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Introduction

The City Pub Group owns and operates an estate of premium pubs across the southern half of England and Wales. The Group’s pub estate comprises 41 free houses located largely in London, Cathedral cities and market towns, each of which is focused on appealing specifically to its local market, and a further 3 sites will open in Spring/Summer 2022. The Group’s portfolio consists of predominantly freehold, managed pubs, offering a wide range of high-quality drinks and food tailored to each of its pubs’ customers.

The City Pub Company (East) PLC and The City Pub Company (West) PLC were originally founded by Clive Watson, David Bruce and John Roberts, in late 2011. The first pub began trading in March 2012, with the estate growing rapidly to 34 sites by November 2017 when The City Pub Group was formed through the all share merger of the two original companies. The City Pub Group successfully completed an IPO in November 2017, when the shares were admitted to trading on AIM.

The City Pub Group leverages its sector contacts and experience to ensure it is well placed to acquire, high quality, well-located freehold or leasehold pubs. Following acquisition, it aims to improve profitability through targeted investment in each pub, incentivisation of its key employees, introducing its flexible retail strategy, dedicated marketing and utilising its centralised buying power.

The Directors have considerable experience of acquiring pubs, expanding pub portfolios and creating premium pub companies. This includes leading the Capital Pub Company from start-up through to flotation on AIM and its subsequent acquisition by Greene King for £93 million.

The Group continued to acquire on average six pubs per year. In order to fund the acquisitions, the Companies raised in aggregate £38 million under the Enterprise Investment Scheme and through the issue of convertible preference shares. The Group raised a further £35 million in gross primary proceeds as part of the IPO in November 2017. In October 2018 the Group raised an additional £6.2 million of funds through a share placing, and following a further placing and open offer, raised approximately £22 million in April 2020.

Company History and Development

The companies in the Group were co-founded by Clive Watson, David Bruce and John Roberts in October 2011 with the aim of building a high quality portfolio of premium pub assets located predominantly in London, Cathedral cities and market towns across southern England and Wales. The Companies began trading in March 2012 and, by the end of 2012, had acquired six pubs, including its first sites in Bath, Cambridge, Oxford,

The Group has historically traded as two separate companies, The City Pub Company (East) plc and The City Pub Company (West) plc. In April 2013, CPCW and CPCE appointed Alex Derrick and Rupert Clark, respectively, as its designated Chief Executives. Under their stewardship, both of the Companies expanded their pub portfolios further and by the end of their first full trading year (to 29 December 2013) CPCW had 6 trading outlets and CPCE had 7 trading outlets. The Companies continued to acquire, in aggregate, on average 6 pubs per year, ending 2017 with a total of 34 pubs, including a number of sites in London, Bristol, Brighton, Norwich and Winchester.

On 1 November 2017, the Group was formed through the all share merger of CPCE and CPCW by way of a scheme of arrangement of CPCW and the same time changed its name to The City Pubs Group plc. The City Pubs Group plc was admitted to AIM on 23 November 2017 with Alex Derrick and Rupert Clark as joint Managing Directors of the combined Group reporting to Executive Chairman, Clive Watson. At this point, the Group aimed to double the size of its estate over the following three to four years.

In November 2020, Alex Derrick stepped down from the Board and left the Company by mutual agreement, and Toby Smith joined the company and the Board as Chief Operating Officer. In November 2021, Holly Elliott joined the company and the Board as Chief Financial Officer, replacing Tarquin Williams, who left the business at the end of February 2022.

Key Strengths

The key strengths of the City Pub Group are:

Premium operator creating individual identity for each pub

The Group’s pub estate and flexible retail strategy addresses the trend away from branded pubs and toward premium individualised pubs, each of which have a product range appropriate for their local market.

Scalable platform with strong pipeline of potential acquisitions

The centralised infrastructure platform, comprising systems and processes as well as head office staff, enables a smooth change of ownership for the pubs which are currently in the acquisition pipeline, as well as those identified through the Group’s appraisal of both individual sites and portfolios of pubs across southern England and Wales.

The Group is asset backed

Prior to the IPO in November 2017, an independent valuation report by CBRE valued the Group’s portfolio of 34 pubs at £73.65 million. At the time the valuation represented a 9% uplift on net book value. The company has purchased four new properties of which two are freehold. A 2022 independent evaluation valued 17 properties at £98m. The Directors believe a conservative value of the full estate is £150m.

Impressive financial performance and growth

The Group has enjoyed consistently strong sales and EBITDA growth, with steadily increasing operating margins over the last few years. Supplier agreements are expected to further improve operating margins going forward.

Experienced management team, motivated staff and strong culture

The management team of the Group has over 100 years’ experience in the pub industry with an excellent reputation, extensive contact base and proven skill in identifying attractive sites for an attractive price. Staff are incentivised to focus on customer service and are represented at board meetings, giving a high retention rate among key staff and a strong sense of culture.

Management strength and track record provides confidence in the deliverability of a premium hyper-local strategy of refurbishing and repositioning wet-led pubs across UK Cathedral cities and market towns.

The Business Model

What We Do

Established in 2011, The City Pub Group is a managed pub business operating in London and across the South of England and Wales. It has a collection of 44 unbranded free-house pubs, clustered around affluent Cathedral cities and market towns, 3 of these are larger sites and opening in Spring/Summer 2022. Its premium, wet-led offer and flexible approach give it broad customer appeal across residents, workers, students, shoppers and tourists.

Product Offering

The Directors believe that in the premium managed pub sector, liquor sales such as craft ales, craft spirits and independent coffee brands offer higher growth potential, higher margins and higher predictability over sales than traditional beers, lagers and spirits. Food menus are also developed individually for each pub and offer high quality, freshly prepared food, providing good value for money and offering a wide range of choice. Increasingly, more healthy and vegan options are being offered in each pub to broaden the appeal to a wider range of customers. In addition, bedrooms and function rooms are an increasingly important part of the revenue stream for many of the sites.

The Group has five key target markets;

 

Our Approach

City Pub Group stands out from the crowd with its unique and premium offer. This is embedded in its culture and influences everything from site selection, food and menu design to the quality of its employees.

Importantly its portfolio is built up of unbranded, wet-led pubs in high footfall areas that appeal to a broad range of customers. Each pub is centred on a high calibre level of staff that offers a relaxed, enthusiastic charming environment. The Group has a solid track record of identifying, acquiring, refurbishing and repositioning pubs to drive higher returns.

Its approach is highly differentiated and combines the flexibility of the managed pub model with the entrepreneurialism of the tenanted model. This differentiated approach has been honed over management’s 100 or more collective years of pub retail experience.

 

 

Our Strategy

The Group expects to have at least 44 trading pubs by year end and it intends to continue to acquire new sites. The Group already has extensive relationships with property agents specialising in the licenced trade industry and many of these relationships have been in existence for a number of years.

Acquisition Strategy

The Group’s acquisition strategy is broken down into five key areas and the Directors believe that these areas will provide sufficient acquisition opportunities to support the targeted growth of the Group’s pub estate.

1. Acquisition of existing pubs
Central to the Group’s acquisition strategy is buying existing pubs that are already trading well and are typically sold by private sellers. The main change is to transfer the pub’s supply contracts onto the Group’s centralised platform, quickly improving operating margins. The Group prides itself on the way it works with the existing employees in these pubs and, over a period of time, aims to integrate these employees into the Group’s entrepreneurial culture.

2. Acquisition of trading pubs requiring redirection
The Group also seeks to acquire existing pubs that require modest refurbishment and improved retailing standards. Typically, the Group will target an investment of circa £250,000 to tailor the décor to the pub’s local market and improve the liquor and food offerings, as well as help the existing staff to adopt an entrepreneurial approach in managing the pub.

3. Closed down pubs requiring extensive refurbishment
The Group also looks to acquire sites that are either underperforming or have been closed down and which provide the opportunity for the Group to substantially refurbish and improve the product offer to better serve the tastes of the Group’s target consumers.

4. Unlicensed premises
The Group is able to target sites which are currently unlicensed but which present the opportunity to be transformed into premium trading pubs.

The Group typically targets pubs and sites that produce, or are expected to produce, higher EBITDA per pub than the industry average. The Directors believe that by focusing on sites expected to produce a higher EBITDA, head office costs as a percentage of sales are reduced and this performance also enables the attraction and retention of top performing pub managers.
The Group evaluates new sites by testing them against five key target markets: residents, office workers, students, tourists and shoppers. For a new site to be considered, it must address at least four of the five key target markets.

5. Investment into other EIS companies

The Group will look for opportunities to invest into EIS companies as it has done with Mosaic Pub and Dining Tranche 1 and with Barts Pub LTD.

Refurbishment Strategy

The Group’s strategy is to enhance existing sites rather than redesign to a set formula. The Directors believe that an operation comprising individual quality outlets that are unbranded will trade better over the longer term. When refurbishing a pub, the Group adopts a timeless design style, which is one of high quality but is not fashionable or contemporary. A typical refurbishment is undertaken in a style which the Directors believe is long lasting. With regular maintenance the estate is kept to a high standard, this helps to ensure that future refurbishment costs are reduced and closures of pubs for major refurbishments are minimised.

