067

 

7,566

5,515

8,367

6,582

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.

 

Group and Company

 

Cash at bank and short-term deposits

 

 

 

2021

£'000

 

2020

£'000

A1

 

 

12,210

12,082

Not rated

 

 

300

249

 

 

 

12,510

12,331

 

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 £25,000,000 at year end as disclosed in note 20. These were loans taken out with Barclays to facilitate the purchase of 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 26 December 2021, 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%

26 December 2021

(250)

250

(250)

250

27 December 2020

(317)

317

(317)

317

 

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 26 December 2021:

 

 

 

 

Borrowings

-

-

24,750

 

Lease liabilities

1,912

1,912

5,613

14,312

Trade and other payables

5,654

-

-

-

 

 

 

 

 

As at 27 December 2020:

 

 

 

 

Borrowings

-

-

24,801

-

Lease liabilities

2,103

2,103

6,119

15,108

Trade and other payables

3,412

-

-

-

 

 

 

 

 

 

Company

Less than

1 year

£'000

Between

1 and 2 years

£'000

Between

2 and 5 years

£'000

Over

5 years

£'000

As at 26 December 2020:

 

 

 

 

Borrowings

-

-

24,750

 

Lease liabilities

1,912

1,912

5,613

14,312

Trade and other payables

6,455

-

-

-

 

 

 

 

 

As at 27 December 2020:

 

 

 

 

Borrowings

-

-

24,801

-

Lease liabilities

2,103

2,103

6,119

15,108

Trade and other payables

4,479

-

-

-

 

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.

 

22  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 material financial asset or liabilities measured at fair value as at 29 December 2019. During the period ended 27 December 2020 the Group acquired investments in other companies, which have been recognised at fair value in the prior year and at the current reporting date.

 

 

23  Deferred tax

 

Group

2021

£'000

Group

2020

£'000

Company

2021

£'000

Company

2020

£'000

Provision for deferred tax liabilities

 

 

 

 

Accelerated capital allowances

1,324

1,044

1,324

1,044

Arising on revaluations

3

-

-

-

Arising on acquisition

1,137

1,137

1,137

1,137

 

2,464

2,181

2,461

2,181

 

 

 

 

 

Provision at the start of the period

2,181

2,123

2,181

2,123

Deferred tax charge through OCI

3

-

-

-

Deferred tax charge through profit or loss

280

58

280

58

Provision at the end of the period

2,464

2,181

2,461

2,181

 

 

 

 

 

Group and Company

 

 

 

2021

£'000

 

2020

£'000

Deferred tax asset

 

 

 

 

Arising on tax losses carried forward

 

 

1,018

503

 

 

 

 

 

Deferred tax asset at the start of the period

 

 

503

-

Deferred tax credit for the period

 

 

515

503

Deferred tax asset at the end of the period

 

 

1,018

503

 

24  Share capital

 

2021

£'000

2020

£'000

Allotted called up and fully paid

 

 

105,793,430 Ordinary shares of 1 pence each (2020: 105,684,425)

1,058

1,057

3,021,770,759 Deferred shares of 1 pence each (2020: 3,021,770,759)

30,218

30,218

Total

31,276

31,275

 

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.

 

In September 2021 the Group issued 86,505 £0.01 shares at a price of £1.156 per share in relation to the acquisition of The Cliftonville Hotel in Cromer, Norfolk. The premium on the shares issued was 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 deferred shareholders are not entitled to be paid a dividend out of any surplus profits and only participate in surplus assets on winding up after certain conditions. The deferred shares do not entitle the holder to vote at a General Meeting.

 

In the prior year (April 2020) the Group undertook a subdivision of its ordinary share capital, which resulted in the issued ordinary share capital of 61,668,791 ordinary £0.50 shares being subdivided into 3,083,439,550 ordinary £0.01 shares. After the subdivision 3,021,770,759 ordinary £0.01 shares were re-designated as 3,021,770,759 deferred £0.01 shares, leaving 61,668,791 ordinary shares of £0.01 each.

 

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

 

 

£0.50 Ordinary

shares Number

£0.01 Ordinary

shares Number

Deferred

shares Number

At 29 December 2019

61,623,791

-

-

Issue of new ordinary shares on exercise of share options

45,000

-

-

Sub-total

61,668,791

-

-

Impact of the subdivision of £0.50 ordinary shares to £0.01
ordinary shares

(61,668,791)

3,083,439,550

-

Impact of the re-designation to deferred shares

-

(3,021,770,759)

3,021,770,759

Issue of new ordinary shares on Placing

-

30,000,000

 

Issue of new ordinary shares on Open Offer

-

14,015,634

 

At 27 December 2020

-

105,684,425

3,021,770,759

Issue of new ordinary shares on exercise of share options

-

22,500

-

Issue of new ordinary shares

-

86,505

-

At 26 December 2021

-

105,793,430

3,021,770,759

 

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 (2019: no shares) in the Company were purchased during the period at a cost of £nil (2020: £nil).

