REG - City Pub Group (The) - Final Results for the year ended 25 December 2022
18/04/2023 07:00
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RNS Number : 5025W City Pub Group PLC (The) 18 April 2023
The City Pub Group PLC
(the "City Pub Group", the "Company" or the "Group")
FINAL RESULTS FOR THE YEAR ENDED 25 DECEMBER 2022
The City Pub Group is pleased to announce its audited results for the 52 weeks
ended 25 December 2022.
The Group currently operates a predominately freehold estate of 43 premium
pubs across Southern England and Wales. The Group has made good progress in a
challenging year for both the industry and consumers. Sales, pleasingly, have
returned to pre Covid levels and the Group now has fully refurbished, very
well invested estate from which to move forward with a strong financial base
with historically low levels of debt and an efficient operational platform
combining to give the flexibility to take advantage of opportunities as they
arise and drive continued growth.
Financial and trading 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
25.12.22 25.12.22 26.12.21 26.12.21 Pre IFRS 16
£m £m £m £m %
Revenue 57.8 57.8 35.4 35.4 63%
Adjusted EBITDA 10.1 8.0 5.9 3.8 111%
Adjusted Profit/(loss) before tax 3.6 3.8 0.9 1.0 280%
* 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.
· Current valuation of the estate of £160 million equating to NAV
of 150p per share
Highlights
· Completed the estate refurbishment programme and acquired two pubs
since the interim results announcement in September 2022
· Balance sheet strengthened with historic lows of £4m of net debt
at year end, following the £16 million sale of 6 pubs in June 2022. Estate
further fine-tuned through disposal of three non-core leaseholds
· Launched share buyback programme in October 2022, acquiring c.1m
shares to date (representing 0.95% of the issued share capital) at a cost of
c. £830,000
· Strengthened management team to drive premiumisation of estate
o Rupert Clark appointed Chief Operating Officer in January 2023;
o Richard Myers appointed Chief Marketing Officer in February 2023 to drive
commercial and digital marketing activities
Outlook
· Encouraging trading performance in first 3 months of 2023, with
like-for-like sales versus 2022 in excess of 13% and ahead of expectations
which, whilst early in the year provides confidence in the outlook
· Increased investment in Mosaic Pub & Dining Group to 48% in
April 2023, with the intention to take operational control in the next 2
months
· Performance underpinned by increasing our pubs' retail intensity
as a result of the operational improvements implemented over recent years
· Inflationary pressures in some areas beginning to abate
· Continuing to drive our optimisation of capacity.
Clive Watson, Chairman of City Pub Group said:
"The Group has achieved a pleasing performance through 2022, demonstrating the
strength of our adaptable model and ability to recover following covid and
through the challenging conditions of the last year. Our premium estate is now
fully refurbished creating, together with the strengthened management team, a
platform for expansion when the time is right.
"Our near term ambition is to continue to premiumise the pub estate to deliver
additional organic sales and profit growth. We have seen an encouraging start
to the year, with trading ahead of expectations which, whilst still early in
the year, provides confidence for the coming year."
18 April 2023
Enquiries:
City Pub Group Today: via Instinctif
Clive Watson, Executive Chairman
Holly Elliott, CFO
Instinctif Partners +44 (0) 20 7457 2020
Matthew Smallwood
Peel Hunt (Joint Broker) +44 (0)78 9520 5644
George Sellar
Liberum (Nomad & Joint Broker) +44 (0) 20 3100 2000
Chris Clarke
Edward Thomas
For further information on City Pub Group pubs visit www.citypubcompany.com
(http://www.citypubcompany.com)
CHAIRMAN'S STATEMENT
I am pleased to report that we have made good progress throughout the year
consolidating, strengthening and improving the Group. This year, sales have
returned to pre-COVID-19 levels, the pub estate is fully refurbished, there
have been significant improvements at the operating level and net debt has
been maintained at a low level.
Sales performance of our pubs in 2022 was encouraging. We put a lot of effort
in making sure we optimised our capacity at site level and we believe there is
further organic growth from the existing pub estate. The Company continues to
be primarily focused on organic growth rather than acquiring additional pubs,
however, should an outstanding opportunity arise we have the flexibility to
act quickly and decisively. Despite the impact of Omicron, like for like gross
sales for FY2022 were up by 3%, improving to 7.8% in Q4. 2023 is trading 13%
ahead of 2022 on a like for like basis.
2022 was a challenging year with inflationary headwinds, especially on energy
and food, and the shortage of labour throughout the year creating challenges
relating to opening times and operational effectiveness when the pubs were
busy.
For the year ended 25 December 2022 revenue rose 63% to £57.8m (2021 35.4m)
reflecting a year without disruption from the pandemic. Pre IFRS 16 adjusted
EBIDTA was up 111% to £8m (2021 £3.8m), adjusted profit before tax was up
280% to £3.8m (2021 £1m) and reported profit/(loss) at £1.1m (2021
(£2.9m)).
The Company's portfolio is 61% freehold and these pubs account for over 90% of
our investment. This gives us strong asset backing and helps protect our
margins as we do not have large rent liabilities.
The Trading Estate
The Group currently operates 43 trading pubs which has increased by three
since reporting the interim results in September 2022: the Bath Cider House
opened in October 2022, Potters in Newport was acquired in November 2022, and
the Bridge, Barnes, SW London was purchased in January 2023 this year. These
follow the three openings in the first half of 2022:
- Oyster House, Mumbles - May 2022
- Tivoli, Cambridge - May 2022
- Damson & Wilde, Bury St Edmunds - June 2022
A number of sites also completed their refurbishments programmes (with dates
completed):
- The Althorp, Wandsworth, SW London - November 2022
- Roundhouse, Wandsworth, SW London - November 2022
- Belle Vue, Clapham, SW London - February 2023
- Lighthouse, Battersea, SW London - February 2023
- Pride of Paddington, Paddington, West London - February 2023
- Cliftonville, Cromer, Norfolk - April 2023
This completes the refurbishment program although we are looking to get
planning approval to create outside covered trading spaces and if successful,
a further 2 sites will benefit from a combined investment of c£250k.
Disposals
A small number of our pubs for various differing reasons have not fully
recovered from COVID-19 and we have worked hard at disposing of these units.
As a result of a review of the estate, the following leases have been fully
disposed of:
- Prince Street Social, Bristol - July 2022
- Bicycle Shed, Oxford - November 2022
- The Yard - March 2023
The operating loss of these pubs throughout 2022 amounted to circa £500k and
their disposal has helped us to improve our operating margins and
profitability going forwards.
In April 2022, we rationalised the estate by selling off 6 sites primarily on
the South Coast for net proceeds of £16.1m This disposal significantly
reduced our bank debt leaving the Company in a very strong financial position
to take advantage of growth opportunities which closer align with the
Company's strategy.