Acquisition Pipeline

The Group is continually appraising both individual sites and portfolios of pubs across southern England and Wales, and has developed a strong pipeline of potential acquisitions out of the large number of opportunities presented. All acquisitions are subject to approval by the Board and a key consideration, when seeking board approval, is to recommend pubs and sites in areas which are not highly competitive.

The Group has a low annual rent charge compared to its turnover which was circa 3.4% as at 26th December 2021 (2020 3.4%) based on normalised trading levels. The Group intends to keep it around this level or lower.

The Group also reviews the existing portfolio to see if any of the sites should be considered for disposal and has sold six sites in 2022. These include Inn on the Beach, The Walrus, The Lion and Lobster, Brighton Beach Club, Travellers Friend and the London Road Brew House, for £17.1m.

Our strategy is to enhance existing sites rather than redesign to a set formula. Our Directors believe that an operation comprising individual quality outlets which are unbranded will trade better over the longer term.

Our Relationships

 

Our People

Recruitment and retention of high quality staff is key to the Group’s strategy, both at head office and across the estate. The Group’s staff are well trained and appropriately incentivised, given their respective roles, with the focus on attracting the most suitable employees to support the growth of the Group and maintain high levels of consumer satisfaction. Over the covid period the company topped up employees wages when they were sick.

People and culture
The Group’s localised strategy requires a certain standard and quality in its staff. The inherent ability to be engaging, intelligent and motivated are key attributes. The strategy to focus primarily within Cathedral cities means finding the right type of staff should be easier especially as universities are central to all these cities. Finding the right people is followed by training programmes and a highly rewarding incentives package that we feel is unique in the industry. Putting its staff at the heart of the business is also reflected, with two employee representatives included at every board meeting.

Operation structure and staffing
Growth, accompanied with the clustering strategy, means many General Managers are ‘homegrown’. This has allowed for progression to area manager in some cases. Each pub has a General Manager and Head Chef on-site. The pre-Covid average full time equivalent staff per pub ranges from 15-25 depending on size and offer (higher for those with accommodation and greater food offer). The operational structure is highly devolved fostering a more entrepreneurial spirit that is rarely seen in larger groups.

Staff Training
The overarching aim is to offer customers exceptional experiences, while striving to offer employees sufficient development possibilities to build a career within the Group.

Selective trainings offered to employees include:

Management:

    1. Conflict Resolution

    2. Deputy Manager Development Days

    3. Employment Law Training

    4. Fully Funded Online Short Courses

    5. Hospitality Supervisor & Manager Apprenticeships

    6. Management Development Programme

    7. Mental Wellbeing Training

    8. Rising Stars Programme for Supervisors & Assistant Managers

    9. Short Management Masterclasses

    10. P&L Training for Managers

    11. Senior Culinary Chef Apprenticeships

Administrative:

    1. Anti-Modern Slavery Training

    2. Disability Awareness

    3. Diversity, Inclusion & Equity

    4. Emergency First Aid At Work Training

    5. Fire Marshal Training

    6. Food Safety Levels 1, 2, & 3

    7. Food Safety & Health & Safety Coaching Visits

    8. Health & Safety Level 2

    9. Operational Systems Training

    10. Personal License Holder Training

    11. Regional Inductions

    12. Social Media & Marketing

Food & Beverage:

    1. Brewery Visits

    2. Cellar Management & Pint Perfection

    3. Level 2 & 3 Front of House & Chef Apprenticeships

    4. Licensing & Social Responsibility

    5. New Menu Cook-Offs

    6. Supplier Training, Tastings, & Visits

    7. WSET Levels 1 & 2

Incentives
The City Pub Group has developed a comprehensive incentives policy with all employees participating at some level. Importantly bonuses are based on both quantitative and qualitative targets are paid out weekly, monthly, as well as annually.

Our Customers

While value for money is a major component, there is a key focus on a premium offer across the entire estate. Aligned with keeping the values of the pub intact, there is an aim for the pub to become a central part of the local community by incorporating local suppliers, local staff and providing several reasons for people to visit often.

The Group has five target markets:
• Residents
• Tourists
• Office workers
• Students
• Shoppers

Adapting and driving consumer preference
Shifts in consumer preferences combined with the changing profile of the high street, have blurred the lines between pubs, restaurants, cafes and coffee shops. Customers are now able to have a breakfast in a pub or dinner in a coffee shop. Menus are developed individually for each pub and offer good value across a wide range of choice. Increasingly, healthier and vegan options are being offered in each pub to broaden the appeal to a wider range of customers.

Our Suppliers

The Group adopts a long-term approach with its suppliers and has maintained relationships with its major suppliers since inception. This includes contractors, professional advisers, designers and property agents, as well as food and drink suppliers.

Over 70% of our drink products have now been signed up on a three year fixed price deal, assisting margin improvement mitigating against inflation risk in this area.

The Group has also recently centralised its food purchasing function and significantly reduced the number of its suppliers. This has resulted in an improvement in its purchasing terms and will enable greater economies of scale to be achieved as the pub estate grows.

ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG)

Throughout 2021, we have made progress in developing our strategy to ensure that we operate as a more responsible business, primed to play a positive role in society. We have launched a significant and thorough review of our current operations and introduced robust data collection processes to fully understand our impact on the environment and the communities in which we operate. We are taking our responsibilities seriously and want to get ESG right. This year we have reported against the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) for the first time and prepared standalone ESG and TCFD Reports to communicate our ESG journey to our stakeholders.

Our ESG Strategy

Our aim is to empower our customers, benefit our people, enrich our local communities and protect our planet. Our approach is localised, independent and responsible – adding value by being different and unique. Creating safe and supportive spaces for people and for the planet is central to achieving our goals.

We have enlisted the help of a third party specialist to support us in developing our ESG strategy, measuring our impact and enhancing our reporting. We are in the process of establishing clear and measurable targets as part of our ESG Strategy reducing our carbon emissions, waste, and water, improving health and safety, learning and development, diversity and supporting our local communities. We aim to develop these targets in 2022.
In developing the City Pub Group ESG Strategy, we have considered a range of different ESG disclosures and reporting frameworks to ensure best practice across the Group.

As a plc, we comply with the Energy Savings Opportunity Scheme (ESOS), a mandatory energy assessment scheme which the Group must perform every four years. This along with our Streamlined Energy and Carbon Reporting (SECR) Report (page 17) enables the Group to assess and report our energy usage, associated emissions, energy efficiency action, and energy performance.
In 2021, we reported on our progress against the TCFD for the first time. The TCFD requires UK premium-listed companies to report on a ‘comply or explain’ basis, effective for periods beginning on or after 1st January 2021, and was introduced by the Financial Conduct Authority (FCA). This year, we also published our first ESG Report outlining the Group’s ESG programme and our progress to date. Our ESG Report has been prepared in accordance with the Global Reporting Initiative, an in depth ESG reporting framework that enables organisations to report on their environmental, social, economic and governance performance. To enhance our ESG strategy, we aim to submit a Carbon Disclosure Project (CDP) ‘Climate’ response in summer 2022 to report further on our environmental impact management.

We operate a robust governance framework throughout the Group, outlining the relationships between our stakeholders, the Board and senior management in shaping our strategy. We have embedded ESG into our existing governance processes and responsibility for managing ESG performance is held by various individuals across multiple governance forums at Board, executive and management level.

The City Pub Group Board has overall responsibility for the Group’s ESG programme. Given the importance of ESG to our stakeholders, the Board established a specific ESG Committee to ensure ESG issues are dedicated appropriate attention. The ESG Committee is chaired by Emma Fox, Independent Non-Executive Director of City Pub Group and Chief Executive of Berry Bros & Rudd, and includes Neil Griffiths, Independent Non-Executive Director of City Pub Group, former COO of Punch Taverns Plc, and Clive Watson, Co-Founder and Executive Chairman of City Pub Group.
The Committee is responsible for developing the Group’s ESG strategy, overseeing initiatives and ensuring compliance with current and emerging ESG regulation. The Committee meets quarterly, reporting on performance of ESG initiatives across the Group. An update is provided to the Board once a year.
Following feedback from our stakeholders on the importance of ESG, we completed a thorough review of our current operations in 2020, assessing our impact across energy use and carbon emissions, waste, our people, customers and local communities. In 2021, we built upon this by launching a robust data collection process across the group, expanding our material issues to specially include water, biodiversity, health and safety, learning and development, and diversity. In order to reduce our impact in these areas, we have set appropriate targets and introduced processes to monitor our progress in achieving these targets.

Environmental

Protecting the planet
The Group aims to act sustainably, minimising waste, reducing our environmental impact, and ensuring that our operations are continuously monitored for improvements. For this, we have implemented an environmental policy, committing to operating in the most responsible and sustainable way.

