REG - City Pub Group (The) - Preliminary Results
27/04/2022 07:16
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RNS Number : 4478J City Pub Group PLC (The) 27 April 2022
The City Pub Group PLC
(the "City Pub Group", the "Company" or the "Group")
FINAL RESULTS FOR THE YEAR ENDED 26 DECEMBER 2021
The City Pub Group is pleased to announce its audited results for the 52 weeks
ended 26 December 2021. The Group currently operates a predominately freehold
estate of 41 pubs, with the Oyster House in Mumbles opening this week. We have
a further three development sites in London, Southern England and Wales.
Since the last statement in September 2021, the business has emerged fully
from the COVID-19 lockdowns in 2021 and Omicron over the 2021 festive season
and into 2022. All our 40 pubs have reopened and most of the estate is now
trading normally.
By November last year, following the lifting of restrictions, we were trading
ahead of 2019's level demonstrating demand and the recovery of our business
but that growing momentum reversed with the outbreak of Omicron in December
2021. Encouragingly, trading for the last 9 weeks is 98% of 2019, on a like
for like basis. We are now confident that 2022 trading across the portfolio
will exceed 2019 by the end of the second quarter.
Financial highlights
Post IFRS 16 Pre IFRS 16 Post IFRS 16 Pre IFRS 16
52 weeks to 52 weeks to 52 weeks to 52 weeks to Change
26.12.21 26.12.21 27.12.20 27.12.20 Pre IFRS 16
£m £m £m £m %
Revenue 35.4 35.4 25.8 25.8 37%
Adjusted EBITDA 5.9 3.8 1.2 (0.8) N/A
Adjusted Profit/(loss) before tax 0.9 1.0 (5.4) (5.1) N/A
* Pre-IFRS16 Adjusted earnings before exceptional items, share option charge,
interest, taxation, depreciation and amortisation.
** Pre-IFRS16 Adjusted profit / (loss) before tax is the profit / (loss)
before tax, share option charge and exceptional items.
· Intention to recommence dividends in September with the Interim
Results
Balance sheet and estate valuation
· Following the disposal of 6 pubs following the year end the
Company has current net debt of c.£2.0m and £35m banking facilities
· Estate valued at 145p or £150 million (excluding lotting
premium)
Estate enhancement and development
· The Hoste, Georgian Townhouse, Bath Brewhouse, and Daly's have
been enhanced with either capacity gains through investment in outside seating
or being refurbished
· Significant progress on the development sites with Tivoli,
Cliftonville Hotel and the Nest opening during the summer and planning now
received for our new concept Damson and Wilde
Mosaic acquisition
· Increased stake from 25% to 36% at a total investment of £4.1m.
Intention to acquire remaining shares not owned in 2023
· 10 high quality pubs which will complement existing estate
Outlook
· Strongest balance sheet since inception
· Some impact from industry challenges particularly energy and food
costs. Short term effect on margin as decision to hold prices.
· Trading in the last 9 weeks of 2022 is 98% of 2019 and we're
confident that trade will revert to 2019 levels in the second half.
· Well positioned to take advantage of acquisition opportunities
when they arise.
Clive Watson, Chairman of City Pub Group said:
"Following the reversal over the festive season, trading is now beginning to
build in momentum and we look forward to an uninterrupted summers' trading.
We are emerging from the pandemic in the strongest financial position that we
have ever been in and therefore have signalled our intention to recommence
dividends in the autumn.
We have a very strong platform from which to grow and much to look forward to
despite the inflationary headwinds our development sites are coming on stream,
Mosaic will be fully acquired next year adding ten high quality pubs, our new
concept will begin trading and we can take full advantage of, adhering to our
strict criteria, freehold acquisition opportunities that arise."
27 April 2022
Enquiries:
City Pub Today: via Instinctif
Group
Clive Watson, Executive Chairman
Holly Elliott, CFO
Instinctif Partners +44 (0) 20 7457 2020
Matthew Smallwood
Peel Hunt +44 (0)78 9520 5644
George Sellar
Liberum (Nomad & 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
Since my last statement in September 2021, the business has emerged fully from
the COVID-19 lockdowns and Omicron over the 2021 festive season and early
2022. All our 40 pubs have reopened and most of the estate is now trading
normally.
Our focus is on growing our premium business of high quality, predominantly
freehold pubs in great cities and market towns of Southern England and Wales.
We will do this by driving sales in our core estate, as well as continuing our
expansion. Our central marketing structure is giving us better visibility of
how to further build future sales which together with the City Club App
enables us to enhance improved customer loyalty. We are benefitting from more
a streamlined business and the significant savings achieved.
Staff morale has considerably improved since our last report helped by
increased communication within the Group and the way we cared for our staff
during the pandemic.
By November last year, following the lifting of restrictions, we were trading
ahead of 2019's level demonstrating demand and the recovery of our business
but that growing momentum reversed with the outbreak of Omicron in December
2021.Encouragingly, trading for the last 8 weeks of 2022 is at around 98% of
2019. We are now confident that 2022 trading across the portfolio will exceed
2019 by the end of the second quarter.
Trading Estate
The Group currently operates 41 trading sites and a further 3 development
sites. Another 3 are at the heads of agreement stage.
In order to maintain and continuously improve the quality of our estate we
have made the following investments:
· The Hoste, Burnham Market, Norfolk - an further 18 rooms are in the
process of being refurbished and an outside seating area for 60 added
· Georgian Townhouse, Norwich - Further premiumisation of the site has
taken place together with enhancement of the outside trading area, including
the addition of an all-weather terrace with 60 covers and a retractable roof
· Bath Brew House, Bath - the outside sitting area for over 80 seats
has been covered creating extra weather proof trading space
· Phene, Chelsea - garden significantly upgraded to take advantage of
the summer months
· Daly's Wine Bar and Temple Brew House on the Strand were our last
pubs to be reopened, fully refurbished after 2 years of closure
Investments being implemented:
· Cliftonville Hotel, Cromer, to be reopened having been refurbished,
in time for summer holidays, with potential extra outside seating of circa 100
covers
· Most recently, on 25(th) April, the Oyster House, Mumbles, opened and
we are very confident that with a good summer we will achieve high levels of
trade and benefit from the16 luxury hotel rooms to rival any in the region
· The Tivoli, Cambridge has taken us over 2 years to develop due to
COVID delays. Following significant investment we anticipate it becoming one
of our trophy sites. This opens in May 22.
· The Nest, Bath - it has finally been granted planning for its large
outside beer garden and licensed for the extended hours. We anticipate it
opening in early August
· Planning consent has now been granted for the Café Rouge site in
Bury St Edmunds - our new All-Day Trading concept is being launched here - it
is being named Damson & Wilde. Featuring an all-day menu, a premium drinks
offer, great coffee and high service levels we expect to develop this to
capitalise on the best aspects of high street offers. Once proven and
implemented, we anticipate replicating the all day format in other pubs which
will further help to premiumise them. If Damson & Wilde proves to be a
success, we will look at expanding this concept but will not be sucked into
paying high rents on the High Street which have increased considerably in the
last few months.
Post balance sheet date events - Disposals/Mosaic
In March this year we announced the disposal of 6 sites predominantly on the
South coast for the consideration of approximately £17m. The board felt that
they could reinvest this money into higher growth assets and also use it to
increase our stake in the Mosaic Pubs, which has 10 high quality pubs of which
8 are freehold. Mosaic has a strong London and Birmingham presence and we've
recently increased our stake from 25% to 36% at a total cost of c. £4.1m. We
will make an offer for the outstanding shares in Mosaic by the middle of next
year at which point we will be able to consolidate their trading estate with
our own. The Mosaic estate will complement our existing pub estate and will
help drive further growth in 2023.
Financial Highlights
Summary for the year ended 26 December 2021:
• Revenue up 37% to £35.4 million (2020: £25.8 million)
• Adjusted EBITDA* of £3.8 million (2020: £(0.8) million)
• Adjusted profit/(loss) before tax** of £1.0 million (2020: £(5.1)
million)
• Reported profit/(loss) of £(2.9) million (2020: £(6.5) million)
Key Metrics
Post IFRS 16 Pre IFRS 16 Post IFRS 16 Pre IFRS 16
52 weeks to 52 weeks to 52 weeks to 52 weeks to Change
26.12.21 26.12.21 27.12.20 27.12.20 Pre IFRS 16
£m £m £m £m %
Revenue 35.4 35.4 25.8 25.8 37%
Adjusted EBITDA 5.9 3.8 1.2 (0.8) N/A
Adjusted Profit/(loss) before tax 0.9 1.0 (5.4) (5.1) N/A
* Pre-IFRS16 Adjusted earnings before exceptional items, share option charge,
interest, taxation, depreciation and amortisation.
** Pre-IFRS16 Adjusted profit / (loss) before tax is the profit / (loss)
before tax, share option charge and exceptional items.
Bank Facilities
Currently, we have net debt of circa £2m resulting in a very strong balance
sheet. We have credit facilities of £35m, therefore the company is well
placed to acquire assets at the right time, at the right price.
Consequently we have no requirement for the £5m CLBLS which we took out last
year and this facility has now been cancelled.
Estate Valuation
The trading portfolio of pubs has been revalued and the total sum of gross
trading assets equates to £150m (this excludes the recent pub disposals).
Within the valuation, 17 of the larger pubs were independently valued,
accounting for 65% of the gross trading value. Net Asset Value, excluding any
lotting premium which would be undoubtedly achieved for an estate of quality
premium assets, is circa 145p per share.
Board Changes
Holly Elliott joined the company on 29 November 2021 as Chief Financial
Officer, having previously worked at Five Guys and Caffé Nero. Holly has vast
experience in the hospitality industry and has joined to help the Company
improve its systems, financial controls, and to assist with the expansion of
the business.
Tarquin Williams left the business at the end of February 2022 after serving
as CFO for over 6 years. Tarquin was heavily involved in the Group's flotation
on AIM in November 2017 and assisted in steering it through difficult COVID
period. The board would like to thank Tarquin for his contribution and wish
him all the best for the future.
ESG
Last year we established an ESG committee chaired by Emma Fox, an independent
Non-Executive Director. Throughout 2021, we have made progress in developing
our strategy to ensure that we operate as a more responsible business, primed
to play a positive role in society. We have launched a significant and
thorough review of our current operations and introduced robust data
collection processes to fully understand our impact on the environment and the
communities in which we operate. We are taking our responsibilities seriously
and want to get ESG right.
This year we have reported against the recommendations of the TCFD for the
first time and prepared standalone ESG and TCFD Reports to communicate our ESG
journey to our stakeholders. We are continuously improving and implementing
measures and new procedures across our estate which will help continue reduce
our carbon footprint.
Our policies will be outlined in our published report and accounts. I would
like to thank Emma and the committee for their immense contribution it's been
a challenging and rewarding year.
Dividends
The Group is now in strong financial position and the Board believes that
shareholders should be rewarded for supporting the business through the last
couple of very challenging years. The Board therefore plans to reintroduce
dividends on a progressive basis with the current intention being that this
will accompany the interim results in September.
