City Pub Group plans to double its portfolio size by 2021

Despite industry body’s warnings of widespread pub closure, upmarket chain City Group reported strong sales and healthy profits in its half-year results.

Clive Watson’s pub group netted £1.6 million in pre-tax profits as he continues to expand the chain.

The group, which owns sites like  netted £1.6 million in pre-tax profits in the first half of the 2018, a 73% rise on the same period last year.

Despite a 8-point dip in stocks this morning to 235p per share, the Group, which owns premium-positioned sites like the Phene in Chelsea and Nell Gwynn in Covent garden, has seen them steadily increase by more than 65% since April 2018 as it continues a ‘strategic expansion’, which has seen the group open a further eight pubs so far this year.

The business is ahead of its strategy to double in size to 65-70 sites by 2021, it said, and thanks to a “softening” in the market and less competition from rival businesses, anticipates operating more than 50 pubs by mid-2019.

Analyst Liberum re-issued its buy recommendation on the chain’s shares this morning, and raised its price target by 5p to 655p per share.

The pub group was founded by Clive Watson in 2011, who floated the business on AIM in December 2017 with a view to raising £30m for the ongoing expansion. The group surpassed its target, raising £35 million with shares valued at 170p.

Watson, 56, previously owned Capital Pub Group, but sold the company to Greene King in 2011 for £93 million. His Chelsea pub, along with daughters Lucy and Tiffany, have starred in Channel 4 reality show Made in Chelsea, with Watson himself making a guest appearance.

The company currently owns 42 sites across the south of England, most of which are run on a freehold basis. It spent £12 million on nine pub acquisitions this year,

Watson said the expansion was “key to the strong progress we have made in the first half,” but added the group was one of many in the UK to benefit from both the World Cup and an unusually warm summer.

“We were well positioned to capitalise on the excellent weather and our sports orientated pubs have benefitted significantly.”

Part of City Pub Group’s success has been through its practice of buying properties which don’t attract goodwill payments, freeing up the opportunity to redevelop them into sites that chime with the company’s branding.

This, the board said, means that it is able to capitalise on the struggles faced by smaller businesses in the pub sector, such as “uncertainty about the outcome of Brexit and business rates.”

Meanwhile, larger chains are “consolidating their sites to focus on key markets,” according the Group’s results allowing, it to plug the gap.

“Already we are experiencing less competition for sites and we intend to take advantage of this.”

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