Energy Use
City Pub Group are committed to reducing our energy use and improving the efficiency of our operations.
In 2021, we launched an energy savings project, introducing a range of initiatives to help us achieve our goals.
We have installed Technik2 Cellar Manager, Cellar Manager Plus and Fridge Manager technology across the Group to boost efficiency and reduce energy consumption in our Pubs. Remote optimisers have also been installed to manage our usage. The completion of this project will result in an estimated payback of £226,000 and 480,575 kwh energy reduction over 5 months.
Many of our sites are fitted with LED lighting, timers and motion sensors for lighting, and fridge and freezer seals. Outdated windows are being upgraded to secondary glazing across the Group.
We have worked to reduce our reliance on gas for cooking at our Pubs by replacing old units with Induction hobs, which are up to 50% more energy efficient than gas or other electric ceramic models.
Behavioural changes are an important factor for City Pub Group to meet our reduction targets. By encouraging employees to ‘turn stuff off’, we are aiming to reduce our energy usage by 10%.
We have enhanced our communication of our energy saving project across the Group, producing posters educating employees on best practice at all sites. Energy Consumption readings are now monitored on a real time basis and energy consumption is reviewed against our targeted consumption reduction of 20% on weekly calls with Operators. Cash incentives for management teams for reductions have been rolled out throughout City Pub Group.

Sustainable Development
We refurbish our sites with the environment in mind. Where possible, we minimise building materials by repurposing as much original or recycled material as possible. Waterless urinals have been installed, ensuring the building is as energy efficient as possible. Multiple electric vehicle charging points have been installed to three of our pubs with rooms. We now provide blankets and hot water bottles to our customers in our outdoor areas instead of installing additional heaters. Moving forward we will promote sustainable travel by also installing staff and public cycle racks where possible across the Group.

Water
Reducing our water usage is crucial to City Pub Group. We have started installing water saving and recording measures in 2021 to begin this journey. In 2021, we installed 21 limpets, accounting for around 50% of our estate so far. We plan to roll this out to our full estate in 2022.
We have introduced waterless urinals to our sites to significantly reduce water consumption and waste. We have also rolled out a Water Filtration system to 8 of our pubs. This enables us to bottle our own filtered water instead of stocking mineral water and reduces our waste as bottles are reused on site. We donate 25-50% of the selling price of this water to ‘Water Aid’, an international non-governmental organisation, focused on water, sanitation and hygiene. Regular Audits are conducted at all sites, where all water taps and seals are checked for leaks to ensure there is no waste. We have hung posters in all our kitchens to educate staff on water usage and the importance of ensuring taps are turned off and the process for reporting leaks.

Reducing Waste
The Group is committed to reducing our waste production by minimum of 5% each year. A range of initiatives have been introduced across the Group in order to reduce the amount of waste we produce. We have improved our recycling methods by separating cardboard and glass and introduced bailers across several sites to streamline our waste directly to be recycled. Packaging waste has been reviewed throughout our operations. We return delivery crates to our dry goods supplier Elite and have replaced single use 50ml shampoo and conditioners to refillable bottles in our hotels rooms. We have worked to reuse equipment where possible reduce waste, for example, in some of our Pubs we serve our pizzas on the trays on which they are cooked. Our Executive Group Chef considers portion size when selecting new menu items to reduce food waste, as well as increasing the number of vegan and vegetarian options which also aids in a wider carbon reduction for the environment. Our City Pub App, enabling customers to access menus online. We are also exploring draught wine to reduce waste from bottles.

Biodiversity
We have assessed our sites and determined our operations have a low impact on biodiversity. Within many of our sites, we have beer gardens, housed with vegetation that offer a natural and green environment for many species to inhabit. When redeveloping buildings, we consider the local wildlife before commencing with construction. For our Tivoli project we are introducing a ‘Living Roof’ on the river frontage which will support local biodiversity. For our more rural sites we continue to provide safe havens for wildlife by maintaining our outdoor spaces and implementing herb gardens.

Social

We aim to keep the values of each pub across our estate intact, enabling each pub to become a central part of the local community by incorporating local suppliers, local staff and providing several reasons for our loyal customers to visit often.

Benefiting our People
At City Pub Group, we put our staff at the heart of our business, ensuring they are always heard and looked after throughout the company. Two employee representatives are included at each Board meeting to ensure employee concerns and improvements in staff welfare can be discussed. We promote inclusive and fair renumeration and reward schemes across our pubs. Selected staff are awarded share options in the business after six months service by which time the company recognises the efforts of individuals to contribute to the overall success of the business. City Pub Group operate an Employee Assistance Programme (EAP) run the Hospitality Action. The EAP is available 24 hours a day and provides a range of specialist, independent and confidential support services and resources on topics including Covid, anxiety, addiction, home and family life, domestic abuse, bereavement, financial uncertainty, employee rights, and general wellbeing. We launched a company ‘Furlough’ scheme to allow those who started after the government cut off of March 21 to earn 80% of their wage if they were forced to isolate. We also re-introduced Furlough for all employees after the government scheme finished at the end of the year, when cases of Omicron were rising and many could not work.
In April 2022, we have introduced ‘Wagestream’ enabling employees to access their pay within 24 hours of completing a shift, as opposed to having to wait for their traditional pay packets.

Engagement
We held a range of initiatives throughout the year to enhance the engagement of our employees. A competition was live for employees to rename our new pub in The Mumbles. The winner received a two night stay with breakfast, champagne and travel included. A ‘Bounty Hunter’ refer a friend scheme was also re-launched in 2021. Employees received up to £1000 worth of rewards for each successful referral. Employees across the Group also participated in a City Pub Group Strava challenge, promoting employee health and wellbeing, and Christmas Decoration competitions. During the year, City Pub Group improved weekly communication via video blogs from the central teams, highlighting energy saving initiatives, staff opportunities, employee benefits and more.

Diversity and Inclusion
We seek to build a more diverse and inclusive workplace at Board, Executive, site management and employee level. We provide flexible working arrangements to support our staff to help facilitate family commitments or advance educational studies. In 2021, we have appointed a female CFO and NED, as well as two female Heads of Department. We aim to develop our strategy to improve our gender, racial, LGBTQ+, age and disability diversity and inclusivity of our company in 2022.

Learning and development
We encourage an atmosphere of constant learning and upskilling by offering our employees access to training and development programmes. Our operational structure is highly devolved, fostering a more entrepreneurial spirit that is rarely seen in larger groups. This enables employees to be innovative and develop throughout their careers with City Pub Group. Our model of nearby pubs creating local clusters gives staff learning opportunities through sharing knowledge and expertise. These local clusters help to foster our culture of collaboration and support across the Group and internal promotion within clusters is encouraged so that employees have genuine career prospects. We provide wide range of apprenticeship qualifications with our partners at HIT Training and encourage career progression through career pathways. Currently, 85% of our Ops Managers/Directors have been promoted from within. At City Pub Group, 12 employees are currently enrolled on Apprenticeship scheme and 40 employees (ranging from Supervisor to GM) are set to enter into our Management Development Programme in 2022.

Our Customers
Following the pandemic, our pubs are once again bringing people together in safe and supportive spaces so they can connect. We pride ourselves in creating inclusive environments whereby people from all walks of life enjoy their leisure time at our pubs and feel safe and supported. As part of this, we ensure all of our spaces have rooms that are adapted for people with disabilities. We put considerable efforts behind making sure our customers are well cared for and safe in our venues. Our staff are trained in safeguarding practices to ensure our customers’ comfort and well-being. Many enhanced health and safety measures which were introduced during the COVID-19 pandemic have remained to prioritise the safety of our customers. We encourage responsible drinking practices across all our pubs, including training on serving alcohol responsibly and offering better availability of low and non-alcoholic drinks products. We stay updated on changing customer preferences and behaviours in this industry. Menus are diversified across our pubs and offer good value across a wide range of choice. Following the importance of ESG, and ensuring we reduce our impact on the environment, we have introduced healthier, vegetarian and vegan options in each pub to broaden the appeal to a wider range of customers and support them in making more sustainable life choices.

Enriching the local community
We aim to act responsibly and improve the local communities in which we operate across the Group. City Pub Group is built on a firm belief in the importance of independence, and our focus has always been on creating the perfect experience for each local community we serve. The COVD-19 pandemic has impacted our engagement with local communities in recent years, however we aim to enhance our community initiatives in 2022. Across the Group, we partner with numerous local organisations. Our City Club App is used to communicate local events, charities and companies to our customers in the surrounding communities. Additionally, City Pub Group are committed to enhancing our position in the local community. In 2022, we aim for City Pub Group to develop as a local community hub by holding our own events across our estate. Loneliness has been a prevalent issue in many of our local communities over the past few years, therefore we aim to hold social events where people are encouraged to attend, mingle and meet new people from their community. Our employees are also passionate about improving the local communities in which they work. We work with our staff to identify specific partnerships opportunities that benefit the community and make donations to charities our employees are passionate about. Our Pubs are also encouraged to work with local charities with sites such as Cock & Bottle raising money for Grenfell and Petersfield raising money for the local hospice. We have previously partnered with Foodcycle who used our kitchens to provide cooked meals to those who need it most. We have also partnered with Something to Look Forward To, which offers restaurant meals to those going through cancer treatment and their families to bring a ray of normality to their lives. We aim to continue these programmes during 2022. For the full report please refer to our website.

Pub Estate

The Group currently has a portfolio of 44 free-of-tie pubs in Cathedral cities and market towns across the southern half of England and Wales, including seventeen in London, eight in Cambridge, four in Norfolk, three in South Wales, three in Bath, and two in each of Oxford, Norwich, Bath, Cardiff, Exeter and Winchester, in addition to sites in Bristol, Exeter, Reading, and Bury St Edmunds in Suffolk . We have a strong pipeline for future development with a number of others currently being appraised. Of the total of 44 sites nearly 61% are freehold.