Mosaic Investment
Following the acquisition of a further 13% share in Mosaic Investments in
April 2023, we now have a stake of 48% at an additional cost of c.£2.2m. We
will now integrate the Mosaic estate into our own estate over the course of
the next two to three months. The Mosaic estate comprises of 9 pubs situated
in London and Birmingham, of which 7 are freehold. We welcome the Mosaic
employees to our Group. There are many cultural similarities between the two
companies and we anticipate a smooth, effective and efficient integration
process. This is a great step forward for the Group - now with 52 operational
sites located in great cities or fantastic destination locations.
Financial Highlights
Summary for the Period ended 25 December 2022:
- Revenue up 63% to £57.8m (2021 35.4m)
- Pre IFRS 16 adjusted EBIDTA up 111% to £8m (2021 £3.8m)
- Adjusted profit (loss) before Tax up 280% to £3.8 (2021 £1m)
- Reported profit/(loss) at £1.1m (2021 (£2.9m))
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
25.12.22 25.12.22 26.12.21 26.12.21 Pre IFRS 16
£m £m £m £m %
Revenue 57.8 57.8 35.4 35.4 63%
Adjusted EBITDA* 10.0 8.0 5.9 3.8 111%
Adjusted Profit/(loss) before tax** 3.6 3.8 0.9 1.0 280%
* 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.
Despite unprecedented challenges faced by the industry, including inflation,
staff shortages, Omicron at the start of 2022, transport strikes and weakening
consumer confidence, the Board is pleased with the trading performance for the
last year. To be in such a position with sales today above pre COVID-19 levels
is a reflection of the determination, innovation, loyalty and resilience of
our people to provide true hospitality to our customers.
Bank Facilities
As of today's date, net debt is £8m, a modest increase on the position at the
end of the first half mainly as a result of acquiring a controlling interest
in Mosaic Pub Co at a cost of c.£2.2m. The Group is conservatively financed
and has undrawn credit facilities of £23m. We are operating comfortably
within our banking covenants, and we will be renewing our bank facilities on a
longer term basis in the near future.
The Group's estate value based primarily on an independent valuation of the
estate in Mar 2022 is c.£160m equating to NAV of circa 150p per share.
Environmental, Social and Governance (ESG)
The Company's ESG committee, established in 2021 and chaired by Emma Fox, an
independent Non-Executive Director, is tasked with developing the Group's ESG
strategy to ensure that we operate as a responsible and sustainable business,
primed to play a positive role in society. Following a significant and
thorough review of operational practices and wider supply chain ESG policies,
the Group established a robust data collection process across all aspects of
ESG, from carbon emissions and energy use through to social impact, and is in
the process of defining short and long-term targets to further improve best
practice and efficiencies in achieving Net-Zero target and creating positive
social impact. We are taking our responsibilities seriously and want to make a
positive impact, not just because it is the right thing to do for our business
but also because we believe it results in a competitive advantage for us.
Share Buybacks
The Board commenced a share buyback programme in September 2022 and has to
date bought c.1m shares (representing 0.95% of the issued share capital) at a
cost of c. £0.83m. With the continued discount between our current share
price and NAV per share of around 45%, the Board believes it should keep open
the option of further share buybacks to deliver value, but is also conscious
of maintaining prudent gearing levels. The Board believes share buybacks are
an efficient way of creating shareholder value, rather than dividends and as a
result, no dividends are proposed on the back of these results.
Industry Issues
The hospitality industry is facing many challenges hampering its ability to
move on from COVID-19. Generally, the pressures from these issues are
beginning to abate with energy prices, whilst still much higher than before
the start of the Ukrainian conflict, significantly reduced since we last
reported in September 2022. With around 35% of our energy hedged over the next
two years, the Company will benefit from these falling prices. In addition,
the Company as a whole is focused on reducing energy usage as much as possible
through installing energy saving equipment and encouraging best practice,
especially in the pubs.
Food inflation has spiralled over the least 12 months eroding our food
margins. We have tried to curtail price rises to remain competitive and
deliver good value to our customers because we believe food is an integral
part of our retail offer.
Labour costs have continually risen over recent years, with the minimum wage
again increasing by 10% in April of this year. Staff shortages have been
alleviated to a certain extent and we have benefitted from our weekly staff
bonus which has been key in retaining and attracting staff. Hospitality needs
constant access to a flexible, vibrant diverse workforce and we continue to
urge and call upon the Government to grant 2- year work visas to Europeans.
This access would enable businesses like ours to grow with more confidence in
the future.
Our estate has now been re-valued, as of April 2023, for business rates
purposes with the quantum payable remaining about the same. However, the Group
firmly believes that business rates should be more focused on what the
businesses generate in terms of sales, and not where it's located. Pubs are
important part of the community and should not be taxed unfairly just because
they provide a service to our loyal local customers in our cities.
Outlook
Overall, the Board is pleased with the progress the business has made in the
last 12 months. The Group has weathered the storm and it is for the first time
in 3 years that we are able to adopt a more ambitious approach. Like for like
sales for FY2023 to date are up by 13%.
The Group remains in a very strong financial position - its bank borrowings
are historically low and because of the freehold nature of the estate, its
operational gearing remains low too.
Following significant change over the last three years, Head Office has been
revitalised with an enthusiastic and ambitious team who will drive future
growth. The Mosaic acquisition gives us further scale with more than 50 sites
trading, the highest number the Group has ever had.
The platform has been created for expansion when the time is right. The pub
estate is now fully refurbished - the focus can now be on primarily organic
growth as we continue to increase our optimisation of capacity. There are a
number of further acquisition opportunities which we are evaluating and should
they meet our strict criteria, price expectations and maintenance of a strong
balance sheet, we will continue growing our estate.
I would like to thank everyone - our pub employees, our head office team, our
customers, our shareholders, Barclays Bank, our advisors, and everyone else
who has played their part in helping City Pub Group become a premium pub
retailer with ambition and a positive approach to the future. I would also
like to thank my Board of Directors who have been incredibly supportive in
very challenging circumstances in which the whole pub industry has been
facing.
If we can achieve the organic growth and acquire new pubs at the right price,
I am confident of strong progress in both the short and medium term. For the
first time in 3 years, I am confident about crystallising enhancement of
shareholder value. The Company is now in the best shape it's ever been in.