 

At 26 December 2021 the JSOP held 1,925,000 ordinary shares in The City Pub Group plc (2020: 1,925,000).

 

At 26 December 2021 awards over 675,000 (2020: 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").

 

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.

 

25  Other reserves

Group

Other

reserve

Share-

based

payment

reserve

Revaluation reserve

Total

Balance at 29 December 2019

92

977

-

1,069

Employee share-based compensation

-

397

-

397

Transactions with owners

-

397

-

397

Balance at 27 December 2020

92

1,374

-

1,466

Employee share-based compensation

-

703

-

703

Transactions with owners

-

703

-

703

Revaluation - gross

-

-

18

18

Deferred tax on revaluation

-

-

(3)

(3)

Total comprehensive income for the period

-

-

15

15

Balance at 26 December 2021

92

2,077

15

2,184

 

 

 

26  Staff costs

Number of employees

The average monthly numbers of employees (including salaried Directors) during the period was:

 

 

2021

2020

Management and Administration

83

92

Operation of Public Houses

879

892

 

962

984

 

Employment costs (including Directors)

 

2021

£'000

2020

£'000

Wages and salaries

16,701

15,500

Pension costs

336

323

Social security costs

951

913

Share based payments charge

703

397

 

18,691

17,133

 

 

27  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

Compensation
for loss of office

Total

 

2021

£'000

2020

£'000

2021

£'000

2020

£'000

2021

£'000

2020

£'000

2021

£'000

2020

£'000

2021

£'000

2020

£'000

Clive Watson

Alex Derrick

-

101

-

6

-

5

-

166

-

278

Rupert Clark

153

112

9

  9

21

7

-

-

183

128

Tarquin Williams

135

104

2

2

23

2

-

-

160

108

Toby Smith

253

33

10

-

-

-

-

-

263

33

Holly Elliott

18

-

-

-

-

-

-

-

18

-

Richard Prickett

48

38

-

-

-

-

-

-

48

38

John Roberts*

33

26

-

-

34

26

-

-

67

52

Neil Griffiths

42

32

-

-

-

-

-

-

42

32

Emma Fox

30

-

-

-

-

-

-

-

30

-

Total

865

558

26

26

98

47

-

166

989

797

 

* John Roberts provides brewery consultancy services to the Group in relation to our seven microbreweries. The fees for these consultancy services are included within the Other column.

 

Emoluments in respect of the Directors are as follows:

 

2021

£'000

2020

£'000

Remuneration for qualifying services

989

797

 

The highest paid Director in the period received remuneration of £263,000; (2020: £278,000). Four directors had equity settled share options in issue at the period end (2020: Four). Additional information on Directors' remuneration is given within the Corporate Governance Report.

 

28  Share-based payments

The Group provides share-based payments to employees, which are all equity settled, in the form of a Company Share Ownership Plan (CSOP), started in 2016, a Joint Share Ownership Plan ("JSOP") started in 2018 and the Group's Long Term Incentive Plan ("LTIP") started in 2020. The Company uses the Black-Scholes valuation model to value these 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 26 December 2021 175,000 options were granted under the CSOP scheme (2020: 2,515,000 options granted), 2,950,000 options were granted under the Group's Long Term Incentive Plan (2020: 2,100,000 options granted); and no awards were made under the JSOP scheme (2020: no awards). A share-based payment charge of £703,000 (2020: £397,000) has been reflected in the consolidated statement of comprehensive income.

 

 

 

 

 

 

The fair value of options granted in the current period and the assumptions used in the calculation are shown below:

 

Year of grant

2021 - CSOP

2021 - LTIP

Exercise price (£)

1.20

0.00

Number of awards granted

175,000

2,950,000

Performance based criteria (see Directors options for criteria)

No

Yes

Vesting period (years)

3

3

Expected Life (years)

7

4

Contractual life (years)

10

10

Risk free rate

0.048%

(0.011)%

Expected dividend yield

1.40%

1.00%

Volatility

30%

27%

Fair value (£)

0.15

0.92

 

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

 

 

2021

Number of

Awards

2021

Weighted

average

exercise price

£

2020

Number of

Awards

2020

Weighted

average

exercise price

£

Outstanding at start of period

6,980,000

0.90

3,332,500

1.75

Granted

3,125,000

0.07

4,615,000

0.33

Exercised

(22,500)

1.00

(45,000)

1.00

Expired

(2,122,500)

1.73

(922,500)

1.11

Outstanding at end of period

7,960,000

0.44

6,980,000

0.90

 

 

 

 

 

Exercisable at 26 December 2021

1,165,000

1.68

405,000

1.00

 

The weighted average remaining contractual life of options outstanding at the end of the period is 8.42 years (2020: 6.66 years).