Recent News

Securities Information

The Company’s issued share capital consists of 103,868,430 ordinary shares of 1p each (“Ordinary Shares”) as at 11th January 2022.

The Company does not hold any Ordinary Shares in treasury.

In so far as the Company is aware as at 11th January 2022, the identity and percentage holdings of its significant shareholders are as follows:

Shareholder% Ordinary Shares
Otus Capital Management Limited11.1%
BlackRock Investment Management (UK) Limited9.5%
Canaccord Genuity Wealth Management7.2%
Gresham House Asset Management6.8%
Unicorn Asset Management Limited5.0%
Hargreaves Lansdown, stockbrokers (EO)5.0%
Directors4.7%
Royal London Asset Management3.8%
Clive Royston Watson3.3%
BGF3.0%

In so far as the Company is aware, the percentage of the Company’s issued share capital that is not in public hands is approximately 15.2%

Advisers

Nominated Adviser & Joint Corporate Broker Liberum Capital Limited, 25 Ropemaker Street, London EC2Y 9LY

Joint Broker Peel Hunt LLP, 100 Liverpool Street, London EC2M 2AT

Auditors Haysmacintyre LLP, 10 Queen Street Place, London, EC4R 1AG

Solicitors to the Company Addleshaw Goddard LLP, Exchange Tower, 19 Canning Street, Edinburgh EH3 8EH

Financial Public Relations Adviser to the Company Instinctif Partners, 65 Gresham Street, London EC2V 7NQ

Registrars Equiniti Limited, Aspect House, Spencer Road, Lancing BN99 6DA

The Board

The Board comprises of four highly experienced Executive Directors with over 100 years’ combined experience of developing and operating pub companies. In addition, the three Non-Executive Directors also add many decades of pub and drinks industry expertise.

Executive Directors

Clive Watson ACA (61) – Executive Chairman. Clive qualified as a Chartered Accountant with Price Waterhouse in London in 1986 before joining the investment bank Manufacturers Hanover Limited where he spent three years. He joined Regent Inns PLC as Finance Director and Company Secretary in 1990. Clive left Regent Inns PLC in February 1998 and co-founded Tup Inns Limited, where he was responsible for financial and commercial matters as well as acquisitions, before becoming Chief Executive and Finance Director of Tom Hoskins PLC, an AIM listed company. Clive was founding director of the Capital Pub Company in 2000 where he served as Finance Director until 2007 and then Managing Director before becoming Chief Executive in June 2008. He over-saw the sale of the Capital Pub Company to Greene King in July 2011. Clive was appointed as Chief Executive of The City Pub Company (East) plc in December 2011 before becoming Chairman in September 2014 and served throughout the period.

Toby Smith (51) – Chief Operating Officer Toby is a highly experienced senior operator with over 25 years’ experience in the UK hospitality industry. He has held CEO roles with Stonegate Pub Company, Novus Leisure and Town & City Pub Company, and prior to these held senior roles at Laurel Pub Company, Spirit Group and Scottish & Newcastle Retail. He joined the City Pub Company as Chief Operating Officer in November 2020.

Rupert Clark (50) – Managing Director. Rupert has over 20 years’ experience in the running of high-volume food and liquor-led pubs, both in and outside London. Rupert was previously Operations Manager of the Capital Pub Company and was with Capital for four years. After the sale of Capital to Greene King in 2011, Rupert stayed on to ensure the smooth integration of pubs into the Greene King estate. Prior to Capital, Rupert worked as Operations Manager at The Food and Drink Group, repositioning their city bars, and at Fullers first developing The Fine Line brand and then their unbranded bars and gastro pubs. Rupert was appointed as Joint-Chief Executive of The City Pub Company (East) PLC in April 2013 becoming sole Chief Executive in September 2014 and served throughout the period.

Holly Elliot (49) – Chief Financial Officer. Holly joined the Board as Chief Financial Officer on 29th November 2021 from Honest Burgers where she was interim CFO. Before that, Holly was CFO of Five Guys, the fast-food chain operating in the UK, France Spain and Germany, for four years, and previously spent 12 years at Caffe Nero in a number of roles including Finance Director.

Non-Executive Directors

Richard Prickett (70) – Senior Independent Non-Executive Director. Richard has considerable public markets experience, gained through numerous non-executive director roles including acting as Independent Non-Executive Director for Regent Inns Plc and the Capital Pub Company. Richard currently serves as a Non-Executive Director to Pioneer (City) Pub Company, a start-up EIS managed pub company, and is also Finance Director to Landore Resources Limited. Richard qualified as a chartered accountant in 1973 with Coopers & Lybrand and has many years’ experience in corporate finance. Richard is Chairman of both the Remuneration Committee and the Audit & Risk Committee, and sits on the Nominations Committee. Richard was appointed as a Non-Executive Director on 25th October 2017 and served throughout the period.

Neil Griffiths (60) – Independent Non-Executive Director. Neil was appointed as a Non-Executive Director of the Company on 17th January 2018 and served throughout the period. Neil qualified as a Chartered Surveyor in 1987 and has over 30 years of experience in retail, leisure and property sectors. Neil worked at Punch Taverns plc from 2001 to 2017 holding a number of senior management roles including Chief Operating Officer, Chief Strategy Office, and Group Property Director. Neil joined Punch from Time Warner where he was International Property Director for their cinema division. Prior to that he held a number of Senior Management and Divisional Board roles at Bass Plc including Head of Property and Commercial Develop Director. Neil is a Trustee Director for the Prince of Wales initiative ‘Pub is the Hub. He is a former Council member of the British Beer & Pub Association having have sat on panels and committees for both the BBPA and Royal Institution of Chartered surveyors. Neil is Chairman of the Nominations Committee and sits on both the Audit, ESG & Risk and Remuneration Committees.

Emma Fox (54) – Independent Non-Executive Director. Emma is an exceptionally experienced director with over 30 years of experience in the retail, leisure, and drinks sectors. Emma is currently CEO of Berry Bros & Rudd, the oldest wine and spirit merchant in the UK. She was appointed as CEO in 2020, having served an Independent Non-Executive Director since 2017, to help guide the business through its next phase of growth. Emma joined Berry Bros & Rudd from The Original Factory Shop where she also held the role of CEO. Previously, Emma held several senior management and divisional board roles at large retailers including Commercial Director at Halfords, Chief Marketing Officer at Walmart Canada and Commercial and Logistics Director roles at ASDA. Emma also has extensive hospitality and leisure experience having worked with Hollywood Bowl as Marketing Director, Bass Brewers and as a Non-Executive Director at Punch Taverns Plc. Emma was appointed as a Non-Executive Director of the Company on 11 March 2021. Emma is chair of the ESG Committee and sits on the Audit Committee and Remuneration Committee.

Company Secretary

James Dudgeon (74) – Company Secretary. James has been Company Secretary since 2011. He was previously Company Secretary of the Capital Pub Company. He has an accounting background.

Directors’ duties – S172 Companies Act 2006
Directors’ duties to promote the long-term success of the company.

The directors behave and carry out their activities to promote long-term success for the benefit of the company’s shareholders, employees, clients and stakeholders. They focus on the company passing on a stronger, better and more sustainable business to those who follow while maintaining intergenerational fairness.

They engage with shareholders, employees, clients and stakeholders to reflect their insights and views when making decisions on strategy; delivering operational effectiveness; making plans; driving initiatives; and committing to deliver outcomes that enhance social value.

The culture and values promoted by the directors creates a focus across the Group on observing and maintaining the highest standards of business conduct in promoting the long-term success of the company. Directors’ duties – S172 Companies Act 2006

The narratives in the corporate governance report and directors’ report highlight how the directors have observed these principles and engaged with shareholders, employees, clients and stakeholders in decision-making and in promoting the long-term success of the company.

As we emerge from the pandemic Environmental, Social and Governance (ESG) agenda has become increasingly important for all businesses. In response we have established an ESG committee, which will be chaired by Emma Fox, continues to highlight the importance of these initiatives.

We have launched a significant and thorough review to ensure that we emerge as a more responsible business, primed to play a positive role in the industry’s recovery. We are taking our responsibilities seriously, want to get it right as we understand that those that succeed in this area will have competitive advantage.

Further explanation of these duties can be found in the ESG report.

Corporate Governance

(The information was last reviewed on 18th May 2022)

Introduction

The Directors recognise the importance of sound corporate governance and they comply with the Quoted Companies Alliance Corporate Governance Code / QCA Guidelines.

The Board comprises eight Directors of which four are executives and three are non-executives, reflecting a blend of different experience and backgrounds. The Board considers the three non-executive directors to be independent in terms of the QCA Guidelines.

The Board meet regularly to review, formulate and approve the Group’s strategy, budgets, and corporate actions and oversee the Group’s progress towards its goals. In accordance with the best practice, the Group has established Audit and Risk, Remuneration, ESG and Nomination committees with formally delegated duties and responsibilities and with written terms of reference. From time to time separate committees may be set up by the Board to consider specific issues when the need arises.

