£15m City Pub Group share offer to offset coronavirus impact

The operator of close to 50 sites across London and the south, City Pub Group’s placing comes as part of a two-pronged fundraising effort that aims to raise a total of £22m.

Following today’s offering of 30,000,000 new ordinary shares to certain existing shareholders and other institutional investors at a price of 50p per share – a discount of 10.7% – the operator hopes to raise a further £7m via an open offer at the same share price.

According to a statement from City Pub Group, the net proceeds of both the placing and open offer will be used to strengthen the operator’s balance sheet first and foremost, as well as expanding its portfolio of pubs at a time when company directors’ believe acquisition prices will be reduced.

Following the outbreak of coronavirus, City Pub Group has taken a number of steps to reduce its operating costs including both temporary and permanent reductions in staff numbers, unpaid leave and salary sacrifices, directors taking a 50% pay cut until the pubs reopen, and halting training and recruitment costs.

What’s more, the operator intends to retain key head office staff and pub managers to protect the business in the longer term.

Trading impact of coronavirus

The successful placement comes as the City Pub Group revealed that its trading had been dented by the spread of coronavirus – which saw the operator shut its sites on 20 March after an announcement by Prime Minister Boris Johnson that pubs, cafés, bars and restaurants should close their doors​. 

While total turnover for the 11 weeks to 15 March 2020 was up by 11% against the same period last year, like-for-like sales were reported to have fallen by 4.5%. 

Furthermore, as reported by The Morning Advertiser​, the operator of 47 pubs across London and the south revealed that its profits had been hit by a cocktail of external factors​, including consumer uncertainty about politics and bad weather at the tail end of 2019.

In its trading report for the 52-week period to 29 December 2019, the group said its pre-tax profits for the year were expected to be “slightly below market expectations” at between £9.1m and £9.2m – a year-on-year increase of 15% on the same period last year.

Show of investor support

City Pub Group’s directors believe the operator will be well placed to grow and recover shareholder value once its pubs reopen should its fundraising efforts prove fruitful.  

“We are delighted with the investor support we have had at this difficult time,” Clive Watson, executive chairman of City Pub Group said of the placing.

“Together with our existing funding arrangements, this significantly strengthens our balance sheet, providing a further cushion in the event the suspended environment is extended. The additional funds will also allow improvements to our operational structure during the period of closure and enable us to grow the business and recover shareholder value once pubs are permitted to reopen.

“We recognise the great support we have had from our people, suppliers, bankers, brokers and advisers, and also from Government through its aid package, especially regarding employment costs and business rates.”