Industry Issues
The Group has come through the challenges of COVID and the action that it took
during the pandemic is seeing it emerge a better, stronger business albeit
facing well publicised macro-economic challenges including inflation, issues
arising from Brexit and more recently the impact from the war in Ukraine.
The Group benefits from a 3-year supply agreement with our major beer
suppliers agreed in December 2021. This agreement helps mitigate some of the
inflationary pressures that our industry faces and means that we will in real
terms be paying less for larger parts of our liquor supplies.
Energy costs have soared, and we have hedged our future exposure but the cost
to the business in this financial year is in excess of £1m.
Food price inflation is also high as well as building material and labour
costs.
There is no quick term solution to inflation. The Board feels it's
inappropriate and counterproductive to keep increasing prices that we charge
customers, and therefore margins will be impacted in the short term. We would
rather delight our customers than price ourselves anti competitively.
Outlook
The Group is in a very strong financial position, and it continues to review
and seek acquisition opportunities to create value. The Board believes this is
the best way to drive shareholder value. Large parts of our estate are trading
well but there are still some pubs that need focus to re-establish normalised
levels of trading.
We have worked hard to forge a strong culture within the business which is
helping to retain key employees at retail and head office level. As part of a
deliberate plan, many have share options to incentivise them for the future.
The estate is high quality with 220 letting rooms and we anticipate benefiting
from the continued popularity of staycations. Room sales are expected to be,
this year, over 10% of the overall sales compared to 6% in 2019. With our
coastal investments such as the Hoste in Burnham Market, Oyster House in
Mumbles and Cliftonville in Cromer we are well positioned to take advantage of
this market.
The board remains ambitious and with the planned Mosaic acquisition next year
and new opportunities arising from the dislocation in the marketplace, our
ambition is to have 65-70 quality pubs open by the end of next year.
There are undoubtedly major challenges such us inflation, but with a high
intensity retailing approach, we believe we can overcome these challenges over
the next 12 months, taking advantage of our balance sheet, one of the
strongest in the hospitality industry. We have a very strong platform to build
on.
I would like to thank all my Directors, all our staff, our Advisers, our
Bankers, Barclays Bank Plc, suppliers and Shareholders for all their help in
in getting us to this stage. I am confident that the better times will return
and that in the meantime we can continue to weather the storm and continue to
improve on Group's fortunes.
Clive Watson
Executive Chairman
26 April 2022
Consolidated statement of profit or loss
for the 52 week period ended 26 December 2021 (2020: for the 52 week period
ended 27 December 2020)
Notes 2021 2020
£'000 £'000
Revenue 4 35,364 25,815
Cost of sales (8,273) (6,280)
Gross profit 27,091 19,535
Other operating income 4a 5,084 5,391
Administrative expenses (35,126) (31,423)
Operating loss 5 (2,951) (6,497)
Reconciliation to adjusted EBITDA*
Operating loss (2,951) (6,497)
Depreciation 5 4,881 5,494
Share option charge 28 703 397
Exceptional items 8 3,288 1,814
* Adjusted earnings before exceptional items, share option charge, interest, 5,921 1,208
taxation and depreciation
Share of losses of associate 15 (78) -
Other financial items 15 943 -
Finance costs 6 (1,041) (1,137)
Loss before tax (3,127) (7,634)
Tax credit 7 259 1,171
Loss for the period (2,868) (6,463)
Earnings per share
Basic earnings per share (p) 10 (2.76) (7.15)
Diluted earnings per share (p) 10 n/a n/a
All activities comprise continuing operations.
The notes form part of these financial statements.
Consolidated statement of comprehensive income
for the 52 week period ended 26 December 2021 (2020: for the 52 week period
ended 27 December 2020)
Notes 2021 2020
£'000 £'000
Loss for the period (2,868) (6,463)
Other Comprehensive income
Items that will not be reclassified to profit or loss
Changes in the fair value of equity investments at fair value through other 14 18 -
comprehensive income
Income tax relating to these items (3) -
Other comprehensive income for the period, net of tax 15 -
Total comprehensive income for the period (2,853) (6,463)
All of the total comprehensive income for the period is attributable to the
owners of The City Pub Group plc and all arise from continuing operations.
The notes form part of these financial statements.
Consolidated statement of financial position
as at 26 December 2021 (2020: as at 27 December 2020)
Notes 2021 Restated
£'000 2020
£'000
Assets
Non-current
Intangible assets 11 2,250 3,282
Property, plant and equipment 12 107,367 108,573
Right-of-use assets 13 17,875 19,565
Deferred tax assets 23 1,018 503
Financial assets at fair value through OCI 14 254 1,309
Investments in associates 15 4,248 -
Total non-current assets 133,012 133,232
Current
Inventories 17 1,048 703
Trade and other receivables 18 3,331 3,064
Cash and cash equivalents 12,510 12,331
Total current assets 16,889 16,098
Total assets 149,901 149,330
Liabilities
Current liabilities
Trade and other payables 19 (12,214) (8,430)
Financial liabilities - lease liabilities 13 (1,912) (2,103)
Total current liabilities (14,126) (10,533)
Non-current
Borrowings 20 (24,750) (24,801)
Financial liabilities - lease liabilities 13 (16,473) (17,750)
Deferred tax liabilities 23 (2,464) (2,181)
Total non-current liabilities (43,687) (44,732)
Total liabilities (57,813) (55,265)
Net assets 92,088 94,065
Equity
Share capital 24 31,276 31,275
Share premium 24 59,475 59,303
Own shares (JSOP) 24 (3,272) (3,272)
Other reserve 25 2,184 1,466
Retained earnings 24 2,425 5,293
Total equity 92,088 94,065
The notes form part of these accounts.
Approved by the Board and authorised for issue on 26 April 2022.
Clive Watson Holly Elliott
Chairman Chief Financial
Officer
Company No. 07814568
Company statement of financial position
as at 26 December 2021 (2020: as at 27 December 2020)
Notes 2021 Restated
£'000 2020
£'000
Assets
Non-current
Intangible assets 11 2,250 3,282
Property, plant and equipment 12 107,367 108,573
Right-of-use assets 13 17,875 19,565
Deferred tax assets 23 1,018 503
Financial assets at fair value through OCI 14 71 1,309
Investments in associates 15 4,248 -
Investments in subsidiaries 16 801 1,067
Total non-current assets 133,630 134,299
Current
Inventories 17 1,048 703
Trade and other receivables 18 3,496 3,064
Cash and cash equivalents 12,510 12,331
Total current assets 17,054 16,098
Total assets 150,684 150,397
Liabilities
Current liabilities
Trade and other payables 19 (13,015) (9,497)
Financial liabilities - lease liabilities 13 (1,912) (2,103)
Total current liabilities (14,927) (11,600)
Non-current
Borrowings 20 (24,750) (24,801)
Financial liabilities - lease liabilities 13 (16,473) (17,750)
Deferred tax liabilities 23 (2,461) (2,181)
Total non-current liabilities (43,684) (44,732)
Total liabilities (58,611) (56,332)
Net assets 92,073 94,065
Equity
Share capital 24 31,276 31,275
Share premium 24 59,475 59,303
Own shares (JSOP) 24 (3,272) (3,272)
Share-based payment reserve 24 2,077 1,374
Retained earnings 24 2,517 5,385
Total equity 92,073 94,065
The loss for the financial period of the Parent Company, The City Pub Group
plc was £2,868,000 (2020: loss £3,678,000). The notes form part of these
accounts. Approved by the Board and authorised for issue on 26 April 2022.
Clive Watson Holly Elliott
Chairman Chief Financial
Officer
Company No. 07814568
Consolidated statement of changes in equity
for the 52 week period ended 26 December 2021
Notes Share Share Own Other Retained Total
capital premium shares Reserves earnings
(note 25)
(JSOP)
Balance at 29 December 2019 30,812 38,570 (3,272) 1,069 11,756 78,935
Employee share-based compensation 28 - - - 397 - 397
Issue of new shares 24 463 20,733 - - - 21,196
Transactions with owners 463 20,733 - 397 - 21,593
Loss for the period - - - - (6,463) (6,463)
Total comprehensive income - - - - (6,463) (6,463)
for the period
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 - - - 15 (2,868) (2,853)
for the period
Balance at 26 December 2021 31,276 59,475 (3,272) 2,184 2,425 92,088
The notes form part of these accounts.
Company statement of changes in equity
for the 52 week period ended 26 December 2021
Notes Share Share Own Share-based payment reserve Retained Total
capital premium shares earnings
(JSOP)
Balance at 29 December 2019 30,812 38,570 (3,272) 977 9,063 76,150
Employee share-based compensation 28 - - - 397 - 397
Issue of new shares 24 463 20,733 - - - 21,196
Transactions with owners 463 20,733 - 397 - 21,593
Loss for the period - - - - (3,678) (3,678)
Total comprehensive income for the period - - - - (3,678) (3,678)
Balance at 27 December 2020 31,275 59,303 (3,272) 1,374 5,385 94,065
Employee share-based compensation 28 - - - 703 - 703
Issue of new shares 24 1 172 - - - 173
Transactions with owners 1 172 - 703 - 876
Loss for the period - - - - (2,868) (2,868)
Total comprehensive income for the period - - - - (2,868) (2,868)
Balance at 26 December 2021 31,276 59,475 (3,272) 2,077 2,517 92,073
The notes form part of these accounts.
Consolidated statement of cash flows
for the 52 week period ended 26 December 2021 (2020: for the 52 week period
ended 27 December 2020)
Notes 2021 2020
£'000 £'000
Cash flows from operating activities
Loss for the period (2,868) (6,463)
Taxation 7 (259) (1,171)
Finance costs 6 1,041 1,137
Result from equity accounted investment 15 78 -
Other financial items 15 (943) -
Operating loss (2,951) (6,497)
Adjustments for:
Depreciation 5 4,881 5,494
Gain on disposal of property, plant & equipment 125 -
Share-based payment charge 28 703 397
Impairment 12 3,690 933
Change in inventories (345) 517
Change in trade and other receivables (571) 1,055
Change in trade and other payables 3,800 (258)
Cash generated from operations 9,332 1,641
Tax (paid) received 651 (341)
Net cash generated from operating activities 9,983 1,300
Cash flows from investing activities
Purchase of property, plant and equipment 12 (5,493) (2,304)
Acquisition of new property sites (1,600) -
Purchase of investments and associates 14&15 (2,309) (1,309)
Proceeds from disposal of property, plant and equipment 2,163 821
Net cash used in investing activities (7,239) (2,792)
Cash flows from financing activities
Proceeds from issue of share capital 24 73 21,196
Repayment of borrowings (91) (7,544)
Principal element of lease payments (1,416) (1,347)
Interest paid (includes implied interest under IFRS16) 6 (1,131) (1,251)
Net cash used in/from financing activities (2,565) 11,054
Net change in cash and cash equivalents 179 9,562
Cash and cash equivalents at the start of the period 12,331 2,769
Cash and cash equivalents at the end of the period 12,510 12,331
The notes form part of these accounts.
