- Pub group with 47 premium sites in 'cathedral cities'
- Sites are wet-led/drinks focused
- High-quality outlets are in demand and management has built and sold pub groups before
What it does
At a time when pubs are closing at a rate of knots, City Pub is expanding.
The City Pub Group PLC (LON:CPC) owns and operates 47 ‘wet’ or drink-led pubs across Southern England and Wales.
At the helm is Clive Watson – a 30-year pub veteran, who is perhaps better known in younger circles as the dad of Made in Chelsea stars Lucy and Tiff.
Those in the City of a slightly older vintage are more likely to remember him for Capital Pub Company, which he set up with fellow industry veteran David Bruce in 2001, before selling it on ten years later to Greene King PLC (LON:GNK) for £93mln.
“Our whole rationale is to widen our target market as much as possible; to be ageless, classless, to be premium without being overly expensive or too posh.
“Really to be somewhere where anyone, as long as they behave themselves, can feel comfortable.”
How it’s doing
In January, City Pub said total turnover for the 2019 year was £59.8m, an increase of approximately 31% on the prior year with like-for-like sales up by 1.7%.
Profit expectations were trimmed, though, with underlying profits forecast to be between £9.1mln and £9.2mln, which was approximately 15% ahead of 2018.
A number of ‘one-offs’ were blamed for the undershoot including election uncertainty, rail strikes and rain in November and December.
Like-for-like sales over the six-week period ending 5 January 2020 were marginally ahead of prior year.
Two site conversions also took longer than expected, which mean they missed the Christmas trading season.
Aragon House in Parsons Green, West London is described by the company as the most successful pub it has ever opened.
This year, 2020, will also see a full year’s contribution from the Hoste, Burnham Market, the Market House, Reading, and the Pride of Paddington.
Three large new sites are under development and should open this year in Exeter, Cambridge and Bath, all a sites that fit in the company’s target of cathedral cities (broadly) where, in most cases, there is a large student population, lots of tourists coming along and lots of local businesses.
What the broker says: Berenberg
“We think that 1.7% lfl sales growth in 2019 is not a bad outcome considering those factors and management has re-doubled its focus to avoid any recurrence of such issues in 2020 and beyond.
“Our 2020 estimates are only modestly reduced, and we think there are plenty of areas for improvement on 2019.
“CPC is a unique asset that warrants a premium multiple, which should also be supported by recent transactions in the sector demonstrating the appeal of freehold pub assets to trade, private equity and international buyers.”
- New sites come on stream in 2020
- Converted sites contribute fully for a year
- Berenberg expects underlying earnings to rise 24% in 2020
- Broker’s target price is 220p