Board of Directors

The Board has overall responsibility for the Group’s system of internal control and reviewing its effectiveness. Key elements of the system of internal control include clearly defined levels of responsibility and delegation, together with well-structured reporting lines up to the Board; the preparation of comprehensive budgets for each pub and head office, approved by the Board; a review of period results against budget, together with commentary on significant variances and updates of both profit and cash flow expectations for the period; Board authorisation of all major purchases and disposals and regular reporting of legal and accounting developments to the Board

Corporate governance principles applicable to CPG

As a result of deciding to apply the QCA Code, the corporate governance principles which now apply to us are those contained in the QCA Code. These are:

Corporate governance principles

  1. Establish a strategy and business model which promote long-term value for shareholders

  2. Seek to understand and meet shareholder needs and expectations

  3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

  4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

  5. Maintain the board as a well-functioning, balanced team led by the chair

  6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

  7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

  8. Promote a corporate culture that is based on ethical values and behaviours

  9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

  10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

 

Application of the QCA Code and required disclosures in our annual report or on our website

The correct application of the QCA Code requires us to apply the principles set out above and also to publish certain related disclosures; these can appear in our annual report, be included on our website or we can adopt a combination of the two approaches. Recommended locations for each disclosure are specified in the QCA Code; we have chosen to follow these. An index setting out where each required disclosure can be found appears at the end of this document.

 

Chairman’s corporate governance statement

The City Pub Group is a vibrant, growing business with a clear strategy, a strong and experienced management team and a well-developed pipeline of sites with an exciting market opportunity ahead.

2017 was a pivotal year in the evolution of the City Pub Group. City Pub Company (East) Plc (“CPCE”) combined with City Pub Company (West) Ltd (“CPCW”) to form the City Pub Group plc. The Group was subsequently listed onto AIM in November 2017 raising £35m at 170p.

The AIM listing achieved a liquidity event for existing EIS shareholders and the Group’s financial position was significantly strengthened providing the platform for the Group to acquire further pubs which it has continued to do, with 41 pubs trading as of April 2022 and a further 3 opening during Spring/Summer 2022.

City Pub Group is committed to maintaining the highest standards of corporate governance throughout its operations and to ensuring that all of its practices are conducted transparently, ethically and efficiently. The Company believes that scrutinising all aspects of its business and reflecting, analysing and improving its procedures will result in the continued success of the Company and improve shareholder value. Therefore, and in compliance with the updated AIM Rules for Companies, the Company has chosen to formalise its governance policies by complying with the UK’s Quoted Companies Alliance Corporate Governance Guidelines for Small and Mid-Size Quoted Companies (the “QCA Code“).

We will have to provide details of it on our website and then explain how we comply with that code and include reasons where we have departed from it. This information is to be reviewed annually and the website will need to include the date on which this was last done. This rule took effect from 28 September 2018.

Clive Watson

Chairman

Principle 1

Establish a strategy and business model which promote long-term value for shareholders

Our Business Model (pg. 8 of 2021 annual report)

City Pub Group stands out from the crowd with its unique and premium offer. This is embedded in its culture and influences everything from site selection, food and menu design to the quality of its employees.

Importantly its portfolio is built up of unbranded, wet-led pubs in high footfall areas that appeal to a broad range of customers. Each pub is centred on a high calibre level of staff that offers a relaxed, enthusiastic charming environment. The Group has a solid track record of identifying, acquiring, refurbishing and repositioning pubs to drive higher returns. Its approach is highly differentiated and combines the flexibility of the managed pub model with the entrepreneurialism of the tenanted model. This differentiated approach has been honed over management’s 100 collective years of pub retail experience.

 

 

Our strategy (pg. 11 of report)

The Group expects to have at least 44 trading pubs by the end of 2022 and intends to continue acquire new sites. The Group already has extensive relationships with property agents specialising in the licenced trade industry and many of these relationships have been in existence for a number of years.

Acquisition strategy

The Group’s acquisition strategy is broken down into five key areas and the Directors believe that these areas will provide sufficient acquisition opportunities to support the targeted growth of the Group’s pub estate.

1. Acquisition of existing pubs

Central to the Group’s acquisition strategy is buying existing pubs which are already trading well and are typically sold by private sellers. The main change is to transfer the pub’s supply contracts onto the Group’s centralised platform, quickly improving operating margins. The Group prides itself on the way it works with the existing employees in these pubs and, over a period of time, aims to integrate these employees into the Group’s entrepreneurial culture.

2. Acquisition of trading pubs which require redirection

The Group also seeks to acquire existing pubs that require modest refurbishment and improved retailing standards. Typically, the Group will target an investment of circa £250,000 to tailor the décor to the pub’s local market and improve the liquor and food offerings, as well as help the existing staff to adopt an entrepreneurial approach in managing the pub.

3. Closed down pubs requiring extensive refurbishment

The Group also looks to acquire sites that are either underperforming or have been closed down and which provide the opportunity for the Group to substantially refurbish and improve the product offer to better serve the tastes of the Group’s target consumers.

4. Unlicensed premises

The Group is able to target sites which are currently unlicensed but which present the opportunity to be transformed into premium trading pubs.

The Group typically targets pubs and sites which produce, or are expected to produce, higher EBITDA per pub than the industry average. The Directors believe that by focusing on sites expected to produce a higher EBITDA, head office costs as a percentage of sales are reduced and this performance also enables the attraction and retention of top performing pub managers.

The Group evaluates new sites by testing them against five key target markets: residents, office workers, students, tourists and shoppers. For a new site to be considered, it must address at least four of the five key target markets.

5. Investment into other EIS companies

The Group will look for opportunities to invest into EIS companies as it has done with Mosaic Pub and Dining Tranche 1 and with Barts Pub LTD.

Refurbishment strategy

The Group’s strategy is to enhance existing sites rather than redesign to a set formula. The Directors believe that an operation comprising individual quality outlets which are unbranded will trade better over the longer term. When refurbishing a pub, the Group adopts a timeless design style which is one of high quality but is not fashionable or contemporary. A typical refurbishment is undertaken in a style which the Directors believe is long lasting. With regular maintenance the estate is kept to a high standard, this helps to ensure that future refurbishment costs are reduced and closures of pubs for major refurbishments are minimised.

 

Acquisition pipeline

The Group is continually appraising both individual sites and portfolios of pubs across southern England and Wales and develops a pipeline of potential acquisitions out of the large number of opportunities presented. All acquisitions are subject to approval by the Board and a key consideration, when seeking board approval, is to recommend pubs and sites in areas which are not highly competitive.
The Group has a low annual rent charge compared to its turnover which was circa 3.4% as at 26 December 2021 (2020: 3.4%), based on normalised trading levels.
The Group intends to keep it around this level or lower. The Group also reviews the existing portfolio to see if any sites should be considered for disposal, and has sold six sites in 2022.
Our strategy is to enhance existing sites rather than redesign to a set formula. Our Directors believe that an operation comprising individual quality outlets which are unbranded will trade better over the longer term.

Principle 2

Seek to understand and meet shareholder needs and expectations

The Group maintains effective contact with Shareholders and welcomes contact from investors. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website.

Copies of our annual report (which includes the notice of AGM) and the interim report are sent to all shareholders and copies can be downloaded from the investors section of www.citypubcompany.com alternatively, they are available on request by writing to the Company Secretary at Essel House, 2ndFloor, 29 Foley Street, London W1W 7TH. The company secretary can also be contacted by shareholders on matters of governance and investor relations.

Clive Watson (Executive Chairman) and Holly Elliott (CFO) are the key contacts with shareholders. Twice a year, at the time of the interim and full year results, they will present to analysts and shareholders. These meetings allow the Chairman and the Chief Financial Officer to update shareholders on strategy and the group’s performance and receive feedback.

Additional meetings with institutional investors and / or analysts are arranged from time to time.

The board supports the use of the AGM to communicate with all investors including non-institutional investors. The meeting is generally well attended and all shareholders are given the opportunity to ask questions and raise issues; this can be done formally during the meeting or informally with the directors afterwards.

Principle 3

Take into account wider stakeholder and social responsibilities and their implications for long-term success

 

Our business model which explains how we create value, is set out on page 8 of our annual report. That model has five principal elements, the broad headings for which are as follows:

Principal elements of our business model

  1. Premium and differentiated product offering

  2. People and culture

  3. Acquisition and transformation of sites

  4. Sourcing

  5. Dedicated marketing

Our key strengths and resources include:

Premium operator creating individual identify for each pub

The Group’s pub estate and flexible retail strategy addresses the trend away from branded pubs and toward premium individualised pubs, each of which have a product range appropriate for their local market.

Scalable platform with strong pipeline of potential acquisitions

The centralised infrastructure platform, comprising systems and processes as well as head office staff, enables a smooth change of ownership for the pubs which are currently in the acquisition pipeline, as well as those identified through the Group’s appraisal of both individual sites and portfolios of pubs across southern England and Wales.

The group is asset backed

Prior to the IPO in November 2017, an independent valuation report by CBRE valued the Group’s portfolio of 34 pubs at £73.65 million. At the time the valuation represented a 9% uplift on net book value. The company has purchased four new properties, of which two are freehold. A 2022 independent valuation valued 17 properties at £98m. The Directors believe a conservative value of the full estate is £150m.

