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City Pub Group tempers expansion

The pub group is slowing its pace of expansion until there is more certainty around Brexit
September 19, 2019

City Pub Group’s (CPC) decision to scale back its expansion plans could be viewed as both cautious and opportunistic. Chief executive Clive Watson said the company cannot ignore "the potential impact of a No Deal [Brexit]”, and so it will take a “much more prudent and even more selective approach” to acquiring new sites. Mr Watson also notes that a hard Brexit could present an opportunity to pick up pubs on the cheap. For now, City Pubs will focus on completing development work on existing sites, paying down debt and using cash generated to increase the dividend, “until a time where there is more certainty”.

IC TIP: Buy at 198p

Four pubs have been opened in 2019, and another four are in development. This brings the total estate to 47 sites, and management said the target of 65 locations is “well within our reach”. This expansion helped boost sales, while adjusted cash profits were up by a fifth to £3.6m. However, net operating cash flow was held in check due to changes in trade and other payables, while another £18.4m in new borrowings was added through the period. 

Analysts at Berenberg expect EPS of 8.61p for the full year, increasing to 9.66p in 2020.

CITY PUB GROUP (CPC)   
ORD PRICE:198pMARKET VALUE:£ 118m
TOUCH:195-200p12-MONTH HIGH:253pLOW: 173p
DIVIDEND YIELD:1.4%PE RATIO:72
NET ASSET VALUE:130pNET DEBT:39%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201820.00.931.34nil
201927.10.950.86nil
% change+36+2-36-
Ex-div:na   
Payment:na