Clive Watson
Executive Chairman
17 April 2023
Consolidated statement of profit or loss
for the 52 week period ended 25 December 2022 (2021: for the 52 week period
ended 26 December 2021)
2022 2021
Notes £'000 £'000
Revenue 4 57,793 35,364
Cost of sales (14,063) (8,273)
Gross profit 43,730 27,091
Other operating income 4a 239 5,084
Administrative expenses (42,542) (35,126)
Operating profit/(loss) 5 1,427 (2,951)
Reconciliation to adjusted EBITDA*
Operating profit/(loss) 1,427 (2,951)
Depreciation 5 5,174 4,881
Share option charge 28 1,042 703
Exceptional items 8 2,439 3,288
* Adjusted earnings before exceptional items, share option charge, interest, 10,082 5,921
taxation
and depreciation
Share of losses of associates and joint ventures 15 (157) (78)
Other financial items 15 - 943
Finance costs 6 (1,054) (1,041)
Profit/(loss) before tax 216 (3,127)
Tax credit 7 735 259
Profit/(loss) for the period 951 (2,868)
Earnings per share
Basic earnings per share (p) 10 0.92 (2.76)
Diluted earnings per share (p) 10 0.89 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 25 December 2022 (2021: for the 52 week period
ended 26 December 2021)
2022 2021
Notes £'000 £'000
Profit/(loss) for the period 951 (2,868)
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 (494) 18
Income tax relating to these items 123 (3)
Other comprehensive income for the period, net of tax (371) 15
Total comprehensive income for the period 580 (2,853)
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 25 December 2022 (2021: as at 26 December 2021)
2022 2021
Notes £'000 £'000
Assets
Non-current
Intangible assets 11 2,450 2,250
Property, plant and equipment 12 99,065 107,367
Right-of-use assets 13 17,565 17,875
Deferred tax assets 23 1,843 1,018
Financial assets at fair value through OCI 14 386 254
Investments in associates & joint ventures 15 6,004 4,248
Total non-current assets 127,313 133,012
Current
Inventories 17 1,152 1,048
Trade and other receivables 18 3,659 3,331
Cash and cash equivalents 4,121 12,510
Total current assets 8,932 16,889
Total assets 136,245 149,901
Liabilities
Current liabilities
Trade and other payables 19 (13,931) (12,214)
Financial liabilities - lease liabilities 13 (1,915) (1,912)
Total current liabilities (15,846) (14,126)
Non-current
Borrowings 20 (7,657) (24,750)
Financial liabilities - lease liabilities 13 (16,674) (16,473)
Deferred tax liabilities 23 (2,445) (2,464)
Total non-current liabilities (26,776) (43,687)
Total liabilities (42,622) (57,813)
Net assets 93,623 92,088
Equity
Share capital 24 31,276 31,276
Share premium 24 59,475 59,475
Own shares 24 (3,359) (3,272)
Other reserve 25 2,855 2,184
Retained earnings 24 3,376 2,425
Total equity 93,623 92,088
The notes form part of these financial statements.
Approved by the Board and authorised for issue on 17 April 2023.
Clive Watson Holly Elliott
Chairman
Chief Financial Officer
Company No. 07814568
Company statement of financial position
as at 25 December 2022 (2021: as at 26 December 2021)
2022 2021
Notes £'000 £'000
Assets
Non-current
Intangible assets 11 2,450 2,250
Property, plant and equipment 12 99,065 107,367
Right-of-use assets 13 17,565 17,875
Deferred tax assets 23 1,723 1,018
Financial assets at fair value through OCI 14 71 71
Investments in associates & joint ventures 15 6,004 4,248
Investments in subsidiaries 16 801 801
Total non-current assets 127,679 133,630
Current
Inventories 17 1,152 1,048
Trade and other receivables 18 4,045 3,496
Cash and cash equivalents 4,121 12,510
Total current assets 9,318 17,054
Total assets 136,997 150,684
Liabilities
Current liabilities
Trade and other payables 19 (14,732) (13,015)
Financial liabilities - lease liabilities 13 (1,915) (1,912)
Total current liabilities (16,647) (14,927)
Non-current
Borrowings 20 (7,657) (24,750)
Financial liabilities - lease liabilities 13 (16,674) (16,473)
Deferred tax liabilities 23 (2,445) (2,461)
Total non-current liabilities (26,776) (43,684)
Total liabilities (43,423) (58,611)
Net assets 93,574 92,073
Equity
Share capital 24 31,276 31,276
Share premium 24 59,475 59,475
Own shares 24 (3,359) (3,272)
Share-based payment reserve 24 3,119 2,077
Retained earnings 24 3,063 2,517
Total equity 93,574 92,073
The profit for the financial period of the Parent Company, The City Pub Group
plc was £546,000 (2021: loss £2,868,000). The notes form part of these
financial statements. Approved by the Board and authorised for issue on 17
April 2023.
Clive Watson Holly Elliott
Chairman
Chief Financial Officer
Company No. 07814568
Consolidated statement of changes in equity
for the 52 week period ended 25 December 2022
Notes Share capital Share premium Own Other Retained earnings Total
Shares Reserves
(note 24) (note 25)
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
Employee share-based compensation 28 - - - 1,042 - 1,042
Purchase of own shares 24 - - (87) - - (87)
Transactions with owners - - (87) 1,042 - 955
Profit for the period - - - - 951 951
Other comprehensive income - - - (371) - (371)
Total comprehensive income for the period - - - (371) 951 580
Balance at 25 December 2022 31,276 59,475 (3,359) 2,855 3,376 93,623
The notes form part of these financial statements.
