City Pub Group PLC (AIM:CPC) shares grew by more than 8% on Tuesday, following encouraging full-year results that saw pre-tax profits reach £3.8mln from £1mln in 2021.
2023 has continued the upward trend for the company as like-for-like sales jumped 13% annually - albeit up against a softer comparative as Covid variant Omicron affected trade.
The pub operator’s sales did remain ahead of trade body CGA’s sales growth industry average of 9.9% vs 2022 for the first three months of 2023.
Fears about the wider industry struggling may be lessened on news that City Group’s energy costs are predicted to remain flat year-on-year despite the company being 65% exposed to soaring prices.
The group currently has 43 trading pubs but could up this to around 52 should its investment in Mosaic, another city-based pub company, reach above 50% - the company currently own 48%.
“The company continues to be primarily focused on organic growth rather than acquiring additional pubs, however, should an outstanding opportunity arise we have the flexibility to act quickly and decisively,” said Clive Watson, executive chairman at City Pub.
Despite dispelling fears for the wider industry, it can be argued that there is very little room for share price growth in the next three to four years.
Analysts at Liberum have predicted EBITDA to rise 46% in the next four years and net debt to fall to £7.9mln, currently at £22.1mln.
Yet, the investment bank thinks City Pub Group will see its enterprise value sink to £89mln by the end of 2025, faster than the fall in net debt.
The company’s market cap is currently around £81mln, but Liberum thinks it’ll stay around this value in the coming years.