City Pub Group PLC (LON:CPC) said its cash burn has been “significantly reduced” to cope with the effects of the coronavirus (COVID-19) pandemic, while also outlining actions that it said will allow it to “rapidly take advantage of pent-up consumer demand and opportunities that will undoubtedly emerge” once restrictions are lifted.
In an update for the year to December 27, 2020, the AIM-listed publican said cash burn has been reduced to £300,000 per month following a number of cost-saving measures including furloughing almost all of its staff, reducing director salaries and negotiating with its landlords.
READ: City Pub Group appoints Toby Smith to its board in the newly created role of chief operating officer
The company also said it has “ample liquidity” into 2022 with £5mln of further credit approved from its bankers, and that a reorganisation of its supplier base and a streamlined retail offer have been completed ahead of a reopening, which is expected to see a “rapid return to cash generation and profitability”.
For 2020, City Pub said it generated revenue of £25.7mln compared to £60mln in 2019 as a result of the closures and restrictions on its estate during the year.
The firm also said it had strengthened its management team in the year by appointing Toby Smith as chief operating officer, which it said will result in a “continued focus on improving operational performance”.
The company added that it has also established an environmental, social and corporate governance committee as well as committed to strengthening the independence and diversity of its board.
"2020 has been a very challenging year, but decisions made since March 2020 with regards to the fundraising, cost control, streamlining of the business, and strengthening of the Board has resulted in a very strong balance sheet, good levels of liquidity, a strengthening of our business model, a more focussed proposition and most importantly, pure determination to go out there and do the business once the pubs reopen”, chairman Clive Watson said in a statement.
“We have the right people in the key roles, whether in the pubs or head office and a fantastic estate to trade from. I look forward to a time when I can announce to shareholders that we are on the acquisition trail again, but this will only be considered once we are hitting high levels of optimisation from our existing capacity", he added.
In a note on Tuesday, analysts at house broker Liberum reiterated their ‘buy’ rating and 135p target price on City Pub shares, saying the actions taken by the firm during the pandemic “bodes well for recovery and return to the acquisition trail”.
“We continue to believe that City Pubs holds strong recovery and market share gain potential. Confirmation of its liquidity headroom and minimised cash burn adds to our confidence”, Liberum's analysts said, noting that the company “maintains a premium estate with the lowest leverage across its peer group, which will help to restore and subsequently enhance shareholder value as the business recovers rapidly post Covid”.