Company statement of changes in equity
for the 52 week period ended 25 December 2022
Notes Share capital Share premium Own Other Retained earnings Total
shares Reserves
(note 24) (note 25)
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
Employee share-based compensation 28 - - - 1,042 - 1,042
Purchase of own shares 24 - - (87) - - (87)
Transactions with owners - - (87) 1,042 - 955
Profit for the period - - - - 546 546
Total comprehensive income for the period - - - - 546 546
Balance at 25 December 2022 31,276 59,475 (3,359) 3,119 3,403 93,574
The notes form part of these financial statements
Consolidated statement of cash flows
for the 52 week period ended 25 December 2022 (2021: for the 52 week period
ended 26 December 2021)
2022 2021
Notes £'000 £'000
Cash flows from operating activities
Profit/(loss) for the period 951 (2,868)
Taxation 7 (735) (259)
Finance costs 6 1,054 1,041
Result from equity accounted investment 15 157 78
Other financial items 15 - (943)
Operating profit/(loss) 1,427 (2,951)
Adjustments for:
Depreciation 5 5,174 4,881
(Gain)/loss on disposal of property, plant & equipment (58) 125
Share-based payment charge 28 1,042 703
Impairment 12 627 3,690
Change in inventories (104) (345)
Change in trade and other receivables (668) (571)
Change in trade and other payables 1,723 3,800
Cash generated from operations 9,163 9,332
Tax (paid) received 53 651
Net cash generated from operating activities 9,216 9,983
Cash flows from investing activities
Purchase of property, plant and equipment 12 (10,262) (5,493)
Acquisition of new property sites (2,045) (1,600)
Purchase of investments and associates 14&15 (2,539) (2,309)
Proceeds from disposal of property, plant and equipment 16,977 2,163
Net cash generated from/used in investing activities 2,131 (7,239)
Cash flows from financing activities
Proceeds from issue of share capital 24 - 73
Purchase of own shares (87) -
Repayment of borrowings (17,169) (91)
Principal element of lease payments (1,362) (1,416)
Interest paid (includes implied interest under IFRS16) 6 (1,118) (1,131)
Net cash used in financing activities (19,736) (2,565)
Net change in cash and cash equivalents (8,389) 179
Cash and cash equivalents at the start of the period 12,510 12,331
Cash and cash equivalents at the end of the period 4,121 12,510
The notes form part of these financial statements
Company statement of cash flows
for the 52 week period ended 25 December 2022 (2021: for the 52 week period
ended 26 December 2021)
2022 2021
Notes £'000 £'000
Cash flows from operating activities
Profit/(loss) for the period 546 (2,868)
Taxation (735) (259)
Finance costs 1,054 1,041
Result from equity accounted investment 15 157 78
Other financial items 15 - (943)
Operating profit/(loss) 1,022 (2,951)
Adjustments for:
Depreciation 5 5,174 4,881
(Gain)/loss on disposal of property, plant and equipment (58) 125
Share-based payment charge 28 1,042 703
Impairment 627 3,690
Change in inventories (104) (345)
Change in trade and other receivables (889) (735)
Change in trade and other payables 1,723 3,800
Cash generated from operations 8,537 9,168
Tax paid 53 651
Net cash generated from operating activities 8,590 9,819
Cash flows from investing activities
Purchase of property, plant and equipment 12 (10,262) (5,493)
Acquisition of new property sites (2,045) (1,600)
Purchase of investments and associates 14&15 (1,913) (2,145)
Proceeds from disposal of property, plant and equipment 16,977 2,163
Net cash generated from/used in investing activities 2,757 (7,075)
Cash flows from financing activities
Proceeds from issue of share capital - 73
Purchase of own shares (87) -
Repayment of borrowings (17,169) (91)
Principal element of lease payments (1,362) (1,416)
Interest paid (1,118) (1,131)
Net cash used in financing activities (19,736) (2,565)
Net change in cash and cash equivalents (8,389) 179
Cash and cash equivalents at the start of the period 12,510 12,331
Cash and cash equivalents at the end of the period 4,121 12,510
The notes form part of these financial statements.
Notes to the financial statements
for the 52 week period ended 25 December 2022 (2021: for the 52 week period
ended 26 December 2021)
1 Company information
The financial statements of The City Pub Group plc (as consolidated "the
Group") for the 52 week period ended 25 December 2022 were authorised for
issue in accordance with a resolution of the directors on 17 April 2023. 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. Judgements made by the
directors in the application of these accounting policies have been discussed
in note 3.
Exemption from audit
For the period ended 25 December 2022 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
The financial statements have been prepared on an accruals basis and under the
historical cost convention, unless otherwise stated. There is no material
difference between the fair value of financial assets and liabilities and
their carrying amount.
The Company undertook a common control combination before listing on AIM.
These consolidated financial statements have been prepared using the
predecessor value method, which is described in 2.4 below.
The financial statements are presented in Great British Pounds and all values
are rounded to the nearest thousand pounds except when otherwise indicated.
As permitted by section 408 of the Companies Act 2006, no separate income
statement is presented in respect of the Parent Company.
2.2 Statement of Compliance
The financial statements of the Company and Group are prepared in accordance
with applicable International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and in accordance with International
Financial Reporting Standards as adopted by the United Kingdom ("Adopted
IFRS").
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 27 December 2021:
· COVID-19-related Rent Concessions beyond 30 June 2021 (Amendments to IFRS
16); and
· Interest Rate Benchmark Reform Phase 2 - Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16.
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.
· 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
· Sale or contribution of assets between an investor and its associate or
joint venture - Amendments to IFRS 10 and IAS 28.
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 has a £35m revolving credit facility (RCF) with Barclays Bank plc
with an accordion option of another £15m. This facility matures in July 2024.
The Group is operating comfortably within their banking covenants and we will
be renewing our bank facilities on a longer term basis in the near future. At
period end we had £8m of debt, and £4m of net debt, with £27m undrawn on
our RCF and £15m of accordion.
Barclays replaced The City Pub Group plc's RCF's existing financial covenants
with a Minimum Liquidity Test plus an additional Minimum EBITDA Test to be
tested on a monthly basis. After June 2022 the original financial covenants
recommenced. The Group has been operating within the covenants comfortably and
the forecasts for the business show substantial headroom.
The Group continues to be EBITDA and cashflow generative, with funding only
required for new acquisitions.
Although there are cost pressures with wage inflation, rising energy prices
and upward pressure on commodities, we continue to lock in procurement
contracts, optimise staffing and implement energy reducing initiatives. Energy
prices have softened into 2023 and by flexibly trading we've avoided being
impacted by spiking prices over 2022.
When making our assessment of going concern, we have assumed that trading
reverts to pre COVID-19 levels.
Based on the current financial projections extended to 12 months from the date
of approval of the financial statements and having considered the facilities
available, together with potential sensitivities to changes in levels of trade
based on current economic factors e.g. energy costs and inflation 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 has identified certain measures that it believes will assist the
understanding of the performance of the business. These APMs are not defined
or specified under the requirements of IFRS. The Group believes that these
APMs, which are not considered to be a substitute for, or superior to, IFRS
measures, provide stakeholders with additional useful information on the
underlying trends, performance and position of the Group and are consistent
with how business performance is measured internally.
The Group's APMs are: like for like revenue growth/(decline), Adjusted EBITDA
(Pre-IFRS) and net cash/(debt).
The Directors use Adjusted EBITDA as a primary KPI in managing the business.
This measure excludes exceptional items, share option expenses and site
pre-opening costs and applies pre-IFRS 16 treatment of leases. The Directors
believe this measure gives a more relevant indication of underlying trading
performance of the Group.
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 periods 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.
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 period, 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
periods. 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 period.
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 period 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 period and adjusted if appropriate
at each financial period end.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the profit or loss.
2.15 Investments in subsidiaries
The Company recognises its investments in subsidiaries at cost, less any
provisions for impairment. Income is recognised from these investments only in
relation to distributions receivable basis from post-acquisition profits.
Distributions received in excess of post-acquisition profits are deducted from
the cost of the investment.
2.16 Investments in associates and joint ventures
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.
