City Pub Group confident that 2022 trading will exceed 2019 by the end of Q2, to acquire Mosaic next year: City Pub Group, which owns and operates 41 premium pubs across southern England and Wales and a further three development sites, has said it is confident that 2022 trading across its portfolio will exceed 2019 by the end of the second quarter. The company, which said its ambition is to have 65-70 quality pubs open by the end of next year, reported revenue for the year to 26 December 2021 was up 37% to £35.4m (2020: £25.8m), with adjusted of Ebitda of £3.8m (2020: £(0.8m)). The company, which has three sites at the heads of agreement stage, said its adjusted profit/(loss) before tax stood at £1m (2020: (£5.1m)). The company said: “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 eight 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. In March this year we announced the disposal of six 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 ten high quality pubs of which eight 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.” 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.” The company said that its 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. The group said it benefits from a three-year supply agreement with its major beer suppliers agreed in December 2021. It said: “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.” Watson said: “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 as 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 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 the group’s fortunes.”