Company statement of cash flows
for the 52 week period ended 26 December 2021 (2020: for the 52 week period
ended 27 December 2020)
Notes 2021 2020
£'000 £'000
Cash flows from operating activities
Loss for the period (2,868) (3,678)
Taxation (259) (1,171)
Finance costs 1,041 1,137
Result from equity accounted investment 15 78 -
Other financial items 15 (943) -
Operating loss (2,951) (3,712)
Adjustments for:
Depreciation 5 4,881 5,494
Realised gain on final hive-up dividend - (2,785)
Gain on disposal of property, plant and equipment 125 -
Share-based payment charge 28 703 397
Impairment 3,690 933
Change in inventories (345) 517
Change in trade and other receivables (735) 1,055
Change in trade and other payables 3,800 (258)
Cash generated from operations 9,168 1,641
Tax paid 651 (341)
Net cash generated from operating activities 9,819 1,300
Cash flows from investing activities
Purchase of property, plant and equipment 12 (5,493) (2,304)
Acquisition of new property sites (1,600) -
Purchase of investments and associates 14&15 (2,145) (1,309)
Proceeds from disposal of property, plant and equipment 12 2,163 821
Net cash used in investing activities (7,075) (2,792)
Cash flows from financing activities
Proceeds from issue of share capital 73 21,196
Repayment of borrowings (91) (7,544)
Principal element of lease payments (1,416) (1,347)
Interest paid (1,131) (1,251)
Net cash used in/from financing activities (2,565) 11,054
Net change in cash and cash equivalents 179 9,562
Cash and cash equivalents at the start of the period 12,331 2,769
Cash and cash equivalents at the end of the period 12,510 12,331
The notes form part of these accounts.
Notes to the financial statements
for the 52 week period ended 26 December 2021 (2020: for the 52 week period
ended 27 December 2020)
1 Company information
The financial statements of The City Pub Group plc (as consolidated "the
Group") for the 52 week period ended 26 December 2021 were authorised for
issue in accordance with a resolution of the directors on 26 April 2022. The
Company is a public limited company incorporated and domiciled in the UK. The
Company number is 07814568 and the registered office is located at Essel House
2nd Floor, 29 Foley Street, London, England, W1W 7TH.
The Group's principal activity is the management and operation of public
houses. Information on the Company's ultimate controlling party and other
related party relationships is provided in Note 29.
Exemption from audit
For the period ended 26 December 2021 the subsidiaries (see note 16) are
exempt from audit under section 480 of the Companies Act 2006.
2 Significant accounting policies
2.1 Basis of preparation
This preliminary announcement does not constitute the Group's full financial
statements for the 52 week period ended 26 December 2021. The auditors have
reported on the Group's statutory accounts for the 52 week period ended 26
December 2021 under s495 of the Companies Act 2006, which do not contain
statements under s498(2) or s498(3) of the Companies Act 2006 and are
unqualified. The statutory accounts for the 52 week period ended 26 December
2021 will be filed with the Registrar of companies in due course.
The consolidated financial statements of The City Pub Group Plc ("the Group")
have been prepared in accordance with International Financial Reporting
Standards ("IFRSs"), as adopted by the EU, IFRIC interpretations and with
those parts of the Companies Act 2006 applicable to companies reporting under
IFRS.
IFRS is subject to amendment and interpretation by the IASB and the IFRS
Interpretations Committee, and there is an on-going process of review and
endorsement by the European Commission. These accounting policies comply with
each IFRS that is mandatory for accounting periods ending on 52 week period
ended 26 December 2021.
The financial statements have been prepared under the historical cost
convention as modified for financial instruments at fair value and in
accordance with applicable accounting standards.
2.2 Statement of Compliance
The financial statements of the Company and Group are prepared in accordance
with applicable International Financial Reporting Standards ("IFRS") as
adopted by the European Union.
2.3 New and Revised Standards
IFRS applied for the first time in the current financial statements
The Group has applied the following Standards and Amendments for the first
time for their annual reporting period commencing 28 December 2020:
· IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors (Amendment - Definition of
Material)
· IFRS 3 Business Combinations (Amendment - Definition of Business)
· Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 8;
and
· Revised Conceptual Framework for Financial Reporting.
The Amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
IFRS in issue but not applied in the current financial statements
The following IFRS and IFRIC Interpretations have been issued but have not
been applied by the Group in preparing these financial statements, as they are
not as yet effective. The Group intends to adopt these Standards and
Interpretations when they become effective, rather than adopt them early.
· Interest Rate Benchmark Reform Phase 2 - Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16
· Property, Plant and Equipment: Proceeds before intended use - Amendments
to IAS 16
· Reference to the Conceptual Framework - Amendments to IFRS 3
· Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 37
· Annual Improvements to IFRS Standards 2018-2020
· Classification of Liabilities as Current or Non-current - Amendments to
IAS 1
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2
· Definition of Accounting Estimates - Amendments to IAS 8
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - Amendments to IAS 12
The Directors are currently evaluating the impact of the adoption of all other
standards, amendments and interpretations but do not expect them to have a
material impact on the Group operation or results.
2.4 Predecessor value method
During the period ended 31 December 2017 the Company undertook a common
control combination, through the issue of new Ordinary Shares, B-Ordinary
Shares and Convertible Preference Shares in exchange for 100% of the Ordinary
Shares, B Ordinary Shares and Convertible Preference Shares of The City Pub
Company (West) Limited an entity under common control. The Directors
considered the business combination to be a common control combination, as the
combining entities were ultimately controlled by the same parties both before
and after the combination and the common control was not transitory. As a
common control combination, the transaction was outside the scope of IFRS 3
("Business Combinations") and the Directors therefore considered the nature of
the transaction, which was eligible for Merger Relief under the Companies Act,
and decided that the predecessor value method would be most appropriate for
preparing those and subsequent Group financial statements.
The predecessor value method involves accounting for the assets and
liabilities of the acquired business using existing carrying values rather
than at fair values, as a result no goodwill arose on the combination. The use
of the predecessor value method gave rise to an "other reserve", which
represents the share premium of the subsidiary entity on consolidation.
The financial results of subsidiaries are included in the consolidated
financial information from the date that control commences until the date that
control ceases. The consolidated financial information presents the results of
the companies within the same group. Intra-group balances and transactions,
and any unrealised income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial information.
2.5 Going concern
The Group agreed a £35m revolving credit facility (RCF) with Barclays Bank
plc in July 2019 with an accordion option of another £15m. This facility has
been extended to July 2024. There is also an undrawn £5m CLBILS facility
available. At year end we had £25m of debt, and £15m of net debt, with £10m
undrawn on our RCF, £15m of accordion and £5m of CLBILS available. We have
since cancelled the CIBLS facility.
Barclays replaced The City Pub Group plc's RCF's existing financial covenants
with a Minimum Liquidity Test in the sum of £8m plus an additional Minimum
EBITDA Test to be tested on a monthly basis. We have significant headroom
between our forecasts and the requirements in the Minimum EBITDA Test. After
June 2022 the financial covenant tests as currently documented will
recommence. The forecasts for the business show substantial headroom.
Post year end, the group has recently sold six pubs for £17.1m. This
effectively reduces debt to zero. The Group is now EBITDA and cashflow
generative, with funding only required for new acquisitions.
During 2020, we reduced Pub and head office costs to the minimum and have kept
a tight grip on these costs post reopening. We applied for Grants where
applicable. We have been in negotiations with landlords with regards to rent
holidays, rent deferrals and changes in terms of some leases.
Although there are cost pressures with wage inflation, rising energy prices
and upward pressure on commodities, we've taken the time during covid to
renegotiate and lock in procurement contracts, streamlining staffing and
implementing energy reducing initiatives.
When making our assessment of going concern, our assumptions have assumed all
covid restrictions continue to be removed. We have assumed that trading
reverts to pre COVID-19 levels. While trading restrictions remain a risk, it
is considered that the likelihood of them returning is now considered remote
and so is not considered to present a material going concern risk to the group
at the date of approval of the financial statements.
Based on the current financial projections to the end of December 2023 and
having considered the facilities available, together with potential
sensitivities to changes in levels of trade the Board is confident that the
Group have adequate resources to continue in operational existence for the
foreseeable future, while also meeting its loan covenant requirements as they
presently stand. For this reason, the Board consider it appropriate for the
Group to adopt the going concern basis in preparing its financial statements.
2.6 Revenue
Revenue represents external sales (excluding taxes) of goods and services net
of discounts. Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration
receivable net of trade discounts and VAT.
Revenue principally consists of drink, food and accommodation sales, which are
recognised at the point at which goods and services are provided and rental
income which is recognised on a straight line basis over the lease term.
Revenue for bedroom accommodation is recognised at the point the services are
rendered. Loyalty card revenue is immaterial and therefore no change in
accounting policy is considered necessary.
2.7 Cost of sales
Costs considered to be directly related to revenue are accounted for as cost
of sales. Costs of goods sold are determined on the basis of the cost of
purchase, adjusted for movements of inventories. Cost of services rendered is
recognised at the time the revenue is recognised.
2.8 Operating profit
Operating profit is revenue less operating costs. Revenue is as detailed above
and as shown in note 4. Operating costs are all costs excluding finance costs,
costs associated with the disposal of properties and the tax charge.
2.9 Exceptional items
The Group presents as exceptional items those significant items of income and
expense which, because of their size, nature and infrequency of the events
giving rise to them merit separate presentation to allow Shareholders to
understand better the elements of financial performance in the period, so as
to facilitate comparison with prior periods to assess trends in financial
performance more readily. These items are primarily pre-opening costs
(including acquisition costs) and non-recurring costs, which are not expected
to recur at a particular site.
2.10 Finance income and expense
Finance income is recognised as interest accrues (using the effective interest
method) on funds invested outside the Group. Finance expense includes the cost
of borrowing from third parties and is recognised on an effective interest
rate basis, resulting from the financial liability being recognised on an
amortised cost basis, including commitment fees. Borrowing costs directly
attributable to the acquisition, construction or production of a qualifying
asset are capitalised during the period of time that is necessary to complete
and prepare the asset for its intended use or sale.
2.11 Taxation and deferred taxation
The income tax expense or income for the period is the tax payable on the
current period's taxable income. This is based on the national income tax rate
enacted or substantively enacted with any adjustment relating to tax payable
in previous years and changes in deferred tax assets and liabilities
attributable to temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the Financial Statements.
Deferred tax assets and liabilities are recognised for temporary differences
at the tax rates expected to be applicable when the asset or liability
crystallises based on current tax rates and laws that have been enacted or
substantively enacted by the reporting date. The relevant tax rates are
applied to the cumulative amounts of deductible and taxable temporary
differences to measure the deferred tax asset or liability.
A deferred tax asset is regarded as recoverable and therefore recognised only
when, on the basis of all available evidence, it can be regarded as more
likely than not that there will be suitable taxable profits against which to
recover carried forward tax losses and from which the future reversal of
temporary differences can be deducted. The carrying amount of deferred tax
assets are reviewed at each reporting date.
2.12 Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the financial instrument and
are measured initially at fair value adjusted for transaction costs.
Subsequent measurement of financial assets and financial liabilities is
described below.
Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement the Group classifies its financial
assets into the following categories: those to be measured subsequently at
fair value (either through other comprehensive income (FVOCI) or through the
income statement (FVPL)) and those to be held at amortised cost.