Investments in joint ventures are accounted for using the equity method, after
initially being recognised at cost in the consolidated statement of financial
position. Under the equity method of accounting, the investments are initially
recognised at cost and adjusted thereafter to recognise the group's share of
the post-acquisition profits or losses of the investee in profit or loss, and
the group's share of movements in other comprehensive income of the investee
in other comprehensive income. Dividends received or receivable from joint
ventures are recognised as a reduction in the carrying amount of the
investment.
Where the group's share of losses in an equity-accounted investment equals or
exceeds its interest in the entity, including any other unsecured long-term
receivables, the group does not recognise further losses, unless it has
incurred obligations or made payments on behalf of the other entity.
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. These are recognised on an accruals
basis and there were no unfulfilled conditions attached to the grants.
2.23 Treasury shares
Where the Company purchases the Company's own equity instruments, for example
as the result of a share buy-back or a share-based payment plan, the
consideration paid, including any directly attributable incremental costs (net
of income taxes), is deducted from equity attributable to the owners of The
City Pub Group plc, as treasury shares until the shares are cancelled or
reissued. Where such ordinary shares are subsequently reissued, any
consideration received, net of any directly attributable incremental
transactions costs and the related income tax effects, is included in equity
attributable to the owners of The City Pub Group plc.
3 Significant judgements and estimates
The judgements, which are considered to be significant, are as follows:
Acquisitions
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.
Performance review
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.
Structure
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:
Impairment
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.
Goodwill as at 25 December 2022 was £2,450,000 (2021: £2,250,000).
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). As at 25 December
2022, the carrying value of property, plant and equipment and right of use
assets were £99,065,000 (2021: £107,367,000) and £17,565,000 (2021:
£17,875,000) respectively. The pre-tax weighted average cost of capital, used
as the discount rate, was 10% (2021: 10%).
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
IBR used to discount the future minimum lease payments, during the period
ended 25 December 2022, ranged from 3.0% to 3.7% (2021: 3.0% to 3.7%).
Share-based payment
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.
Deferred tax asset
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.
Useful economic lives of property, plant and equipment
The depreciation charge is dependent on the assumptions used regarding the
useful economic lives of assets.
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.
2022 2021
£'000 £'000
Revenue 57,793 35,364
Cost of sales (14,063) (8,273)
Gross profit 43,730 27,091
Other operating income before adjusting items (note 4(a)) 239 4,084
Operating expenses:
Operating expenses before adjusting items (33,887) (25,254)
Adjusted non-GAAP EBITDA 10,082 5,921
Depreciation (5,174) (4,881)
Share option charge (1,042) (703)
Exceptional items - operating expenses (2,439) (4,288)
Total operating expenses (42,542) (35,126)
Exceptional items - other operating income (note 4(a)) - 1,000
Operating profit/(loss) 1,427 (2,951)
(a) Other operating income
During 2020 the Group 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.
2022 2021
£'000 £'000
Coronavirus Job Retention Scheme - 2,972
Other government grants 239 1,112
Insurance claim (exceptional item note 8) - 1,000
Total other operating income 239 5,084
5 Profit/(loss) on ordinary activities before taxation
The profit/(loss) on ordinary activities before taxation is stated after
charging/(crediting):
2022 2021
£'000 £'000
Costs of inventories recognised as an expense 14,063 5,502
Staff costs (note 26) 21,461 18,691
Depreciation 5,174 4,881
Fees payable to the company's auditor for the audit of the company's financial 72 65
statements
Exceptional items - non-GAAP (note 8) 2,439 3,288
Operating leases - land and buildings (97) (266)
Rent concessions relating to COVID-19 of £nil (2021: £178,000) have been
recognised within this balance for 2022.
6 Interest payable and similar charges
2022 2021
£'000 £'000
On bank loans and overdrafts 481 475
Interest and finance charges for lease liabilities 637 656
Interest expense capitalised within property, plant & equipment (64) (90)
Total finance cost 1,054 1,041
During the period £64,000 of interest was capitalised (2021: £90,000).
7 Tax charge on profit/(loss) on ordinary activities
(a) Analysis of tax charge for the period
The tax charge for the Group is based on the profit/(loss) for the period and
represents:
2022 2021
£'000 £'000
Current income tax:
Current income tax charge - -
Adjustments in respect of previous period (14) (24)
Total current income tax (14) (24)
Deferred tax:
Origination and reversal of temporary differences (note 23) (16) 280
Adjustment to deferred tax asset on tax losses (note 23) (705) (515)
Total deferred tax (721) (235)
Total tax (735) (259)
(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% (2021: 19.00%). The differences are explained
as follows:
2022 2021
£'000 £'000
Profit/(loss) on ordinary activities before tax 216 (3,127)
Profit/(loss) on ordinary activities multiplied by standard rate of 41 (594)
corporation tax in the United Kingdom of 19.00% (2021: 19.00%)
Effect of:
Temporary differences (317) 265
Items not deductible for tax purposes 400 95
Adjustment in respect of previous periods (274) (24)
Previously unrecognised tax losses (474) -
Change in corporation tax rate (111) -
Share options tax deduction - (1)
Total tax credit (735) (259)
The deferred tax asset included in the balance sheet of £1,843,000 (2021:
£1,018,000) 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. In March 2021 a change to the future corporation tax
rate was substantively enacted to increase from 19% to 25% from 1 April 2023.
Accordingly, the rate used to calculate the deferred tax balances at 25
December 2022 is 25% (2021: 25%) as the timing of the release of this asset is
materially expected to be after this date.
8 Exceptional items (non-GAAP)
2022 2021
£'000 £'000
Pre opening costs 575 37
Impairment of pub sites 627 3,690
Insurance claim - (1,000)
Site disposals 962 -
Other non recurring items 275 561
2,439 3,288
The non-GAAP Exceptional items for both financial periods 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 as the Directors believe share buybacks
are an efficient way of creating shareholder value (2021: £nil)
Dividends not recognised at the end of the reporting period
Since the period end, the Directors are not proposing a dividend and have
continued with the share buyback programme post period end (2021: nil).
10 Earnings/(loss) per share
2022 2021
£'000 £'000
Earnings/(loss) for the period attributable to Shareholders 951 (2,868)
Earnings/(loss) per share:
Basic earnings/loss per share (p) 0.92 (2.76)
Diluted earnings per share (p) 0.89 n/a
Weighted average number of shares: Number of Number of
shares shares
Weighted average shares for basic EPS 103,845,560 103,795,354
Effect of share options in issue 3,524,886 n/a
Weighted average shares for diluted earnings per share 107,370,446 n/a
Own shares held by the City Pub Group plc Joint Share Ownership Plan ("JSOP")
or held in Treasury, which have waived their entitlement to receive dividends,
are treated as cancelled for the purpose of this calculation.