Impressive financial performance and growth

The Group has enjoyed consistently strong sales and EBITDA growth, with steadily increasing operating margins over the last few years. Supplier agreements are expected to further improve operating margins going forward.

Experienced management team, motivated staff and strong culture

The management team of the Group has over 100 years’ experience in the pub industry with an excellent reputation, extensive contact base and proven skill in identifying attractive sites for an attractive price. Staff are incentivised to focus on customer service and are represented at board meetings, giving a high retention rate among key staff and a strong sense of culture. The introduction of our new weekly bonus scheme means that all employees are now on a bonus scheme with shared goals.

Management strength and track record provides confidence in the deliverability of a premium hyper-local strategy of refurbishing and repositioning wet-led pubs across UK Cathedral cities and market towns.

Our Relationships (pg. 12)

Our People

Recruitment and retention of high quality staff is key to the Group’s strategy, both at head office and across the estate. The Group’s staff are well trained and appropriately incentivised, given their respective roles, with the focus on attracting the most suitable employees to support the growth of the Group and maintain high levels of consumer satisfaction. Over the covid period the company topped up employees wages when they were sick.

Our customers (pg. 13)

While value for money is a major component, there is a key focus on a premium offer across the entire estate. Aligned with keeping the values of the pub intact, there is an aim for the pub to become a central part of the local community by incorporating local suppliers, local staff and providing several reasons for people to visit often. The Group has five key target markets: Shoppers, Tourists, Students, Office Workers, and Residents

 

Adapting and driving consumer preference

Shifts in consumer preferences combined with the changing profile of the high street, have blurred the lines between pubs, restaurants, cafes and coffee shops. Customers are now able to have a breakfast in a pub or dinner in a coffee shop. Menus are developed individually for each pub and offer good value across a wide range of choice. Increasingly, healthier and vegan options are being offered in each pub to broaden the appeal to a wider range of customers.

 

Our Suppliers

The Group adopts a long term approach with its suppliers and has maintained relationships with its major suppliers since inception. This includes contractors, professional advisers, designers and property agents, as well as food and drink suppliers.

Over 70% of our drink products have now been signed up on a three year fixed price deal, assisting margin improvement mitigating against inflation risk in this area.

The Group has also recently centralised its food purchasing function and significantly reduced the number of its suppliers. This has resulted in an improvement in its purchasing terms and will enable greater economies of scale to be achieved as the pub estate grows.

Communication

The principal ways in which feedback from the group’s stakeholders is gained is through regular meetings, review of online analytics and weekly communications.

The Managing Directors meet with the Operations Managers on a regular basis to review strategy and performance. Feedback is given on staff, customers and suppliers, and any necessary changes to running the pub are implemented.

Area Operations Managers meet quarterly with their group of General Managers. Targets are reviewed to see which sites reached them and feedback is given if any deviation.

The main suppliers are met with usually on a quarterly basis and continuously reviewed to determine if the latest products are being offered to meet the market needs.

Employees are able to provide feedback and raise any suggestions or issues by e-mailing the nominated employee representatives via a designated e-mail address. The representatives then meet with the Board quarterly to relay this information.

Reviews written by customers via Google, TripAdvisor, Facebook are continuously read by the Managing Director, Operations Managers and General Managers, and reported on at the quarterly meetings.

The Marketing team provides analytics data on customer satisfaction, website visits, bookings, App sales etc. via a weekly communication to all Head Office and GM’s, and reports on a quarterly basis to the Board.

The Chairman also sends a weekly e-mail reporting on best performers of the week, with rewards to those and suggestions for the weeks ahead on how to maximise sales.

The Group is very conscious of the role its pubs play in the local community and as such certain pubs offer discounts to customers who work in the public services. Charity fundraising events are also often held in the Group’s pubs.

Principle 4

Embed effective risk management, considering both opportunities and threats, throughout the organisation

Principal risks and uncertainties (pg. 20)

Risk Management Overview

The City Pub Group is not alone in facing a range of risks and uncertainties in the course of its business. Our aim is to identify and manage these risks effectively so that we can deliver on our strategy and maximise shareholder returns.

In the course of its normal business, the Group continually assesses and takes action to mitigate the various risks encountered that could impact the achievement of its objectives. As detailed in the Corporate Governance Report, there are systems and processes in place to enable the Board to monitor and control the Group’s management of risk. The Audit Committee regularly reviews the effectiveness of this process and seeks to ensure that management’s response is adapted appropriately to the changing environment.

External Risks

There are a number of external risks over which the Board has no direct control, which are discussed at Board and Audit Committee meetings to ensure that the business can respond effectively to changes in the external environment.

• A decline in the UK economy would reduce consumer disposable income and could see a reduction in revenues across the industry, or a polarisation between cost leaders and premium operators.

• The implications of Brexit are uncertain and will continue to be for the foreseeable future while exit terms are negotiated. The business model is dependent on being able to source skilled labour, much of which comes from the EU.

• The war in Ukraine, has seen the unsettling of the global economy, leading to significantly higher energy prices and rising food costs

• The threat of terrorism in the UK has an impact on the way in which we operate and the safety of our customers and employees is of paramount importance. A prolonged terrorist campaign could ultimately reduce consumer spending habits.

• Covid 19 – While all restrictions have now eased, the potential of future restrictions would impact trading.

The following sets out what the Board considers to be the principal risks which affect the Group at present, although it is not intended to be a comprehensive analysis of all the risks that the business may face.

Legislative Changes

The City Pub Group operates in a highly regulated sector where government legislation impacts much on the way we do business and therefore the business model. This includes increases to the National Living Wage, changes to the sale of alcohol, data protection and changes to planning regulations. Changes in policy can have significant impact on the profitability and operation of our pubs, and we carefully monitor legislative changes and identify ways to spread risk and to mitigate any possible impact these may pose to us.

Health and Safety and Food Safety.

The health and safety of the Group’s employees and customers is a key concern to us. We are required to comply with health and safety legislation, including fire safety, food hygiene and allergens. Given the large number of sites and complexity, this is overseen by a Health and Safety Committee managing legislation, assessing risks and allocating appropriate resource and training.

Business Continuity and Crisis Management.

The impact of COVID-19 has been to close all our pubs for long periods of time since March 2020 and only under restrictions when allowed to open for a few months. As this global pandemic and we hope government restrictions ease, we will cautiously trade our sites where they can operate safely for staff and customers, while generating satisfactory contributions to the Group.

Our Managed Pubs represent our key revenue stream and the impact of a major disaster affecting a number of pubs over a period of time could be significant. We have well-documented disaster recovery plans which are rehearsed regularly throughout the business to ensure that normalisation can occur as swiftly as possible after a serious incident and that any damage is contained.

Information Technology

The Group is increasingly reliant on information systems to operate, including sales and financial reporting, supplier payments, and customer data through our websites and app. A significant IT failure could interrupt the running of the business and we have a range of facilities and controls in place as part or our IT Recovery Plan to resume normal operations quickly.

Data Security – the data held by the Group is a key business asset and personal data protection is key. Deliberate acts of cybercrime are on the increase, targeting all markets and heightening risk exposure. Any significant loss of data could lead to a considerable interruption for the business and reputational damage, as well as fines under GDPR. The IT systems in place follow appropriate data protection guidelines to ensure the risk of both personal and Company data loss is minimal. Our network is protected by firewalls and anti-virus protection systems. Threats to our data security by viruses, hacking or breach of access controls are constantly monitored

Recruitment and Staff Retention.

The Group has a business model built upon recruiting and keeping the best people to support its strategy. There is a risk that people may leave and that we cannot recruit the best people. We perform detailed succession planning and the Directors believe the Group’s culture, training and remuneration packages are attractive, which should assist key staff retention.

Economic and Market Risks

Economic uncertainty and cost inflation – market uncertainty and increasing demand leads to cost pressures in several areas, most significantly food and drink production, utilities and staff costs. We are also facing significant cost head-winds such as business rates. The weaker pound sterling gives risk to increasing food costs, particularly from the Eurozone and reduces profitability. Key suppliers undergo a rigorous procurement process to ensure that we get the best deal and we seek to maintain good relations with suppliers.

Loss of Company values or a failure to adhere to them – CPG is a company based on a strong set of values which are key to its success and future. Should these be undermined or not adhered to, the Company’s unique position and long-term future would be jeopardised. The Group has a culture which ensures that management are encouraged to take business decisions for the long-term benefit of the Group, and this culture also promotes a long term and collaborative approach that does not lead to excessive risk taking and the reward system encourages appropriate behaviour.

Consumer demand shifts – the Group’s success is attributable to its ability to anticipate and react to consumer demand. The way in which the Group responds to market changes is critical to its on-going strategy and has a direct impact on all operational activity. Management monitor and research consumer trends and run trials of new technologies, brands and products and gather consumer feedback through surveys, customer complaints and online and social media reviews. We analyse retail pricing and market share data to ensure we are competitive but still premium. The Board approves all significant new acquisition decisions and therefore controls key changes to the Group

Financial Risks (pg. 24)

We expect the Group to be able to access suitable financial facilities to meet the ongoing requirements of the business and our longer term objectives.