Classification depends on the business model for managing the financial assets
and the contractual terms of the cash flows.
Management determines the classification of financial assets at initial
recognition. The Group's policy with regard to financial risk management is
set out in note 21. Generally, the Group does not acquire financial assets for
the purpose of selling in the short term and does not have any financial
assets measured at fair value through the income statement (FVPL) in either
the current or prior year.
The Group's business model is primarily that of "hold to collect" (where
assets are held in order to collect contractual cash flows).
Financial assets held at amortised cost
This classification applies to the Group's trade & other receivables which
are held under a hold to collect business model and which have cash flows that
meet the solely payments of principal and interest (SPPI) criteria. At initial
recognition, trade and other receivables that do not have a significant
financing component, are recognised at their transaction price. Other
financial assets are initially recognised at fair value plus related
transaction costs; they are subsequently measured at amortised cost using the
effective interest method. Any gain or loss on derecognition or modification
of a financial asset held at amortised cost is recognised in the income
statement.
Financial assets at fair value through other comprehensive income (FVOCI)
The Group accounts for financial assets at FVOCI if the assets meet the
following conditions:
· they are held under a business model whose objective it is "hold to
collect" the associated cash flows and
· the contractual terms of the financial assets give rise to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
The Group has opted to classify financial assets which are investments in
equity instruments as financial assets at fair value through other
comprehensive income.
Any gains or losses recognised in other comprehensive income (OCI) will be
recycled upon derecognition of the asset.
Impairment of financial assets
A forward-looking expected credit loss (ECL) review is required for: debt
instruments measured at amortised cost or held at fair value through other
comprehensive income; loan commitments and financial guarantees not measured
at fair value through profit or loss; lease receivables and trade receivables
that give rise to an unconditional right to consideration.
IFRS 9's impairment requirements use more forward-looking information to
recognise expected credit losses - the "expected credit loss (ECL) model".
This replaces IAS 39's "incurred loss model". The Group's instruments within
the scope of the new requirements included trade and other receivables.
Recognition of credit losses is no longer dependent on the Group first
identifying a credit loss event. Instead the Group considers a broader range
of information when assessing credit risk and measuring expected credit
losses, including past events, current conditions, reasonable and supportable
forecasts that affect the expected collectability of the future cash flows of
the instrument.
As permitted by IFRS 9, the Group applies the "simplified approach" to trade
and other receivable balances and the "general approach" to all other
financial assets. The simplified approach in accounting for trade and other
receivables records the loss allowance as lifetime expected credit losses.
These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial
instrument. In calculating, the Group uses its historical experience, external
indicators and forward-looking information to calculate the expected credit
losses. The general approach incorporates a review for any significant
increase in counterparty credit risk since inception. The ECL reviews include
assumptions about the risk of default and expected loss rates.
The nature of the Group's trade and other receivables are such that the
expected credit loss is immaterial in the current and prior year, therefore no
additional disclosures are considered necessary within the credit risk section
of note 21.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and other short
term highly liquid deposits with original maturities of three months or less.
Classification and subsequent measurement of financial liabilities
The Group's financial liabilities include trade and certain other payables.
Financial liabilities are measured subsequently at amortised cost using the
effective interest rate.
Trade and other payables
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
These amounts represent liabilities for goods and services provided to the
Group prior to the end of the financial period, which are unpaid.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value is
recognised in profit or loss over the period of the borrowings using the
effective interest method.
Classification of Shares as Debt or Equity
When shares are issued, any component that creates a financial liability of
the Group is presented as a liability in the statement of financial position;
measured initially at fair value net of transaction costs and thereafter at
amortised cost until extinguished on conversion or redemption. The
corresponding dividends relating to the liability component are charged as
interest expense in the Income Statement. The initial fair value of the
liability component is determined using a market rate for an equivalent
liability without a conversion feature.
The remainder of the proceeds on issue is allocated to the equity component
and included in shareholders' equity, net of transaction costs.
The carrying amount of the equity component is not remeasured in subsequent
years. The Group's ordinary shares are classified as equity instruments. For
the purposes of the disclosures given in note 24, the Group considers its
capital to comprise its ordinary share capital, share premium and accumulated
retained earnings. There have been no changes to what the Group considers to
be capital since the prior year.
Share repurchases
Where shares are repurchased wholly out of the proceeds of a fresh issue of
shares made for that purpose, no amount needs to be transferred to a capital
redemption reserve as there is no reduction in capital as a result of the
purchase and issue of shares.
2.13 Business combinations and goodwill
Other than the group re-organisation that took place prior to Listing,
business combinations, which include sites that are operating as a going
concern at acquisition and where substantive processes are acquired, are
accounted for under IFRS 3 using the purchase method. Any excess of the
consideration of the business combination over the interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities is
recognised in the statement of financial position as goodwill and is not
amortised. To the extent that the net fair value of the acquired entity's
identifiable assets, liabilities and contingent liabilities is greater than
the cost of the investment, a gain is recognised immediately in the profit or
loss.
Goodwill represents the future economic benefits arising from a business
combination that are not individually identified and separately recognised.
Goodwill is carried at cost less accumulated impairment losses. Refer to Note
11 for a description of impairment testing procedures.
2.14 Property, plant and equipment
Property, plant and equipment, other than freehold land, are stated at cost or
deemed cost less accumulated depreciation and any impairment in value.
Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected useful life, with
effect from the first full year of ownership, as follows:
Freehold properties To residual
value over fifty years straight line
Leasehold properties
Straight line over the length of the lease
Fixtures, fittings and equipment Between four and ten years
straight line
Computer
equipment Between two and
five years straight line
No depreciation is charged on freehold land. Where there is no depreciation on
historic freehold buildings as a result of a high residual value/long useful
lives, the freehold building is subject to an impairment review. Residual
values and useful lives are reviewed every year and adjusted if appropriate at
each financial period end.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the profit or loss.
2.15 Investments in subsidiaries
The Company recognises its investments in subsidiaries at cost, less any
provisions for impairment. Income is recognised from these investments only in
relation to distributions receivable basis from post-acquisition profits.
Distributions received in excess of post-acquisition profits are deducted from
the cost of the investment.
2.16Investments in associates
Investments in associates are accounted for using the equity method, unless
associates are held indirectly through a venture capital organization (or
similar entity), in which case they are measured at fair value through profit
or loss.
The carrying amount of the investment in associates is increased or decreased
to recognise the Group's share of the profit or loss and other comprehensive
income of the associate, adjusted where necessary to ensure consistency with
the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in those
entities. Where unrealised losses are eliminated, the underlying asset is also
tested for impairment. When an investment in an associate is held indirectly
via an investment manager it is measured at fair value through profit or loss.
2.17 Impairment of goodwill, property, plant and equipment and investments in
subsidiaries
For impairment assessment purposes, assets are grouped at the lowest levels
for which there are largely independent cash inflows (cash-generating units).
As a result, some assets are tested individually for impairment and some are
tested at cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies of a related
business combination and represent the lowest level within the Group at which
management monitors goodwill.
Cash-generating units to which goodwill has been allocated (determined by the
Group's management as equivalent to its operating segments) are tested for
impairment at least annually. All other individual assets or cash-generating
units are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's (or
cash-generating unit's) carrying amount exceeds its recoverable amount, which
is the higher of fair value less costs of disposal and value-in-use. To
determine the value-in-use, management estimates expected future cash flows
from each cash-generating unit and determines a suitable discount rate in
order to calculate the present value of those cash flows. The data used for
impairment testing procedures are directly linked to the Group's latest
approved budget, adjusted as necessary to exclude the effects of future
reorganisations and asset enhancements. Discount factors are determined
individually for each cash-generating unit and reflect current market
assessments of the time value of money and asset-specific risk factors.
Impairment losses for cash-generating units reduce first the carrying amount
of any goodwill allocated to that cash-generating unit. Any remaining
impairment loss is charged pro rata to the other assets in the cash-generating
unit. With the exception of goodwill, all assets are subsequently reassessed
for indications that an impairment loss previously recognised may no longer
exist. An impairment loss is reversed if the asset's or cash-generating unit's
recoverable amount exceeds its carrying amount.
2.18 Inventories
Inventories are counted independently and stated at the lower of cost and net
realisable value. Cost is calculated using the First In First Out method. Net
realisable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion and the estimated costs to sell.
2.19 Leases
For any new contracts entered into on or after 30 December 2019, the Group
considers whether a contract is, or contains a lease. A lease is defined as 'a
contract, or part of a contract, that conveys the right to use an asset (the
underlying asset) for a period of time in exchange for consideration'. To
apply this definition the Group assesses whether the contract meets three key
evaluations which are whether:
· the contract contains an identified asset, which is either explicitly
identified in the contract or implicitly specified by being identified at the
time the asset is made available to the Group
· the Group has the right to obtain substantially all of the economic
benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract
· the Group has the right to direct the use of the identified asset
throughout the period of use. The Group assess whether it has the right to
direct 'how and for what purpose' the asset is used throughout the period of
use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the balance sheet. The right-of-use asset is measured at
cost, which is made up of the initial measurement of the lease liability, any
initial direct costs incurred by the Group, an estimate of any costs to
dismantle and remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any incentives
received).
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
· fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
· variable lease payments that are based on an index or a rate;
· amounts expected to be payable by the lessee under residual value
guarantees;
· the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option; and
· payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
Lease payments to be made under reasonably certain extension options are also
included in the measurement of the liability.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available. If that
rate cannot be readily determined, which is generally the case for leases in
the Group, the Group's incremental borrowing rate is used, being the rate that
the individual lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
· where possible, uses recent third-party financing received by the
individual lessee as a starting point, adjusted to reflect changes in
financing conditions since third-party financing was received
· uses a build-up approach that starts with a risk-free interest rate
adjusted for credit risk for leases held by the Group, which does not have
recent third-party financing, and
· makes adjustments specific to the lease, e.g. term, country, currency and
security.
Where the Group is exposed to potential future increases in variable lease
payments based on an index or rate, these are not included in the lease
liability until they take effect. When adjustments to lease payments based on
an index or rate take effect, the lease liability is reassessed and adjusted
against the right-of-use asset.
Subsequent to initial measurement, lease payments are allocated between
principal, which reduces the liability, and finance cost. The finance cost is
charged to the statement of comprehensive income over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of
the liability for each period.
Right-of-use assets are measured at cost comprising the following:
· the amount of the initial measurement of lease liability;
· any lease payments made at or before the commencement date less any lease
incentives received;
· any initial direct costs; and
· restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. If the Group is
reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
The Group has elected to account for short-term leases and leases of low value
assets using the practical expedients. Instead of recognising a right-of-use
asset and lease liability, the payments in relation to these are recognised as
an expense in profit or loss on a straight-line basis over the lease term.
The right-of-use assets and lease liabilities have been disclosed separately
on the face of the Statement of Financial Position, within Non-current assets
and across Current & Non-current liabilities respectively.
2.20 Share-based employee remuneration
The Company operates equity-settled share-based remuneration plans for its
employees. None of the Company's plans are cash-settled.
All goods and services received in exchange for the grant of any share-based
payment are measured at their fair values.