For the 52 week period ended 26 December 2021, 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
2022 2021
Group and Company £'000 £'000
Cost brought forward 4,246 4,196
Additions 200 50
Disposal (1,224) -
At end of period 3,222 4,246
Amortisation/impairment brought forward (1,996) (914)
Impairment provided during the period - (1,082)
Disposal 1,224 -
At end of period (772) (1,996)
Net book value at end of period 2,450 2,250
Net book value at start of period 2,250 3,282
The carrying value of goodwill included within the Group and Company statement
of financial position is £2,450,000 (2021: £2,250,000), which is allocated
to the cash-generating unit ("CGU") of groupings of public houses as follows:
2022 2021
£'000 £'000
Freehold 1,574 1,374
Leasehold 876 876
2,450 2,250
The CGU 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 25 December 2022 impairments have been
made against one site, as described further in note 12, with no 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 25 December 2022, the cash-generating unit
recoverable amount was determined based on value-in-use calculations, using
cash flow projections based on one year budgets, extrapolated into perpetuity
for freehold properties and for the length of the lease for leasehold
properties, with key assumptions for both CGU's being the long-term growth
rate of 2% and pre-tax discount rate of 10%. Cash flows for the businesses
are based on management forecasts, which are approved by the Board and
reflect management's expectations of sales growth, operating costs and margin
based on past experience and anticipated changes in the local market places.
Sensitivity to changes in key assumptions: impairment testing is dependent on
management's estimates and judgements, in particular in relation to the
forecasting of future cash flows, the long-term growth rate and the discount
rate applied to the cash flows.
Lowering the discount rate by 1% from 10% to 9% would have the effect of
reducing the impairment charge by £10k to £617k. An increase in the
discount rate to 11% would result in the impairment charge increasing by £10k
to £637k.
Lowering the long term growth rate used from 2% to 1% would result in an
increase in the impairment charge of £6k to £633k. A higher growth rate of
3% would result in the impairment charge reducing by £7k to £620k.
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.
12 Property, plant and equipment
Freehold & leasehold property Fixtures fittings and computers Total
Group and Company £'000 £'000 £'000
Cost
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
Additions 1,527 8,799 10,326
Acquisitions 1,395 450 1,845
Disposals (17,705) (3,785) (21,490)
At 25 December 2022 81,829 40,411 122,240
Depreciation
At 27 December 2020 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
Provided during the period 735 2,896 3,631
Impairment 189 47 236
Disposals (2,107) (2,777) (4,884)
At 25 December 2022 4,824 18,351 23,175
Net book value
At 25 December 2022 77,005 22,060 99,065
At 26 December 2021 90,605 16,762 107,367
At 27 December 2020 91,408 17,165 108,573
During the period ended 25 December 2022 the group made a provision for
impairment against one site totalling £627,000, split £189,000 against
freehold & leasehold property, £47,000 against fixtures and fittings and
£391,000 against right of use assets. During the period ended 26 December
2021 the group made a provision for impairment against a number of sites
totaling £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 25 December 2022 the group capitalised £64,000 (2021:
£90,000) 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:
2022 2021
Group and Company £'000 £'000
Right-of-use assets
Net book value at start of period 17,875 19,565
Additions 3,568 1,192
Disposals (1,944) (1,232)
Impairment (391) (59)
Depreciation (1,543) (1,591)
Total 17,565 17,875
Lease liabilities - see note 20
Current 1,915 1,912
Non-current 16,674 16,473
Total 18,589 18,385
Additions to the right-of-use assets during the 2022 financial period were
£3,568,000 (2021: £1,192,000). 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 £nil
(2021: £178,000). 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.
Details of the maturity analysis of the leases is provided in note 21 and
reconciliation of the lease liabilities from prior period is provided within
note 20.
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:
2022 2021
Group and Company £'000 £'000
Depreciation charge
Leasehold Properties 1,543 1,591
Interest expense (included in finance cost) 637 656
The total cash outflow for leases in 2022 was £1,999,000 (2021: £2,071,000),
see note 20.
14 Financial assets at fair value through Other Comprehensive income
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
At start of period 254 1,309 71 1,309
Additions 626 916 - 751
Transfer to Associates (note 15) - (1,239) - (1,239)
Disposals/repayments - (750) - (750)
Revaluations (494) 18 - -
At end of period 386 254 71 71
During the period the group made additional smaller strategic equity
investments, which have been designated as fair value through other
comprehensive income. Investments, totalling £627,000 (2021: £165,000), were
made through a subsidiary company rather than being held directly by the
parent company.
The Company acquired an initial 14% stake in the Mosaic Companies in September
2020 for £1.2m. During the period 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.
15 Investments in associates and joint ventures
2022 2021
Associates - Group and Company £'000 £'000
Aggregate carrying amount of associated at the start of the period 4,248 -
Additions in the period 1,763 2,144
Transfer from financial assets at fair value through other comprehensive - 1,239
income (note 14)
Revaluations through profit and loss - 943
Aggregate amounts of the group's share of:
Loss from associates (114) (78)
Total comprehensive income (114) (78)
Aggregate carrying amount of associates at the end of the period 5,897 4,248
The Group has recognised its share of the Associate's operating losses during
the period since ownership.
As noted in note 15, during the prior 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. During the period ended 25 December 2022 the Group
participated in additional fund raisings, totalling £1,738,000, resulting in
a stake of 35.9% at the period end.
The Mosaic Companies own nine prominent pubs, predominantly in London and
Birmingham, of which seven are freehold.
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.
All of the investments in associates were equity accounted for during the year
ended 25 December 2022 and relate to companies incorporated within the United
Kingdom. The investments at cost in each Associate, as at 25 December 2022, is
as follows: The Galaxy (City) Pub Company Limited £1,683,400; The Pioneer
(City) Pub Company Limited £1,683,300; The Sovereign (City) Pub Company
Limited £1,683,300, Barts Pub Ltd £683,000; and Bupp Ltd £163,000.
For the majority of the prior period, 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.
During the period ended 25 December 2022 the Group invested £150,000 in a
joint venture.
2022 2021
Joint Ventures - Group and Company £'000 £'000
Additions in the period 150 -
Aggregate amounts of the group's share of:
Loss from continuing operations (43) -
Total comprehensive income (43) -
Aggregate carrying amount of joint ventures at the end of the period 107 -
Aggregate carrying amount of associates and joint ventures at the end of the 6,004 4,248
period
16 Investments in subsidiaries
2022 2021
Company £'000 £'000
At start of period 801 1,067
Write-down of investment - (266)
At end of period 801 801
The investment in Flamequire was written down in the prior period as an
application to strike off the entity was made in December 2021, which was
concluded in March 2022.
