The City Pub Group PLC’s (LON:CPC) recent full-year results, whole historic, are a reminder of the “strong trajectory” the company is on and can be expected to return once lockdown restrictions are eased, according to the company’s house broker.
In a note on Friday, analysts at Liberum also said the company had “the firepower to take advantage of new opportunities that this crisis will inevitably present, while remaining conservatively leveraged”, and retained their ‘buy’ rating on the stock alongside a reduction in the target price to 135p from 155p.
“With a strengthened balance sheet and streamlined business, we believe it is well placed to capture share with its large outlets benefiting from outside space and customers’ desire to ‘stay local’”, the broker said, adding that it had identified the company’s accommodation offering as a “key growth area”.
“The group has undergone significant growth in its accommodation offer with total bedroom increasing to 172 in FY19 (FY18: 54). This has been a purposeful strategy by the board as it delivers an additional revenue stream with little additional cost, therefore generating high margin returns”, Liberum said.
“Furthermore, the premium accommodation product is complementary to the existing pub business and increases cross-sell opportunities”, they added.
Looking to the easing of lockdown, while Liberum said the shape of demand and footfall for pubs once they reopened was unclear given likely government restrictions and low consumer confidence, City Pubs had “several characteristics that should see it comparatively outperform peers”.
“Its pubs are located in Cathedral cities, with multiple pubs trading in areas where existing pubs already trade, resulting in increased presence. With a societal shift to increased working from home and less desire to travel far (at least in the short term), the group will benefit from its presence outside of central London and its local feel”, analysts said.
The broker also added that 40 of the company’s 48 pubs had “large beer gardens or significant outdoor space, which will attract safety conscious customers in the short term”.
“Additionally, pubs with outdoor space may see restrictions lifted earlier than purely indoor hospitality venues”, Liberum concluded.
Shares in The City Pub Group were 0.5% higher at 92.5p in mid-afternoon trading on Friday.
Published at Fri, 12 Jun 2020 13:06:00 +0000-City Pub Group on “strong trajectory”, has firepower to target new opportunities in post-pandemic world, says house broker