Where employees are rewarded using share-based payments, the fair value of
employees' services is determined indirectly by reference to the fair value of
the equity instruments granted. This fair value is appraised at the grant date
and excludes the impact of non-market vesting conditions (for example
profitability and sales growth targets and performance conditions). The fair
value is determined by using the Black-Scholes method.
All share-based remuneration is ultimately recognised as an expense in profit
or loss with a corresponding credit to share-based payments reserve. If
vesting periods or other vesting conditions apply, the expense is allocated
over the vesting period, based on the best available estimate of the number of
share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of
options that are expected to become exercisable. Estimates are subsequently
revised if there is any indication that the number of share options expected
to vest differs from previous estimates. Any adjustment to cumulative
share-based compensation resulting from a revision is recognised in the
current period. The number of vested options ultimately exercised by holders
does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received, net of any directly
attributable transaction costs, are allocated to share capital up to the
nominal (or par) value of the shares issued with any excess being recorded as
share premium.
2.21 Investment in own shares (JSOP)
Shares held in the City Pub Group Joint Share Ownership Plan ("JSOP") are
shown as a deduction in arriving at equity funds on consolidation. Assets,
liabilities and reserves of the JSOP are included in the statutory headings to
which they relate. Purchases and sales of own shares increase or decrease the
book value of "Own shares" in the statement of financial position. At each
period end the Group assess and recognises the value of "Own shares" held with
reference to the expected cash proceeds and accounts for any difference as a
reserves transfer.
2.22 Government grants
The Group has received Government grants for the first time during the period
ended 27 December 2020, mainly in relation to the Coronavirus Job Retention
Scheme provided by the Government in response to COVID-19's impact on our
business. The Group has elected to account for these grants as other operating
income, rather than to off-set the Government grants within administrative
expenses, so that the gross impact is disclosed on the face of the Statement
of Comprehensive Income.
3 Significant judgements and estimates
The judgements, which are considered to be significant, are as follows:
Judgement is required when determining if an acquisition is a business
combination or a purchase of an asset. Each acquisition is assessed
individually to determine which is the most appropriate classification.
Judgement is used to determine those items that should be separately disclosed
to allow a better understanding of the underlying trading performance of the
Group. The judgement includes assessment of whether an item is of a nature
that is not consistent with normal trading activities or of a sufficient size
or infrequency.
Judgement is required when accounting for hive ups that are operationally
enacted and that determines when control has passed. See
note 16.
The estimates, which are considered to be significant, are as follows:
The Group determines whether goodwill is impaired on an annual basis and this
requires an estimation of the value in use of the cash-generating units to
which the goodwill is allocated. This involves estimation of future cash
flows, choosing a suitable discount rate and growth rate. Full details are
supplied in note 11, together with an analysis of the key assumptions.
The determination of any impairment of property, plant & equipment
(including the right of use assets) also requires estimation of fair value and
value in use. As with goodwill, this requires estimation of future cash flows
and selection of a suitable discount rate, together with assessment of the
market values of properties (if applicable). Goodwill was allocated to the
carrying value of property, plant & equipment for the purposes of the
impairment review, with further details around key assumptions provided in
note 11 (such assumptions are also relevant to the carrying value of property,
plant & equipment are detailed in note 12).
The calculation of lease liabilities requires the Group to determine an
incremental borrowing rate ("IBR") to discount future minimum lease payments.
The IBR is the rate of interest that the Group would have to pay to borrow
over a similar term, and with a similar security, the funds necessary to
obtain an asset of a similar value to the right-of-use asset in a similar
economic environment. The IBR therefore reflects what the Group 'would have to
pay', which requires estimation when no observable rates are available or when
they need to be adjusted to reflect the terms and conditions of the lease.
The estimation of share-based payment costs requires the selection of an
appropriate valuation model and consideration as to the inputs necessary for
the valuation model chosen. The Group has made estimates as to the volatility
of its own shares, the probable life of options granted and the time of
exercise of those options. Expectations around employee retention and meeting
of performance criteria have also been considered. The model used by the Group
is the Black-Scholes valuation model and the inputs are detailed in note 28.
The assessment of the probability of future taxable profits on which deferred
tax assets can be utilised is based on the Group's latest approved budget
forecasts, which is adjustment for significant non-taxable income and
expenditure. If a positive forecast of taxable income indicates the probable
use of a deferred tax asset, especially when it can be utilised without a time
limit, that deferred tax asset is usually recognised in respect of the period
for which future profits can be confidently foreseen.
4 Segmental analysis
The Group focuses its internal management reporting predominantly on revenue,
adjusted EBITDA (being earnings before exceptional items, share option charge,
interest, taxation and depreciation) and operating profit.
The Chief Operating Decision Maker ("CODM") receives information on each pub
and each pub is considered to be an individual operating segment. In line with
IFRS 8, each operating segment has the same characteristics and therefore the
pubs are aggregated to form the reportable segment below.
Revenue, and all the Group's activities, arise wholly from the sale of goods
and services within the United Kingdom. All the Group's non-current assets are
located in the United Kingdom.
Revenue arises wholly from the sale of goods and services within the United
Kingdom.
2021 2020
£'000 £'000
Revenue 35,364 25,815
Cost of sales (8,273) (6,280)
Gross profit 27,091 19,535
Other operating income before adjusting items (note 4(a)) 4,084 5,391
Operating expenses:
Operating expenses before adjusting items (25,254) (23,718)
Adjusted EBITDA 5,921 1,208
Depreciation (4,881) (5,494)
Share option charge (703) (397)
Exceptional items - operating expenses (4,288) (1,814)
Total operating expenses (35,126) (31,423)
Exceptional items - other operating income (note 4(a)) 1,000 -
Operating loss (2,951) (6,497)
(a) Other operating income
During 2020 the Group has received Government grants for the first time,
mainly in relation to the Furlough Scheme provided by the Government in
response to COVID-19's impact on our business. Further analysis of other
operating income is set out below.
2021 2020
£'000 £'000
Coronavirus Job Retention Scheme 2,972 5,141
Other government grants 1,112 250
Insurance claim (exceptional item note 8) 1,000 -
Total other operating income 5,084 5,391
5 Loss on ordinary activities before taxation
The loss on ordinary activities before taxation is stated after
charging/(crediting):
2021 2020
£'000 £'000
Costs of inventories recognised as an expense 5,502 6,376
Staff costs (note 26) 18,691 17,133
Depreciation 4,881 5,494
Fees payable to the company's auditor for the audit of the company's 65 60
financial statements
Exceptional items (note 8) 3,288 1,814
Operating leases - land and buildings (266) (351)
Rent concessions relating to COVID-19 of £178,000 (2020: £450,000) have been
recognised within this balance for 2021.
6 Interest payable and similar charges
2021 2020
£'000 £'000
On bank loans and overdrafts 475 551
Interest and finance charges for lease liabilities 656 699
Interest expense capitalised within property, plant & equipment (90) (113)
Total finance cost 1,041 1,137
During the period £90,000 of interest was capitalised (2020: £113,000).
7 Tax charge on loss on ordinary activities
(a) Analysis of tax charge for the period
The tax charge for the Group is based on the loss for the period and
represents:
2021 2020
£'000 £'000
Current income tax:
Current income tax charge - (572)
Adjustments in respect of previous period (24) (154)
Total current income tax (24) (726)
Deferred tax:
Origination and reversal of temporary differences (note 23) 280 58
Adjustment to deferred tax asset on tax losses (note 23) (515) (503)
Total deferred tax (235) (445)
Total tax (259) (1,171)
(b) Factors affecting total tax for the period
The tax assessed for the period differs from the standard rate of corporation
tax in the United Kingdom 19.00% (2020: 19.00%). The differences are
explained as follows:
2021 2020
£'000 £'000
Loss on ordinary activities before tax (3,127) (7,634)
Loss on ordinary activities multiplied by standard rate of corporation tax in (594) (1,450)
the United Kingdom of 19.00% (2020: 19.00%)
Effect of:
Temporary differences 265 446
Items not deductible for tax purposes 95 (5)
Adjustment in respect of previous periods (24) (154)
Share options tax deduction (1) (8)
Total tax credit (259) (1,171)
The deferred tax asset included in the balance sheet of £1,018,000 (2020:
£503,000) relates principally to the carry forward of tax losses. The
Directors have recognised a deferred tax asset in respect of carried forward
trading tax losses as, based on current estimates, the Group is forecast to
make sufficient trading profit over the next 3 years, against which these
losses can be offset.
8 Exceptional items
2021 2020
£'000 £'000
Pre opening costs 37 14
Impairment of pub sites 3,690 933
Inventory impairments - 662
Insurance claim (1,000) -
Other non recurring items 561 205
3,288 1,814
Exceptional items for both financial years presented are included within
administrative expenditure in the Statement of Comprehensive Income.
9 Dividends
Dividends paid during the reporting period
The Board did not declare a dividend due the Covid pandemic (2020: £nil)
Dividends not recognised at the end of the reporting period
Since the year end, the Directors are not proposing a dividend due to the
COVID-19 pandemic (2020: nil).
10 Loss per share
2021 2020
£'000 £'000
Loss for the period attributable to Shareholders (2,868) (6,463)
Loss per share:
Basic loss per share (p) (2.76) (7.15)
Diluted earnings per share (p) n/a n/a
Weighted average number of shares: Number of shares Number of shares
Weighted average shares for basic EPS 103,795,354 90,451,692
Effect of share options in issue n/a n/a
Weighted average shares for diluted earnings per share n/a n/a
Shares held by the City Pub Group plc Joint Share Ownership Plan ("JSOP"),
which has waived its entitlement to receive dividends, are treated as
cancelled for the purpose of this calculation.
For the 52 week period ended 26 December 2021 and 27 December 2020, the Group
recorded a loss. As a result, share options in issue for this period are
considered to be antidliutive and therefore no diluted loss per share has been
presented.
11 Goodwill
Group and Company 2021
£'000 Restated
2020
£'000
Cost brought forward 4,196 4,196
Additions 50 -
At end of period 4,246 4,196
Amortisation/impairment brought forward (914) (60)
Impairment provided during the period (1,082) (854)
At end of period (1,996) (914)
Net book value at end of period 2,250 3,282
Net book value at start of period 3,282 4,136
The carrying value of goodwill included within the Group and Company statement
of financial position is £2,250,000 (2020 restated: £3,282,000), which is
allocated to the cash-generating unit ("CGU") of groupings of public houses as
follows:
2021 Restated
2020
£'000
£'000
Freehold 1,374 2,396
Leasehold 876 886
2,250 3,282
The CGU's recoverable amount has been determined as the higher of its fair
value less costs to sell and value in use based on an internal discounted cash
flow evaluation. During the period ended 26 December 2021 impairments have
been made against a number of sites, as described further in note 12, with
impairments at three sites resulting in reductions to goodwill.
The fair value less costs to sell is calculated based on the market value of
the associated property.