The Company had the following subsidiary undertakings as at 25 December 2022:
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
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
2022 2021
Group and Company £'000 £'000
Finished goods and goods for resale 1,152 1,048
There were no inventory write offs during the period ended 25 December 2022
nor in the period ended 26 December 2021.
18 Trade and other receivables
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade receivables 163 674 163 674
Government grant receivables - - - -
Corporation tax receivables 130 170 130 170
Other receivables 1,688 1,216 1,688 1,216
Amounts due from group undertakings - - 386 165
Prepayments and accrued income 1,678 1,271 1,678 1,271
3,659 3,331 4,045 3,496
Rent deposits are included within other receivables, greater than one year.
They are at £319,000 (2021: £319,000). 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. The Group held no
collateral against these receivables at the balance sheet dates. The Directors
consider that the carrying value of receivables are recoverable in full and
that any expected credit losses are immaterial.
19 Current trade and other payables
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade payables 5,870 4,188 5,870 4,188
Corporation taxation - - - -
Other taxation and social security 2,664 1,498 2,664 1,498
Amounts due to group undertakings - - 801 801
Accruals 3,072 5,062 3,072 5,062
Other payables 2,325 1,466 2,325 1,466
13,931 12,214 14,732 13,015
Included within Other taxation and social security is £nil (2021: £nil),
which is due to be repaid greater than one year.
20 Borrowings and lease liabilities
2022 2021
Group and Company £'000 £'000
Current borrowings and financial liabilities:
Lease liabilities 1,915 1,912
Non-current borrowings and financial liabilities:
Bank loans 7,657 24,750
Lease liabilities 16,674 16,473
24,331 41,223
At 25 December 2022 a revolving credit facility of £35,000,000 with
£7,657,000 drawn (2021: £35,000,000 with £24,750,000 drawn) 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 prior period 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 Short-term
Borrowings Borrowings Total
£'000 £'000 £'000
At 26 December 2021 24,750 - 24,750
Cash flows:
Repayment (17,000) - (17,000)
Non-cash items:
Amortisation of loan arrangement fees (93) - (93)
At 25 December 2022 7,657 - 7,657
Long-term Short-term
Borrowings Borrowings Total
£'000 £'000 £'000
At 27 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
The changes in the Group's and Company's liabilities arising from leases can
be classified as follows:
Long-term Short-term
Lease liabilities Lease liabilities Total
£'000 £'000 £'000
At 26 December 2021 16,473 1,912 18,385
Cash flows:
Repayments - (1,999) (1,999)
Accrued interest - 637 637
Non-cash items:
Additions 3,568 - 3,568
Disposals (2,002) - (2,002)
Reclassification (1,365) 1,365 -
At 25 December 2022 16,674 1,915 18,589
Long-term Short-term
Lease liabilities Lease liabilities Total
£'000 £'000 £'000
At 27 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
21 Financial instruments and risk management
Financial instruments by category:
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Financial assets - loans and receivables
Trade and other receivables 1,851 1,890 1,851 1,890
Amounts owed by group undertakings - - 386 165
Cash and cash equivalents 4,121 12,510 4,121 12,510
5,972 14,400 6,358 14,565
Prepayments are excluded, as this analysis is required only for financial
instruments.
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Non-current
Borrowings 7,657 24,750 7,657 24,750
Lease liabilities 16,674 16,473 16,674 16,473
24,331 41,223 24,331 41,223
Current
Current borrowings - - - -
Lease liabilities 1,915 1,912 1,915 1,912
Trade and other payables 8,195 5,654 8,195 5,654
Amounts due to group undertakings - - 801 801
10,110 7,566 10,911 8,367
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
2022 2021
Cash at bank and short-term deposits £'000 £'000
A1 4,091 12,210
Not rated 30 300
4,121 12,510
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 £8,000,000 at period end (2021:
£25,000,000) 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 25 December 2022, 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 period Equity
+2% (2021: +1%) -2% (2021: -1%) +2% (2021: +1%) -2% (2021: -1%)
£'000 £'000 £'000 £'000
25 December 2022 (160) 160 (160) 160
26 December 2021 (250) 250 (250) 250
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.
Between Between
Less than 1 and 2 2 and 5 Over
1 year years years 5 years
Group £'000 £'000 £'000 £'000
As at 25 December 2022:
Borrowings - - 7,657 -
Lease liabilities 1,915 1,930 5,498 14,833
Trade and other payables 8,195 - - -
As at 26 December 2021:
Borrowings - - 24,750 -
Lease liabilities 1,912 1,912 5,613 14,312
Trade and other payables 5,654 - - -
21 Financial instruments and risk management continued
Between Between
Less than 1 and 2 2 and 5 Over
1 year years years 5 years
Company £'000 £'000 £'000 £'000
As at 25 December 2022:
Borrowings - - 7,657 -
Lease liabilities 1,915 1,930 5,498 14,833
Trade and other payables 8,996 - - -
As at 26 December 2021:
Borrowings - - 24,750 -
Lease liabilities 1,912 1,912 5,613 14,312
Trade and other payables 6,455 - - -
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.
During the period ended 27 December 2020 the Group acquired investments in
other companies, which have been recognised at fair value in the prior period
and at the current reporting date.
23 Deferred tax
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Provision for deferred tax liabilities
Accelerated capital allowances 1,308 1,324 1,308 1,324
Arising on revaluations - 3 - -
Arising on acquisition 1,137 1,137 1,137 1,137
2,445 2,464 2,445 2,461
Provision at the start of the period 2,464 2,181 2,461 2,181
Deferred tax charge through OCI (3) 3 - -
Deferred tax charge through profit or loss (16) 280 (16) 280
Provision at the end of the period 2,445 2,464 2,445 2,461
Group Group Company Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Deferred tax asset
Arising on tax losses carried forward 1,723 1,018 1,723 1,018
Arising on revaluations 120 - - -
1,843 1,018 1,723 1,018
Deferred tax asset at the start of the period 1,018 503 1,018 503
Deferred tax credit through OCI 120 - - -
Deferred tax credit through profit or loss 705 515 705 515
Deferred tax asset at the end of the period 1,843 1,018 1,723 1,018
24 Share capital
2022 2021
£'000 £'000
Allotted called up and fully paid
105,793,430 Ordinary shares of 1 pence each (2021: 105,793,430) 1,058 1,058
3,021,770,759 Deferred shares of 1 pence each (2021: 3,021,770,759) 30,218 30,218
Total 31,276 31,276
There were no shares issued during the period ended 25 December 2022.
In the prior period the following share issues took place. 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.
24 Share capital continued
The ordinary share capital account represents the amount subscribed for shares
at nominal value.
£0.01 Ordinary shares Number £0.50 Ordinary shares Number Deferred shares Number
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 and 25 December 2022 - 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 (2021: no shares) in the
Company were purchased during the period at a cost of £nil (2021: £nil).