The Group has agreed a new £35m revolving credit facility with Barclays and an accordion option of £15m which is in place until July 2024. We also raised £22m before costs from a placing and open offer in March 2020 to strengthen the balance sheet. We have agreed a new £5m CLBLS facility through Barclays to increase our liquidity until we are through the Covid pandemic. We have recently cancelled this facility. The sale of six pubs in April 2022 has resulted in our net debt dropping to £1.2m.

We expect to be able to meet our covenants under a range of cautious liquidity scenarios. COVID-19 has resulted in the temporary closure of our pubs, which effects our ability to meet banking covenants. Barclays have agreed to waive the existing financial covenant tests until the end of June 2022 and have agreed to replace the existing financial covenants with a Minimum Liquidity Test in the sum of £8m and a Minimum EBITDA Test up to June 2022, after which date the financial covenant tests as currently documented will recommence.

Risk of not complying with plc rules/corporate matters

ESOS (Energy Savings Opportunity Scheme) and Packaging Regulations. We need to meet our reporting deadlines and also understand how we are able to be more energy efficient which is good for the environment and will save us money. An external company is employed as our lead assessor and energy auditor and an advisor appointed to help with collecting of data and the reporting of our obligations.

Principle 5

Maintain the board as a well-functioning, balanced team led by the chair.

The Directors recognise the importance of sound corporate governance and they comply with the Quoted Companies Alliance Corporate Governance Code / QCA Guidelines.

The Board comprises eight Directors of which four are executives and three are non-executives, reflecting a blend of different experience and backgrounds. The Board considers the non-executive directors to be independent in terms of the QCA Guidelines.

The Board meet regularly to review, formulate and approve the Group’s strategy, budgets, and corporate actions and oversee the Group’s progress towards its goals. In accordance with the best practice, the Group has established Audit and Risk, Remuneration ESG and Nomination committees with formally delegated duties and responsibilities and with written terms of reference. From time to time separate committees may be set up by the Board to consider specific issues when the need arises.

The Board has overall responsibility for the Group’s system of internal control and reviewing its effectiveness. Key elements of the system of internal control include clearly defined levels of responsibility and delegation, together with well-structured reporting lines up to the Board; the preparation of comprehensive budgets for each pub and head office, approved by the Board; a review of period results against budget, together with commentary on significant variances and updates of both profit and cash flow expectations for the period; Board authorisation of all major purchases and disposals and regular reporting of legal and accounting developments to the Board.

Principle 6

Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.

 

The Board comprises seven Directors of which four are executives and three are independent non-executives, reflecting a blend of different experience and backgrounds.

The non-executive directors, with their impartial judgement, bring a different perspective to the Board. Their background and experience covers a wide sector of business and as such provides a well balanced mix of skills to evaluate company strategy and performance.

The Directors ensure that their knowledge is kept up to date on key issues and developments pertaining to the Company, its operational environment and to the Directors’ responsibilities as members of the Board. During the course of the year, Directors may receive or review updates from various external advisers.

EXECUTIVE DIRECTORS (pg. 26)

Clive Watson ACA (61)

Executive Chairman

Clive qualified as a Chartered Accountant with Price Waterhouse in London in 1986 then joined the investment bank Manufacturers Hanover Limited where he spent three years. He joined Regent Inns PLC as Finance Director and Company Secretary in 1990. Clive left Regent Inns PLC in February 1998 and co-founded Tup Inns Limited, where he was responsible for financial and commercial matters as well as acquisitions, before becoming Chief Executive and Finance Director of Tom Hoskins PLC, an AIM listed company. Clive was a founding director of The Capital Pub Company PLC in 2000 and remained on the board until the company’s sale to Greene King in 2011. Clive was appointed as Chief Executive of The City Pub Company (East) PLC in December 2011 before becoming Chairman in September 2014 and served throughout the period.

 

Toby Smith (51)

Chief Operating Officer

Toby is a highly experienced senior operator with over 25 years’ experience in the UK hospitality industry. He has held CEO roles with Stonegate Pub Company, Novus Leisure and Town & City Pub Company, and prior to these held senior roles at Laurel Pub Company, Spirit Group and Scottish & Newcastle Retail. He joined the City Pub Company as Chief Operating Officer in November 2020.

 

Rupert Clark (50)

Managing Director

Rupert has over 20 years’ experience in the running of high-volume food and liquor-led pubs, both in and outside London. Rupert was previously Operations Manager of The Capital Pub Company PLC and was with Capital for four years. After the sale of Capital to Greene King in 2011 Rupert stayed on to ensure the smooth integration of pubs into the Greene King estate. Prior to Capital, Rupert worked as Operations Manager at The Food and Drink Group, repositioning their City bars, and at Fullers first developing The Fine Line brand and then their unbranded bars and gastro pubs. Rupert was appointed as Joint-Chief Executive of the City Pub Company (East) PLC in April 2013 becoming sole Chief Executive in September 2014 and served throughout the period.

 

Holly Elliott (49)

Chief Financial Officer

Holly joined the Board as Chief Financial Officer on 29th November 2021 from Honest Burgers where she was interim CFO. Before that, Holly was CFO of Five Guys, the fast-food chain operating in the UK, France Spain and Germany, for four years, and previously spent 12 years at Caffe Nero in a number of roles including Finance Director.

 

Non-Executive Directors

 

Richard Prickett (70)

Independent Senior Non-Executive Director

Richard was appointed as a Non-Executive Director of the Company on 25 October 2017 and served throughout the period. Richard has considerable public markets experience, gained through numerous non-executive director roles including acting as Independent Non-Executive Director for Regent Inns Plc and the Capital Pub Company. Richard currently serves as a Non-Executive Director to Pioneer (City) Pub Company, a startup EIS managed pub company, is also Finance Director to Landore Resources Limited. Richard qualified as a chartered accountant in 1973 with Coopers & Lybrand and has many years’ experience in corporate finance. Richard is Chairman of both the Remuneration Committee and the Audit & Risk Committee, and sits on the Nominations Committee.

 

Neil Griffiths (60)

Independent Non-Executive Director

Neil was appointed as a Non-Executive Director of the Group on 17 January 2018 and served throughout the period. Neil qualified as a Chartered Surveyor in 1987 and has over 30 years of experience in retail, leisure and property sectors. Neil worked at Punch Taverns plc from 2001 to 2017 holding a number of senior management roles including Chief Operating Officer, Chief Strategy Officer and Group Property Director. Neil joined Punch from Time Warner where he was International Property Director for their cinema division. Prior to that he held a number of Senior Management and Divisional Board roles at Bass Plc including Head of Property and Commercial Development Director. Neil is a Trustee Director for the Prince of Wales initiative ‘Pub is the Hub’. He is a former Council member of the British Beer & Pub Association having sat on panels and committees for both the BBPA and Royal Institution of Chartered Surveyors. Neil is Chairman of the Nominations Committee and sits on the Audit & Risk, ESG and Remuneration Committees.

 

Emma Fox (54)

Independent Non-Executive Director

Emma is an exceptionally experienced director with over 30 years of experience in the retail, leisure, and drinks sectors. Emma is currently CEO of Berry Bros & Rudd, the oldest wine and spirit merchant in the UK. She was appointed as CEO in 2020, having served an Independent Non-Executive Director since 2017, to help guide the business through its next phase of growth. Emma joined Berry Bros & Rudd from The Original Factory Shop where she also held the role of CEO. Previously, Emma held several senior management and divisional board roles at large retailers including Commercial Director at Halfords, Chief Marketing Officer at Walmart Canada and Commercial and Logistics Director roles at ASDA. Emma also has extensive hospitality and leisure experience having worked with Hollywood Bowl as Marketing Director, Bass Brewers and as a Non-Executive Director at Punch Taverns Plc. Emma was appointed as a Non-Executive Director of the Company on 11 March 2021. Emma is chair of the ESG Committee and sits on the Audit committee and the Nominations Committee.

 

Company secretary

James Dudgeon (74)

James has been Company Secretary since 2011. He was previously Company Secretary of the Capital Pub Company. He has an accounting background. Responsibilities include handling the director’s registrar, taking minutes, filing SHO1’s and dormant companies accounts, application/cancellation of directors, maintaining share dealings code, maintaining the insiders list.

Principle 7

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

In line with best practice and the newly applicable requirements of the QCA Code, the Board intends to undertake an annual evaluation process of the Board, the Chairman and the individual Committees and Directors. The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning. Succession planning is also discussed at the nomination committee.

Principle 8

Promote a corporate culture that is based on ethical values and behaviours

People and Culture (Pg. 12)

The Group’s localised strategy requires a certain standard and quality in its staff. The inherent ability to be engaging, intelligent and motivated are key attributes. The strategy to focus primarily within Cathedral cities means finding the right type of staff should be easier especially as universities are central to all these cities. Finding the right people is followed by training programmes and a highly rewarding incentives package that we feel is unique in the industry. Putting its staff at the heart of the business is also reflected, with two employee representatives included at every board meeting.

Each employee who joins the group is given a company handbook, covering company guidelines and ethics, and undergoes an induction at site.