For the 52 week period ended 26 December 2021, the cash-generating unit
recoverable amount was determined based on value-in-use calculations, using
cash flow projections based on one year budgets, (modified as appropriate for
the impact of COVID-19 and the expected return to normal trading conditions),
extrapolated into perpetuity for freehold properties and for the length of the
lease for leasehold properties, with key assumptions for both CGU's being the
long-term growth rate of 2% and pre-tax discount rate of 10%. Cash flows for
the businesses are based on management forecasts, which are approved by the
Board and reflect management's expectations of sales growth, operating costs
and margin based on past experience and anticipated changes in the local
market places and trading following the re-opening of sites during 2021.
Sensitivity to changes in key assumptions: impairment testing is dependent on
management's estimates and judgements, in particular in relation to the
forecasting of future cash flows, the long-term growth rate and the discount
rate applied to the cash flows and uncertainty of future cash flows related to
COVID-19.
Lowering the discount rate by 1% from 10% to 9% would have the effect of
reducing the impairment charge by £78k to £3,612k. An increase in the
discount rate to 11% would result in the impairment charge increasing by
£170k to £3,860k.
Lowering the long term growth rate used from 2% to 1% would result in an
increase in the impairment charge of £69k to £3,759k. A higher growth rate
of 3% would result in the impairment charge reducing by an immaterial amount.
The assumptions and outlined changes in impairment charge noted in the above
sensitivities are relevant to the combined carrying value of goodwill and
property plant & equipment, and are stated before any allocation between
the two asset classes.
As outlined further in note 33, a prior period restatement has been made to
the 2020 comparatives to transfer £514,000 of impairment from property, plant
and equipment (the fixtures, fittings and computers category) to goodwill.
12 Property, plant and equipment
Group and Company Freehold & Fixtures, Total
leasehold fittings and £'000
property computers
£'000 £'000
Cost
At 29 December 2019 97,292 29,357 126,649
Additions 311 2,107 2,418
Disposals (821) - (821)
At 27 December 2020 96,782 31,464 128,246
Additions 1,405 4,178 5,583
Acquisitions 1,600 50 1,650
Disposals (3,175) (745) (3,920)
At 26 December 2021 96,612 34,947 131,559
Depreciation
At 29 December 2019 4,627 11,108 15,735
Provided during the period 747 3,112 3,859
Impairment (restated) - 79 79
At 27 December 2020 (restated) 5,374 14,299 19,673
Provided during the period 587 2,703 3,290
Impairment 967 1,582 2,549
Disposals (921) (399) (1,320)
At 26 December 2021 6,007 18,185 24,192
Net book value
At 26 December 2021 90,605 16,762 107,367
At 27 December 2020 (restated) 91,408 17,165 108,573
At 29 December 2019 92,665 18,249 110,914
During the period ended 26 December 2021 the group made a provision for
impairment against a number of sites totalling £3,690,000, split £1,082,000
against goodwill, £967,000 against freehold & leasehold property,
£1,582,000 against fixtures and fittings and £59,000 against right of use
assets.
The assumptions and sensitivities relating to the Group's impairment review
laid out in note 11 are also relevant to this note.
During the period ended 27 December 2020 the group made a provision for
impairment against a number of sites totalling £933,000, split £340,000
against goodwill and £593,000 against fixtures and fittings. During the
period ended 26 December 2021 management identified that £514,000 of the
prior year impairment of fixtures and fittings should have been made against
goodwill and therefore a prior year adjustment has been made to restate the
amounts of goodwill and fixtures and fittings accordingly.
During the period ended 26 December 2021 the group capitalised £90,000 (2020:
£113,000) of interest within the Freehold & Leasehold property asset.
13 Leases
Group and Company
This note provides information for leases where the Group is a lessee. The
Group enters into property leases for certain of its pub sites. The lease
terms are negotiated on an individual basis and contain a wide range of
different terms and conditions. The lease agreements do not impose any
covenants, but leased assets may not be used as security for borrowing
purposes.
(i) amounts recognised in the consolidated statement of financial position
The consolidated statement of financial position shows the following amounts
relating to leases:
Group and Company 2021 2020
£'000 £'000
Right-of-use assets
Net book value at start of period 19,565 21,042
Additions 1,192 158
Disposals (1,232) -
Impairment (59) -
Depreciation (1,591) (1,635)
Total 17,875 19,565
Lease liabilities
Current 1,912 2,103
Non-current 16,473 17,750
Total 18,385 19,853
Additions to the right-of-use assets during the 2020 financial year were
£1,192,000 (2020: £158,000). Following the publication on the amendment to
IFRS 16 in relation to rent concessions, the Group has applied the practical
expedient in all cases where relevant conditions were met. These concessions
totalled a credit to the income statement for the period of £178,000 (2020:
£450,000). Changes in leases which do not fulfil the criteria of the
practical expedient have been treated as additions or disposals in line with
normal IFRS 16 accounting.
The assumptions and sensitivities relating to the Group's impairment review
laid out in note 11 are also relevant to this note. The impairment review
resulted in the impairment of the right-of-use assets relating to one site.
(ii) amounts recognised in the consolidated statement of comprehensive
income
The consolidated statement of comprehensive income shows the following amounts
relating to leases:
Group and Company 2021 2020
£'000 £'000
Depreciation charge
Leasehold Properties 1,591 1,635
Interest expense (included in finance cost) 656 699
The total cash outflow for leases in 2021 was £2,071,000 (2020: £2,046,000),
see note 21.
14 Financial assets at fair value through Other Comprehensive income
Group Group Company Company
2021
2020
2021
2020
£'000 £'000 £'000 £'000
At start of period 1,309 - 1,309 -
Additions 916 1,309 751 1,309
Transfer to Associates (note 15) (1,239) - (1,239) -
Disposals/repayments (750) - (750) -
Revaluations 18 - - -
At end of period 254 1,309 71 1,309
The Company acquired an initial 14% stake in the Mosaic Companies in September
2020 for £1.2m. During the year ended 26 December 2021 the group increased
its stake to 24% in certain companies within the Mosaic Pub and Dining Group,
through the acquisition of existing shares in The Galaxy (City) Pub Company
Limited, The Pioneer (City) Pub Company Limited and The Sovereign (City) Pub
Company Limited (the "Mosaic Companies") for a total cash consideration of
approximately £1.2m. This additional investment resulted in the Mosaic
companies becoming Associate investments and therefore the original stake
acquired in the prior period was transferred to Associates - see note 15.
During the year the group made additional smaller strategic equity
investments, which have been designated as fair value through other
comprehensive income. Investments, totalling £165k, were made through a
subsidiary company rather than being held directly by the parent company.
15 Investments in associates
Group and Company 2021 2020
£'000 £'000
Additions in the period 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 continuing operations (78) -
Other comprehensive income - -
Total comprehensive income (78) -
Aggregate carrying amount of associates 4,248 -
During the year ended 26 December 2021 the Group announced that it had
acquired a 49% stake in Barts Pub Ltd, owner of the iconic Kensington Park
Hotel ("KPH") in Ladbroke Grove, for £0.75m. The Group also acquired a 25%
stake in Bupp Ltd for £0.2m.
The KPH is a leasehold pub located 200 metres from Ladbroke Grove tube
station. It has large trading areas on the ground and first floors, benefits
from seven hotel letting rooms and has potential for a further four letting
rooms on the top floor. Ladbroke Grove is a prime residential area
in London and the Company trades very successfully at the Cock & Bottle,
Notting Hill, which is located close by. The Group has recognised its share of
the associates operating losses during the period since ownership.
As noted in note 15, during the period the Group's interest in the Mosaic
Companies exceeded 20% and is therefore deemed to give rise to the power to
the Group to exert significant influence. As such, the Directors consider the
Mosaic Companies to have become associates and the investment has been
reclassified as such.
The Mosaic Companies own ten prominent pubs, predominantly
in London and Birmingham, of which eight are freehold. Mosaic has a strong
balance sheet with over £3m in cash deposits and a very strong freehold
asset-backing.
The City Pub Group and Mosaic jointly negotiate their major liquor supply
deals (draught beer, spirits, wines, soft drinks) and the Company's investment
will help to cement this relationship. It is the intention of both the Company
and Mosaic to assist each other in advancements in technology, especially in
areas such as the City Club app.
Clive Watson is an investment consultant to Mosaic. Richard Prickett,
Non-Executive Director of the City Pub Group, is a Non-Executive Director of
The Pioneer (City) Pub Company Limited.
For the majority of the year, the Group held its interest in Mosaic through an
independently managed investment fund and therefore, in reflection in the
Group's assessment of its valuation and in accordance with IAS 28, it has been
measured at a fair value through profit and loss. Prior to the period end, the
Group took direct control of the investment, meaning that prospectively the
investment in Mosaic will be accounted for in accordance with the equity
method. The Group's share of Mosaic's profits and losses for the period after
it took direct ownership is not considered material.
16 Investments in subsidiaries
Company 2021 2020
£'000 £'000
At start of period 1,067 12,730
Write-down of investment (266) (11,663)
At end of period 801 1,067
The investment in Flamequire was written down in the current period as an
application to strike off the entity was made in December 2021, which was
concluded in March 2022. During 2019 the Company hived up the trade and assets
of its subsidiary The City Pub Company (West) Limited via an intercompany
transfer, which included the transfer of investments previously held by The
City Pub Company (West) Limited. In 2020 there was a final dividend from The
City Pub Company (West) Limited, which eliminated the amounts due to group
undertakings balance (note 16) and resulted in a write down of the investments
carrying value of £11,663,000.
The Company had the following subsidiary undertakings as at 26 December 2021:
Name of subsidiary Class of Country of Proportion Nature of
share held incorporation held business
The City Pub Company (West) Limited Ordinary England and Wales 100% Dormant
BNB Leisure Limited Ordinary England and Wales 100% Dormant
Gresham Collective Ltd Ordinary England and Wales 100% Dormant
Randall & Zacharia Limited Ordinary England and Wales 100% Dormant
Chapel 1877 Ltd Ordinary England and Wales 100% Dormant
Flamequire Limited Ordinary England and Wales 100% Dormant
The above companies all had the same registered office as the parent company,
being Essel House, 2nd Floor, 29 Foley Street,
London, W1W 7TH.
17 Inventories
Group and Company
2021 2020
£'000 £'000
Finished goods and goods for resale 1,048 703
During the year ended 27 December 2020 the Group (and Company) had to write
off £662,000 of inventory due to the impact of the COVID-19 lockdowns in
England, which has been recognised within the other non-recurring items line
as part of the exceptional items in note 8. There were no such impairments
required in the year ended 26 December 2021, as sites remained open.
18 Trade and other receivables
Group Group Company Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Trade receivables 674 235 674 235
Government grant receivables - 379 - 379
Corporation tax receivables 170 774 170 774
Other receivables 1,216 664 1,216 664
Amounts due from group undertakings - - 165 -
Prepayments and accrued income 1,271 1,012 1,271 1,012
3,331 3,064 3,496 3,064
Rent deposits are included within other receivables, greater than one year.
They are at £319k (2020: £358k). In addition the other receivables in 2021
include £300k of deferred consideration relating to the disposal of The
Island, Kensal Rise, which is payable over 4 years.