At 25 December 2022 the JSOP held 1,925,000 ordinary shares in The City Pub
Group plc (2021: 1,925,000).
At 25 December 2022 awards over 675,000 (2021: 675,000) ordinary shares The
City Pub Group plc, made under the terms of the performance share plan, were
outstanding.
Own shares held - Treasury shares
During the period ended 25 December 2022 the Group announced the launch of a
share buyback programme of its ordinary shares of 1p each ("Ordinary Shares")
up to an initial maximum value of £2 million worth of Ordinary Shares from
the date of the announcement, on 5 October 2022, with the option to extend the
Share Buyback Programme by an additional £1 million. The purchased Ordinary
Shares will be held in Treasury. As at 25 December 2022 the Group held 128,365
shares in Treasury (2021: nil).
Group JSOP Treasury Total
£'000
£'000 £'000
Balance at 27 December 2020 and 26 December 2021 (3,272) - (3,272)
Additions in the period - (87) (87)
Balance at 25 December 2022 (3,272) (87) (3,359)
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").
Own shares (Treasury) represents shares in the Company purchased as part of
the Group's share buyback programme.
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 £'000 Share- payment based reserve Revaluation reserve Total
£'000 £'000 £'000
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
Employee share-based compensation - 1,042 - 1,042
Transactions with owners - 1,042 - 1,042
Revaluation - gross - - (494) (494)
Deferred tax on revaluation - - 123 123
Total comprehensive income for the period - - (371) (371)
Balance at 25 December 2022 92 3,119 (356) 2,855
26 Staff costs
Number of employees
The average monthly numbers of employees (including salaried Directors) during
the period were:
2022 2021
Management and Administration 90 83
Operation of Public Houses 963 879
1,053 962
Employment costs (including Directors)
2022 2021
£'000 £'000
Wages and salaries 18,803 16,701
Pension costs 364 336
Social security costs 1,450 951
Share based payments charge 844 703
21,461 18,691
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 period (the Company consider that
the Directors are their key management personnel):
Salary/Fees Taxable Benefits Pension/Other Compensation for Total
loss of office
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Clive Watson 180 153 5 5 18 20 - - 203 178
Rupert Clark 180 153 9 9 19 21 - - 208 183
Tarquin Williams 23 135 1 2 15 23 144 - 183 160
Toby Smith 280 253 2 10 - - - - 282 263
Holly Elliott 220 18 - - 3 - - - 223 18
Richard Prickett 55 48 - - - - - - 55 48
John Roberts* - 33 - - - 34 - - - 67
Neil Griffiths 48 42 - - - - - - 48 42
Emma Fox 48 30 - - - - - - 48 30
Total 1,034 865 17 26 55 98 144 - 1,250 989
*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:
2022 2021
£'000 £'000
Remuneration for qualifying services 1,250 989
The highest paid Director in the period received remuneration of £282,000;
(2021: £263,000). Four directors had equity settled share options in issue at
the period end (2021: 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 25 December 2022 953,892 options were granted under
the CSOP scheme (2021: 175,000 options granted), 1,000,000 options were
granted under the Group's Long Term Incentive Plan (2021: 2,950,000 options
granted); and no awards were made under the JSOP scheme (2021: no awards). A
share-based payment charge of £1,042,000 (2021: £703,000) 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:
Period of grant 2022 - CSOP 2022 - LTIP
Exercise price (£) 0.90 -
Number of awards granted 953,892 1,000,000
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 2.216% 2.239%
Expected dividend yield 1.40% 1.00%
Volatility 30% 27%
Fair value (£) 0.31 0.93
The volatility assumption above has been calculated based on the historical
volatility of the Company's share price, over the relevant period.
Movements in share-based payments are summarised in the table below:
2022 2022 2021 2021
Number of Weighted Number of Weighted
Awards average Awards average
exercise price £ exercise price £
Outstanding at start of period 7,960,000 0.44 6,980,000 0.90
Granted 1,953,892 0.44 3,125,000 0.07
Exercised - - (22,500) 1.00
Expired (379,723) 0.94 (2,122,500) 1.73
Outstanding at end of period 9,534,169 0.41 7,960,000 0.44
Exercisable at end of period 1,132,500 1.70 1,165,000 1.68
The weighted average remaining contractual life of options outstanding at the
end of the period is 7.82 years (2021: 8.42 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 9,534,169 outstanding options (2021:
7,960,000). The breakdown of these is as follows:
345,000 - 2016 CSOP; 112,500 - 2018 CSOP; 675,000 - JSOP; 1,900,000 - 2020
LTIP; 2,035,000 - 2020 CSOP; 25,000 - 2021 CSOP; 2,550,000 - 2021 LTIP;
891,669 - 2022 CSOP; and 1,000,000 - 2022 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:
£5,000 (2021: £3,500) was paid to Helen Watson, who is related to Clive
Watson. At the period end Helen Watson was owed £nil (2021: £nil).
During the period ended 25 December 2022 the Group acquired an additional 12%
in the Mosaic entities for a total cash consideration of approximately £1.7m,
on an arm's length basis, giving a total investment of £4.2m at the year end.
As at 25 December 2022 the Group had an investment in an Associate, being a
36% 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 25 December 2022 and 26 December 2021.
30 Post balance sheet events
Pub acquisitions
The Group acquired a new pub, The Bridge located in Barnes. The purchase
completed post period end on 9 January 2023 and the consideration was not
material.
Pub disposals
The Group disposed of The Yard surrendering the lease and the sale completed
on 24 March 2023 and the proceeds were not material.
Barts Pub Limited Investment
We increased our investment in Barts Pub Limited by £851,000 in March 2023.
Our total stake in Barts Pub Limited is now 99% for a total investment of
£1.6m. Barts Pub Limited ceased trading during 2022, and therefore will not
be accounted as a business combination.
Share Buyback Programme
The share buyback programme was announced during the period and continued post
period end. The purchased Ordinary Shares will be held in Treasury. As at 17
April 2023, the Group held 1,028,212 shares in Treasury (2021: nil).
Mosaic Investment
We also recently announced that we increased our investment in Mosaic Pub and
Dining (Tranche one of companies) by £2.2m in April 2023. Our total stake in
Mosaic is now 48%.
31 Capital commitments
At the period end the Group and Company has no capital commitments.
32 Business combinations
During the period the Group acquired Potters in Newport 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, which was a trade and assets deal, was part of the Group's
continuing strategy to expand its pub portfolio via selective quality
acquisitions.
Group & Company £'000
Provisional fair value:
Property, plant and equipment acquired 1,845
Goodwill 200
Total 2,045
Satisfied by:
Cash 2,045
Shares -
Total 2,045
All other pub acquisitions have been accounted for as property
acquisitions.
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