 

Previous issues of CSOPs in both 2016 and 2018 had a vesting period of 3 years, an expected life of 7 years and a contractual life of 10 years. The exercise price for the 2016 CSOPs was £1.00 and the exercise price for the 2018 CSOPs was £1.70. The JSOP has an exercise price of £2.05 and contractual life of 10 years.

 

At the end of the period there were 7,960,000 outstanding options (2020: 6,980,000). The breakdown of these is as follows:

 

367,500 - 2016 CSOP; 112,500 - 2018 CSOP; 675,000 - JSOP; 1,900,000 - 2020 LTIP; 2,170,000 - 2020 CSOP; 175,000 - 2021 CSOP; and 2,550,000 - 2021 LTIP. 

 

29  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:

 

£3,500 (2020: £1,500) was paid to Helen Watson, who is related to Clive Watson. At the period end Helen Watson was owed £nil (2020: £nil). Helen Watson has an existing £10,000 float with the group.

 

During the year ended 31 December 2021 the Group acquired an additional 10% in the Mosaic entities for a total cash consideration of approximately 1.2m, on an arm's length basis, giving a total investment of £2.4m at the year end. As at 26 December 2021 the Group had an investment in an Associate, being a 24% in certain companies within the Mosaic Pub and Dining Group, through the acquisition of existing shares in The Galaxy (City) Pub Company Limited, The Pioneer (City) Pub Company Limited and The Sovereign (City) Pub Company Limited (the "Mosaic Companies"). There were no transactions between the Group and the Mosaic entities. Clive Watson is an investment consultant to Mosaic. Richard Prickett, Non-Executive Director of the City Pub Group, is a Non-Executive Director of The Pioneer (City) Pub Company Limited, a company which forms part of the Mosaic Pub and Dining Group. James Watson, CEO of Mosaic, is related to Clive Watson.

 

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 27.

 

No key personnel other than the directors have been identified in relation to the periods ended 26 December 2021 and 27   December 2020.

 

30  Post balance sheet events

 

Pub disposals

In March 2022 the group announced the disposal of six public houses (the "Disposal Pubs") in two separate transactions for a total cash consideration of approximately 17.1 million. These transactions have resulted in impairment write-downs during the period ended 26 December 2021.

 

The Group has agreed terms and exchanged contracts for the disposal of five of the six Disposal Pubs on the South Coast of England, which include three pubs in Brighton (Walrus, Brighton Beach Club, and Lion and Lobster), The Inn on the Beach on Hayling Island and The Travellers Friend in Woodford Green, Essex. All are freehold pubs, with the exception of Brighton Beach Club which is leasehold. These five pubs, which had a net book value of approximately 17.1 million as at April 2022 and recorded unaudited aggregate site EBITDA of 0.7 million for the year ended 26 December 2021, are being acquired by Portobello Starboard Limited for cash consideration of 16.2 million. This transaction is expected to complete on or around 11 April 2022, subject to successful lease assignment of the Brighton Beach Club.

 

Separately, the Company has sold The London Road Brewhouse, a freehold pub in Southampton for 0.9m. This sale completed on 18 March 2022.

 

The proceeds from the Disposal Pubs will be used to invest and expand the Group in other geographies across the UK.

 

Mosaic Investment

We also recently announced that we increased our investment into Mosaic Pub and Dining (Tranche 1 of companies) by £1.7m in April 2022. Our total stake in Mosaic is now 36% for a total investment of £4.1m.

 

 

31  Capital commitments

 

At the period end the Group and Company has no capital commitments.

 

 

32  Business combinations

 

During the period the Group acquired The Cliftonville Hotel in Cromer, Norfolk through a business combination, the fair values of the assets and liabilities acquired, and the nature of the consideration, are outlined within the table below. The acquisition was part of the Group's continuing strategy to expand its pub portfolio via selective quality acquisitions.

 

Group & Company

 

2019

£'000

 

Provisional fair value:

 

 

Property, plant and equipment acquired

1,650

 

Goodwill

50

 

Total

1,700

 

 

 

 

Satisfied by:

 

 

Cash

1,600

 

Shares

100

 

Total

1,700

 

All other pub acquisitions have been accounted for as property acquisitions.

 

33  Prior year adjustment

 

During the period ended 27 December 2020 the group made a provision for impairment against a number of sites totalling £933,000, split £340,000 against goodwill and £593,000 against fixtures and fittings.

 

During the period ended 26 December 2021 management identified that £514,000 of the prior year impairment of fixtures and fittings should have been made against goodwill and therefore a prior year adjustment has been made to restate the amounts of goodwill and fixtures and fittings accordingly.

 

As the prior year adjustment was between two categories of non-current assets there was no impact on the total non-current assets or other totals within the Consolidated or Company statements of financial position and there was no impact on the prior year consolidated statement of profit or loss.

 

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