19 Current trade and other payables
Group Group Company Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Trade payables 4,188 2,641 4,188 2,641
Corporation taxation - - - -
Other taxation and social security 1,498 2,828 1,498 2,828
Amounts due to group undertakings - - 801 1,067
Accruals 5,062 2,190 5,062 2,190
Other payables 1,466 771 1,466 771
12,214 8,430 13,015 9,497
Included within Other taxation and social security is £nil (2020: £80,000),
which is due to be repaid greater than one year.
20 Borrowings and lease liabilities
Group and Company
2021 2020
£'000 £'000
Current borrowings and financial liabilities:
Lease liabilities 1,912 2,103
Non-current borrowings and financial liabilities:
Bank loans 24,750 24,801
Lease liabilities 16,473 17,750
41,223 42,551
At 26 December 2021 a revolving credit facility of £25,000,000 (2020:
£25,000,000) was outstanding, net of capitalised arrangement fees, Barclays
Bank PLC had a fixed charge over certain freehold property as security in
respect of this loan. Interest was charged at LIBOR plus a margin, which
varied dependent on the ratio of net debt to EBITDA. During the year the
revolving credit facility was extended for an additional 2 years to July 2024.
Reconciliation of liabilities arising from financing activities
The changes in the Group's and Company's liabilities arising from financing
activities can be classified as follows:
Long-term Short-term Total
Borrowings Borrowings £'000
£'000 £'000
At 28 December 2020 24,801 - 24,801
Cash flows:
Repayment - - -
Non-cash items:
Amortisation of loan arrangement fees (51) - (51)
At 26 December 2021 24,750 - 24,750
Long-term Short-term Total
Borrowings Borrowings £'000
£'000 £'000
At 30 December 2019 32,310 - 32,310
Cash flows:
Repayment (7,500) - (7,500)
Non-cash items:
Amortisation of loan arrangement fees (9) - (9)
At 27 December 2020 24,801 - 24,801
The changes in the Group's and Company's liabilities arising from leases can
be classified as follows:
Long-term Short-term Total
Lease liabilities Lease liabilities £'000
£'000 £'000
At 28 December 2020 17,750 2,103 19,853
Cash flows:
Repayments - (2,071) (2,071)
Accrued interest - 656 656
Non-cash items:
Additions 1,192 - 1,192
Disposals (1,245) - (1,245)
Reclassification (1,224) 1,224 -
At 26 December 2021 16,473 1,912 18,385
Long-term Short-term Total
Lease liabilities Lease liabilities £'000
£'000 £'000
At 30 December 2019 18,959 2,083 21,042
Cash flows:
Repayments - (2,046) (2,046)
Accrued interest - 699 699
Non-cash items:
Additions 158 - 158
Reclassification (1,367) 1,367 -
At 27 December 2020 17,750 2,103 19,853
21 Financial instruments and risk management
Financial instruments by category:
Group Group Company Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Financial assets - loans and receivables
Trade and other receivables 1,890 899 1,890 899
Amounts owed by group undertakings - - 165 -
Cash and cash equivalents 12,510 12,331 12,510 12,331
14,400 13,230 14,565 13,230
Prepayments are excluded, as this analysis is required only for financial
instruments.
Group Group Company Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Non-current
Borrowings 24,750 24,801 24,750 24,801
Lease liabilities 16,473 17,750 16,473 17,750
41,223 42,551 41,223 42,551
Current
Current borrowings - - - -
Lease liabilities 1,912 2,103 1,912 2,103
Trade and other payables 5,654 3,412 5,654 3,412
Amounts due to group undertakings - - 801 1,067
7,566 5,515 8,367 6,582
Statutory liabilities and deferred income are excluded from the trade payables
balance, as this analysis is required only for financial instruments.
There is no material difference between the book value and the fair value of
the financial assets and financial liabilities disclosed above.
The Group's operations expose it to financial risks that include market risk
and liquidity risk. The Directors review and agree policies for managing each
of these risks and they are summarised below. These policies have remained
unchanged from previous periods.
Group and Company
2021 2020
Cash at bank and short-term deposits £'000 £'000
A1 12,210 12,082
Not rated 300 249
12,510 12,331
A1 rating means that the risk of default for the investors and the policy
holder is deemed to be very low.
Not rated balances relate to petty cash amounts.
Market risk - cash flow interest rate risk
The Group had outstanding borrowing of £25,000,000 at year end as disclosed
in note 20. These were loans taken out with Barclays to facilitate the
purchase of public houses.
The Group's policy is to minimise interest rate cash flow risk exposures on
long-term financing. Longer-term borrowings are therefore usually at fixed
rates. At 26 December 2021, the Group is exposed to changes in market interest
rates through bank borrowings at variable interest rates. Other borrowings are
at fixed interest rates. The exposure to interest rates for the Group's cash
at bank and short-term deposits is considered immaterial.
The following table illustrates the sensitivity of profit and equity to a
reasonably possible change in interest rates of +/- 1% on borrowings in the
period. These changes are considered to be reasonably possible based on
observation of current market conditions. The calculations are based on a
change in the average market interest rate on borrowings for each period. All
other variables are held constant.
Profit for the year Equity
+1% -1% +1% -1%
26 December 2021 (250) 250 (250) 250
27 December 2020 (317) 317 (317) 317
Credit risk
The risk of financial loss due to a counter party's failure to honour its
obligations arises principally in relation to transactions where the Group
provides goods and services on deferred payment terms and deposits surplus
cash.
Group policies are aimed at minimising losses and deferred terms are only
granted to customers who demonstrate an appropriate payment history and
satisfy credit worthiness procedures. Individual customers are subject to
credit limits to control debt exposure. Credit insurance is taken out where
appropriate for wholesale customers and goods may also be sold on a cash with
order basis.
Cash deposits with financial institutions for short periods are only permitted
with financial institutions approved by the Board. There are no significant
concentrations of credit risk within the Group. The maximum credit risk
exposure relating to financial assets is represented by their carrying value
as at the financial period end.
Liquidity risk
The Group actively maintains cash and banking facilities that are designed to
ensure it has sufficient available funds for operations and planned
expansions. The table below analyses the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the period end
date to the contractual maturity date. The amounts disclosed in the table are
the contractual undiscounted cash flows.
Group Less than Between Between Over
1 year 1 and 2 years 2 and 5 years 5 years
£'000 £'000 £'000 £'000
As at 26 December 2021:
Borrowings - - 24,750
Lease liabilities 1,912 1,912 5,613 14,312
Trade and other payables 5,654 - - -
As at 27 December 2020:
Borrowings - - 24,801 -
Lease liabilities 2,103 2,103 6,119 15,108
Trade and other payables 3,412 - - -
Company Less than Between Between Over
1 year 1 and 2 years 2 and 5 years 5 years
£'000 £'000 £'000 £'000
As at 26 December 2020:
Borrowings - - 24,750
Lease liabilities 1,912 1,912 5,613 14,312
Trade and other payables 6,455 - - -
As at 27 December 2020:
Borrowings - - 24,801 -
Lease liabilities 2,103 2,103 6,119 15,108
Trade and other payables 4,479 - - -
Capital risk management
The Group manages its capital to ensure it will be able to continue as a going
concern while maximising the return to shareholders through optimising the
debt and equity balance.
The Group monitors cash balances and prepare regular forecasts, which are
reviewed by the board. In order to maintain or adjust the capital structure,
the Group may, in the future, return capital to shareholders, issue new shares
or sell assets to reduce debt.
22 Fair value measurements of financial instruments
Financial assets and financial liabilities measured at fair value are required
to be grouped into three levels of a fair value hierarchy. The three levels
are defined based on the observability of significant inputs to the
measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and
liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and
Level 3: unobservable inputs for the asset or liability.
There were no material financial asset or liabilities measured at fair value
as at 29 December 2019. During the period ended 27 December 2020 the Group
acquired investments in other companies, which have been recognised at fair
value in the prior year and at the current reporting date.
23 Deferred tax
Group Group Company Company
2021 2020 2021 2020
£'000 £'000 £'000 £'000
Provision for deferred tax liabilities
Accelerated capital allowances 1,324 1,044 1,324 1,044
Arising on revaluations 3 - - -
Arising on acquisition 1,137 1,137 1,137 1,137
2,464 2,181 2,461 2,181
Provision at the start of the period 2,181 2,123 2,181 2,123
Deferred tax charge through OCI 3 - - -
Deferred tax charge through profit or loss 280 58 280 58
Provision at the end of the period 2,464 2,181 2,461 2,181
Group and Company
2021 2020
£'000 £'000
Deferred tax asset
Arising on tax losses carried forward 1,018 503
Deferred tax asset at the start of the period 503 -
Deferred tax credit for the period 515 503
Deferred tax asset at the end of the period 1,018 503
24 Share capital
2021 2020
£'000 £'000
Allotted called up and fully paid
105,793,430 Ordinary shares of 1 pence each (2020: 105,684,425) 1,058 1,057
3,021,770,759 Deferred shares of 1 pence each (2020: 3,021,770,759) 30,218 30,218
Total 31,276 31,275
In May 2021 the Group issued 22,500 £0.01 shares at a price of £1.00 per
share in relation to the exercise of share options. The premium on the shares
issued was credited to the share premium account.
In September 2021 the Group issued 86,505 £0.01 shares at a price of £1.156
per share in relation to the acquisition of The Cliftonville Hotel in Cromer,
Norfolk. The premium on the shares issued was credited to the share premium
account.
The ordinary shareholders are entitled to be paid a dividend out of any
surplus profits and to participate in surplus assets on winding up in
proportion to the nominal value of each class of share. All equity shares in
the Company carry one vote per share.
The deferred shareholders are not entitled to be paid a dividend out of any
surplus profits and only participate in surplus assets on winding up after
certain conditions. The deferred shares do not entitle the holder to vote at a
General Meeting.
In the prior year (April 2020) the Group undertook a subdivision of its
ordinary share capital, which resulted in the issued ordinary share capital of
61,668,791 ordinary £0.50 shares being subdivided into 3,083,439,550 ordinary
£0.01 shares. After the subdivision 3,021,770,759 ordinary £0.01 shares were
re-designated as 3,021,770,759 deferred £0.01 shares, leaving 61,668,791
ordinary shares of £0.01 each.
The ordinary share capital account represents the amount subscribed for shares
at nominal value.
£0.50 Ordinary £0.01 Ordinary Deferred
shares Number shares Number shares Number
At 29 December 2019 61,623,791 - -
Issue of new ordinary shares on exercise of share options 45,000 - -
Sub-total 61,668,791 - -
Impact of the subdivision of £0.50 ordinary shares to £0.01 (61,668,791) 3,083,439,550 -
ordinary shares
Impact of the re-designation to deferred shares - (3,021,770,759) 3,021,770,759
Issue of new ordinary shares on Placing - 30,000,000
Issue of new ordinary shares on Open Offer - 14,015,634
At 27 December 2020 - 105,684,425 3,021,770,759
Issue of new ordinary shares on exercise of share options - 22,500 -
Issue of new ordinary shares - 86,505 -
At 26 December 2021 - 105,793,430 3,021,770,759
Own shares held (JSOP)
The Group announced the establishment of a Joint Share Ownership Plan ("JSOP")
in January 2018, as detailed in the Company's AIM Admission Document, to be
used as part of the remuneration arrangements for employees. This resulted in
the purchase of the Group's own shares and the creation of an Employee Benefit
Trust.