Growth, accompanied with the clustering strategy, means many General Managers are ‘homegrown’ and hired from within the Group. This has allowed for progression to area manager in some cases. Each pub has a General Manager and head Chef on-site. The average full time equivalent (FTE) staff per pub ranges from 15-20 depending on size and offer (higher for those with accommodation and greater food offer). The operational structure is highly devolved fostering a more entrepreneurial spirit that is rarely seen in larger groups.

Staff training and incentives

 

The overarching aim is to offer customers exceptional experiences, while striving to offer employees sufficient development possibilities to build a career within the Group.

The City Pub Group has developed a comprehensive incentives policy with all employees participating at some level. Importantly bonuses are based on both quantitative and qualitative targets are paid out weekly, monthly, as well as annually.

Customer satisfaction is monitored via analytics from Google, Facebook and TripAdvisor to ensure that the Group’s high standards are being met from a Customer Service and general point of view.

Principle 9

Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

Clive Watson, as Executive Chairman, leads the Group from the front. Clive along with Holly Elliott, Chief Financial Officer, meet with shareholders and investors on a regular basis. As well as being Chief Financial Officer, Holly handles any questions or feedback from shareholders via e-mails or calls. Toby Smith, COO, and Rupert Clark, Managing Director, oversee the running of the pubs, visiting them on a regular basis, meeting with the Operations Managers and Head Office management team, on no less than a quarterly basis.

The acquisition of pubs is reserved for the Board along with the long term strategic plans.

Board of Directors (pg 26)

The Board has overall responsibility for the Group’s system of internal control and reviewing its effectiveness. Key elements of the system of internal control include clearly defined levels of responsibility and delegation, together with well-structured reporting lines up to the Board; the preparation of comprehensive budgets for each pub and head office, approved by the Board; a review of period results against budget, together with commentary on significant variances and updates of both profit and cash flow expectations for the period; Board authorisation of all major purchases and disposals and regular reporting of legal and accounting developments to the Board.

The Board meets at least quarterly to review, formulate and approve the Group’s strategy, budgets, and corporate actions and oversee the Group’s progress towards its goals. In accordance with the best practice, the Group has established Audit and Risk, Remuneration, ESG and Nomination committees with formally delegated duties and responsibilities and with written terms of reference. From time to time separate committees may be set up by the Board to consider specific issues when the need arises.

Audit and Risk Committee (pg. 28)

The Audit and Risk Committee will assist the Board in discharging its responsibilities, within agreed terms of reference, with regard to corporate governance, financial reporting and external and internal audits and controls, including, amongst other things, reviewing the Group’s annual financial statements, reviewing and monitoring the extent of the non-audit services undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the Group’s internal controls and risk management systems.

During the year the Committee considered key aspects related to the Group’s financial reporting, including matters related to the going concern basis of preparation of the financial statements, revenue recognition, impairment indicators relating to noncurrent assets and the classification and valuation of investments in financial assets.

The Audit and Risk Committee were satisfied with the approach presented by the management and the judgements made in respect of the above matters.

The ultimate responsibility for reviewing and approving the annual report and accounts and the half yearly reports remains with the Board. Membership of the Audit and Risk Committee compromises Neil Griffiths, Emma Fox and Richard Prickett and it is chaired by Richard Prickett. The Audit and Risk Committee will meet formally not less than twice every year and otherwise as required.
The Audit Committee have reviewed the independence and effectiveness of Haysmacintyre LLP, the Group’s external auditor, and are satisfied in both respects. Haysmacintyre LLP have signified their willingness to continue in office and a resolution to reappoint Haysmacintyre LLP as auditor will be proposed at the AGM.

 

Remuneration Committee

The Remuneration Committee is responsible, within agreed terms of reference, for establishing a formal and transparent procedure for developing policy on executive remuneration and to set the remuneration packages of individual Executive Directors. This includes agreeing with the Board the framework for remuneration of the Executive Directors, the company secretary and such other members of the executive management of the Group as it is designated to consider. It is furthermore responsible for determining the total individual remuneration packages of each Executive Director including, where appropriate, bonuses, incentive payments and share options. No Director may be involved in any decision as to their own remuneration.

The membership of the Remuneration Committee comprises Neil Griffiths, Emma Fox and Richard Prickett and the committee is chaired by Richard Prickett. The Remuneration Committee will meet not less than twice a year and at such other times as the chairman of the committee shall require.

 

Nomination Committee

The Nomination Committee will have responsibility for reviewing the structure, size and composition of the Board and recommending to the Board any changes required for succession planning and for identifying and nominating (for approval of the Board) candidates to fill vacancies as and when they arise. The Nomination Committee is also responsible for reviewing the results of the Board performance evaluation process and making recommendations to the Board concerning suitable candidates for the role of senior independent director and the membership of the Board’s committees and the re-election of Directors at the annual general meeting. The membership of the Nomination Committee comprises Neil Griffiths, Emma Fox and Richard Prickett and the committee is chaired by Neil Griffiths. The Nomination Committee will meet not less than once a year and at such other times as the chairman of the committee shall require.

ESG Committee (pg 15-19)

As we emerge from the pandemic Environmental, Social and Governance (ESG) agenda has become increasingly important for all businesses. In response we have established an ESG committee, which will be chaired by Emma Fox our recently appointed NED. We have launched a significant and thorough review to ensure that we emerge as a more responsible business, primed to play a positive role in the industry’s recovery. We are taking our responsibilities seriously, want to get it right as we understand that those that succeed in this area will have competitive advantage.

Principle 10

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Company places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Company’s activities are clear, fair and accurate. The Company’s website is regularly updated.

The Company’s financial reports, including the 2021 Annual Report, can be found in the Shareholder Documents section of the Company’s website.

Notices of General Meetings of the Company can be found in the Shareholder Documents section of the Company’s website.

The results of voting on all resolutions in future general meetings will be posted to the Company’s website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent shareholders.

Gender Pay Gap Report

Published on 30 March 2022

Modern Slavery Statement

For the financial year ended 29 December 2019

Introduction

This statement is made pursuant to section 54(1) of the Modern Slavery Act 2015 for the financial year ending 29 December 2019 and sets out The City Pub Groups actions to understand all potential modern slavery risks related to its business and to put in place steps that are aimed at ensuring that there is no slavery or human trafficking in its own business and its supply chains.

Our group structure and activities

The City Pub Group PLC operates a growing portfolio of pubs, hotels and brew houses in the UK. These are run by highly trained managers whose activities are overseen by an experienced operations team and a head office in Central London. The group monitors and audits to ensure best practice in relation to all of its employees.

Our policy and due diligence processes

As part of the pub industry the group recognises that it has a responsibility to take a robust approach to slavery and human trafficking. The group is absolutely committed to preventing slavery and human trafficking in its corporate activities, and ensuring that its supply chains are free from slavery and human trafficking.

The group makes it clear to employees the actions and behaviour expected of them when representing the group. The group strives to maintain the highest standards of employee conduct and ethical behaviour.

The group is committed to ensuring that its suppliers adhere to the highest standards of ethics that they provide safe working conditions where necessary, treat workers with dignity and respect, and act ethically and within the law in their use of labour.

The group uses only specified, reputable employment agencies to source labour and always verifies the practices of any new agency it is using before accepting workers from that agency.

Supply chains

Our supply chains include the sourcing of finished and raw materials, principally related to the provision of food and drink.

Effectiveness

The group’s anti-slavery initiatives to be implemented this year are as follows:

  • • To inform all our staff, workers and suppliers of our policy.
  • • To deliver training to relevant employees and workers within our business via our on-line training tool for Modern Slavery.
  • • To audit the payroll records to ensure our employees’ working hours are consistent with statutory requirements
  • • To distribute this statement to all our suppliers so they are informed of our policy.  To highlight a zero tolerance stance on the discovery of any modern slavery and human trafficking in their supply chains and to advise our expectations of them in this regard.
  • • To request details from our suppliers of any discovery of modern slavery and human trafficking within their supply chain.
  • • Undertake an annual audit to ensure all our related processes are in place and are being adhered to.

To have in place a whistleblowing policy to encourage members of staff to report concerns about wrongdoing and which offers suitable protection for whistle-blowers.

Board Director Approval

This statement was approved on Tuesday 11th June 2020 by the organisation’s Board Director who reviews and updates it annually.

Director’s Name: Alex Derrick

AIM Rule 26

This page includes links to information that is being disclosed for the purpose of Rule 26 of the AIM Rules for Companies – ‘Company Information Disclosure’.

This website is owned and hosted by The City Pub Group plc.

Country of Incorporation and Main Country of Operation

Country of Incorporation: England and Wales
Company Registration Number: 07814568
Country of Operation: Great Britain

Company Information

Business Overview
Board of Directors
Advisers
Corporate Governance

Documentation and Announcements

Articles of Association
Admission Document
Reports and Presentations
Recent News

Securities Information & Share Price

Share Price
Securities Information

Details of any other exchanges or trading platforms

The Company is not listed on any other exchanges or trading platforms.

Details of any restrictions on the transfer of securities

There are no restrictions on the transfer of securities.

City Code on Takeovers and Mergers

The Company is subject to the UK City Code on Takeovers and Mergers.

This information was last updated on the 1st of July 2020.