The JSOP purchases shares in the Company to satisfy the Company's obligations
under its JSOP performance share plan. No shares (2019: no shares) in the
Company were purchased during the period at a cost of £nil (2020: £nil).
At 26 December 2021 the JSOP held 1,925,000 ordinary shares in The City Pub
Group plc (2020: 1,925,000).
At 26 December 2021 awards over 675,000 (2020: 1,925,000) ordinary shares The
City Pub Group plc, made under the terms of the performance share plan, were
outstanding.
Nature and purpose of reserves
The share premium account represents premiums received on the initial issuing
of the share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax
benefits.
Own shares (JSOP) represents shares in the Company purchased by the Group's
Employee Benefit Trust as part of a Joint Share Ownership Plan ("JSOP").
The other reserve has arisen from using the predecessor value method to
combine the results of the Company and its subsidiary The City Pub Company
(West) Limited, which was acquired through a share for share exchange as part
of the reorganisation of two entities under common control prior to the
Company's Listing on AIM. The reserve represents the share premium that exists
within The City Pub Company (West) Limited.
Share-based payments reserve is used to recognise the grant date fair value of
options issued to employees but not exercised.
Retained earnings include all results as disclosed in the statement of
comprehensive income.
25 Other reserves
Group Other Share- Revaluation reserve Total
reserve based
payment
reserve
Balance at 29 December 2019 92 977 - 1,069
Employee share-based compensation - 397 - 397
Transactions with owners - 397 - 397
Balance at 27 December 2020 92 1,374 - 1,466
Employee share-based compensation - 703 - 703
Transactions with owners - 703 - 703
Revaluation - gross - - 18 18
Deferred tax on revaluation - - (3) (3)
Total comprehensive income for the period - - 15 15
Balance at 26 December 2021 92 2,077 15 2,184
26 Staff costs
Number of employees
The average monthly numbers of employees (including salaried Directors) during
the period was:
2021 2020
Management and Administration 83 92
Operation of Public Houses 879 892
962 984
Employment costs (including Directors)
2021 2020
£'000 £'000
Wages and salaries 16,701 15,500
Pension costs 336 323
Social security costs 951 913
Share based payments charge 703 397
18,691 17,133
27 Directors' remuneration
Single total figure of remuneration table
The following table shows a breakdown of the remuneration of individual
Directors who served in all or part of the year:
Salary/Fees Taxable Benefits Pension/Other Compensation Total
for loss of office
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Clive Watson 153 112 5 9 20 7 - - 178 128
Alex Derrick - 101 - 6 - 5 - 166 - 278
Rupert Clark 153 112 9 9 21 7 - - 183 128
Tarquin Williams 135 104 2 2 23 2 - - 160 108
Toby Smith 253 33 10 - - - - - 263 33
Holly Elliott 18 - - - - - - - 18 -
Richard Prickett 48 38 - - - - - - 48 38
John Roberts* 33 26 - - 34 26 - - 67 52
Neil Griffiths 42 32 - - - - - - 42 32
Emma Fox 30 - - - - - - - 30 -
Total 865 558 26 26 98 47 - 166 989 797
* John Roberts provides brewery consultancy services to the Group in relation
to our seven microbreweries. The fees for these consultancy services are
included within the Other column.
Emoluments in respect of the Directors are as follows:
2021 2020
£'000 £'000
Remuneration for qualifying services 989 797
The highest paid Director in the period received remuneration of £263,000;
(2020: £278,000). Four directors had equity settled share options in issue at
the period end (2020: Four). Additional information on Directors' remuneration
is given within the Corporate Governance Report.
28 Share-based payments
The Group provides share-based payments to employees, which are all equity
settled, in the form of a Company Share Ownership Plan (CSOP), started in
2016, a Joint Share Ownership Plan ("JSOP") started in 2018 and the Group's
Long Term Incentive Plan ("LTIP") started in 2020. The Company uses the
Black-Scholes valuation model to value these types of share-based payment plan
and the resulting value is amortised through the consolidated income statement
over the vesting period of the share-based payments.
In prior periods the Group also operated an equity settled share option plan
known as the Enterprise Management Incentive Share Option Plan. The Group was
required to reflect the effects of share-based payment transactions in profit
or loss and in its statement of financial position. For the purposes of
calculating the fair value of share options granted, the Black Scholes Pricing
Model was used by the Group. Fair values have been calculated on the date of
grant. A key input into the model is the share price, on the date of grant of
the options. The share price has been estimated based on the most recent
subscription for shares. In the prior period a transfer was made between the
share-based payment reserve and the retained earnings in respect of the EMI
share options that were all exercised during the prior period.
During the period ended 26 December 2021 175,000 options were granted under
the CSOP scheme (2020: 2,515,000 options granted), 2,950,000 options were
granted under the Group's Long Term Incentive Plan (2020: 2,100,000 options
granted); and no awards were made under the JSOP scheme (2020: no awards). A
share-based payment charge of £703,000 (2020: £397,000) has been reflected
in the consolidated statement of comprehensive income.
The fair value of options granted in the current period and the assumptions
used in the calculation are shown below:
Year of grant 2021 - CSOP 2021 - LTIP
Exercise price (£) 1.20 0.00
Number of awards granted 175,000 2,950,000
Performance based criteria (see Directors options for criteria) No Yes
Vesting period (years) 3 3
Expected Life (years) 7 4
Contractual life (years) 10 10
Risk free rate 0.048% (0.011)%
Expected dividend yield 1.40% 1.00%
Volatility 30% 27%
Fair value (£) 0.15 0.92
Movements in share-based payments are summarised in the table below:
2021 2021 2020 2020
Number of Weighted Number of Weighted
Awards average Awards average
exercise price exercise price
£ £
Outstanding at start of period 6,980,000 0.90 3,332,500 1.75
Granted 3,125,000 0.07 4,615,000 0.33
Exercised (22,500) 1.00 (45,000) 1.00
Expired (2,122,500) 1.73 (922,500) 1.11
Outstanding at end of period 7,960,000 0.44 6,980,000 0.90
Exercisable at 26 December 2021 1,165,000 1.68 405,000 1.00
The weighted average remaining contractual life of options outstanding at the
end of the period is 8.42 years (2020: 6.66 years).
Previous issues of CSOPs in both 2016 and 2018 had a vesting period of 3
years, an expected life of 7 years and a contractual life of 10 years. The
exercise price for the 2016 CSOPs was £1.00 and the exercise price for the
2018 CSOPs was £1.70. The JSOP has an exercise price of £2.05 and
contractual life of 10 years.
At the end of the period there were 7,960,000 outstanding options (2020:
6,980,000). The breakdown of these is as follows:
367,500 - 2016 CSOP; 112,500 - 2018 CSOP; 675,000 - JSOP; 1,900,000 - 2020
LTIP; 2,170,000 - 2020 CSOP; 175,000 - 2021 CSOP; and 2,550,000 - 2021
LTIP.
29 Ultimate controlling party and related party transactions
The Directors consider there to be no ultimate controlling party. The
following related party transactions took place during
the period:
£3,500 (2020: £1,500) was paid to Helen Watson, who is related to Clive
Watson. At the period end Helen Watson was owed £nil (2020: £nil). Helen
Watson has an existing £10,000 float with the group.
During the year ended 31 December 2021 the Group acquired an additional 10% in
the Mosaic entities for a total cash consideration of approximately £1.2m,
on an arm's length basis, giving a total investment of £2.4m at the year end.
As at 26 December 2021 the Group had an investment in an Associate, being a
24% in certain companies within the Mosaic Pub and Dining Group, through the
acquisition of existing shares in The Galaxy (City) Pub Company Limited, The
Pioneer (City) Pub Company Limited and The Sovereign (City) Pub Company
Limited (the "Mosaic Companies"). There were no transactions between the Group
and the Mosaic entities. Clive Watson is an investment consultant to Mosaic.
Richard Prickett, Non-Executive Director of the City Pub Group, is a
Non-Executive Director of The Pioneer (City) Pub Company Limited, a company
which forms part of the Mosaic Pub and Dining Group. James Watson, CEO of
Mosaic, is related to Clive Watson.
Remuneration of Key Management Personnel
The Company consider that the Directors are their key management personnel and
further detail of their remuneration is disclosed in note 27.
No key personnel other than the directors have been identified in relation to
the periods ended 26 December 2021 and 27
December 2020.
30 Post balance sheet events
Pub disposals
In March 2022 the group announced the disposal of six public houses (the
"Disposal Pubs") in two separate transactions for a total cash consideration
of approximately £17.1 million. These transactions have resulted in
impairment write-downs during the period ended 26 December 2021.
The Group has agreed terms and exchanged contracts for the disposal of five of
the six Disposal Pubs on the South Coast of England, which include three pubs
in Brighton (Walrus, Brighton Beach Club, and Lion and Lobster), The Inn on
the Beach on Hayling Island and The Travellers Friend in Woodford
Green, Essex. All are freehold pubs, with the exception of Brighton Beach
Club which is leasehold. These five pubs, which had a net book value of
approximately £17.1 million as at April 2022 and recorded unaudited
aggregate site EBITDA of £0.7 million for the year ended 26 December 2021,
are being acquired by Portobello Starboard Limited for cash consideration
of £16.2 million. This transaction is expected to complete on or around 11
April 2022, subject to successful lease assignment of the Brighton Beach Club.
Separately, the Company has sold The London Road Brewhouse, a freehold pub
in Southampton for £0.9m. This sale completed on 18 March 2022.
The proceeds from the Disposal Pubs will be used to invest and expand the
Group in other geographies across the UK.
Mosaic Investment
We also recently announced that we increased our investment into Mosaic Pub
and Dining (Tranche 1 of companies) by £1.7m in April 2022. Our total stake
in Mosaic is now 36% for a total investment of £4.1m.
31 Capital commitments
At the period end the Group and Company has no capital commitments.
32 Business combinations
During the period the Group acquired The Cliftonville Hotel in Cromer, Norfolk
through a business combination, the fair values of the assets and liabilities
acquired, and the nature of the consideration, are outlined within the table
below. The acquisition was part of the Group's continuing strategy to expand
its pub portfolio via selective quality acquisitions.
Group & Company
2019
£'000
Provisional fair value:
Property, plant and equipment acquired 1,650
Goodwill 50
Total 1,700
Satisfied by:
Cash 1,600
Shares 100
Total 1,700
All other pub acquisitions have been accounted for as property acquisitions.
33 Prior year adjustment
During the period ended 27 December 2020 the group made a provision for
impairment against a number of sites totalling £933,000, split £340,000
against goodwill and £593,000 against fixtures and fittings.
During the period ended 26 December 2021 management identified that £514,000
of the prior year impairment of fixtures and fittings should have been made
against goodwill and therefore a prior year adjustment has been made to
restate the amounts of goodwill and fixtures and fittings accordingly.
As the prior year adjustment was between two categories of non-current assets
there was no impact on the total non-current assets or other totals within the
Consolidated or Company statements of financial position and there was no
impact on the prior year consolidated statement of profit or loss.
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