Young & Co, the London brewer and pub operator, has unveiled a 72.1% surge in first-half operating profits to £12.1m on sales up 11.9% to £63.9m.
At its managed arm, which comprised 112 houses, sales rose 13.6%. Like-for-like sales growth was 5.7%, or 1.9% on an uninvested basis. It said the figures masked significant monthly variations, with a strong start to the half offset by the poor summer weather.
The company said there had been a slight slowing of uninvested like-for-like sales growth in the six weeks since the half year, to 1.4%, although on an invested basis, like-for-likes had chased ahead 8.3% since the six months to September 29.
The company said it had detected a slight softening in consumer confidence and also attributed the growth fall to a lack of autumn rugby internationals and customers “keeping their powder dry” ahead of the Christmas period.
A factor in building managed-house revenues was the “premiumisation” of the pub estate and a move to food. During the period £4.3m was spent upgrading 10 pubs. Sites refurbished and re-opened more than 12 months ago were delivering a cash return (CROCI) of 26.4%.
Food sales grew 23.9% during the period and now accounted for 24.5% of the sales mix in managed pubs. This growth had helped offset beer sales that were down between 2% and 3%, it said.
“This is part of an ongoing trend,” said Stephen Goodyear, chief executive. “It’s a mix change that you can visibly see across our business, with greater volumes of food, wine and soft drinks. It’s still a bit early to tell whether or not smoking will have a greater impact on this changing mix.”
Young’s was using individual pub websites to drive footfall at its sites, with 56 managed houses now hosting their own websites. It had collated 100,000 individual email addresses and despatched more than five million emails to customers in the period. This resulted in more than 800,000 “hits” on its websites, a 185% increase over last year.
It has also upped its investment in consumer public relations, with a focus on promoting pubs after refurbishment.
Acquisitions remained a priority, the group said, although were increasingly difficult to deliver. During the period it acquired one freehold pub – the Rose & Crown in Farnborough – for £3.5m.
The company was also interested in bolt-on acquisitions. Peter Whitehead, finance director, said that the company could fund a deal of a “couple of hundred million”, dependent on the target. “This is opportunity driven,” said Goodyear. “We don’t want to overpay and what we don’t want to do is lower the batting average of our current business.”
Debt currently stood at £94.5m. This would fall to £35.8m after the company received the £58.7m final payment from the sale of the Wandsworth brewery, due in January. To avoid significant capital gains issues – the brewery was sold for £69m against a book value of some £11m – the majority of the proceeds would be reinvested in the business. Since the sale was agreed, a total of about £39m had been spent on acquiring and upgrading pubs.
At Wells & Young’s Brewing Company (WYBC), the joint venture formed with Charles Wells following the sale of the Ram Brewery, sales were £108.6m, with profits of £3m, before exceptional costs of £2.1m. Young’s share of the profit was £1.2m. WYBC sold 458,000 barrels during the period, of which 255,000 were brewed in Bedford.
It said the performance of WYBC, in which Young’s owns 40%, came in a transitional year that included the integration of beer portfolios and workforces. It also came in a challenging year for the beer market with the costs of raw materials and energy rising, compounded by a poor summer.
In its tenanted division, revenues rose 1.6%, with like-for-like growth up 0.8%, or 0.5% on an uninvested basis. Operating profit increased 35.9%. A drive towards leasing, where appropriate, was underway with six pubs now operating under 20-year lease agreements and a further eight under review.
During the period, three pubs were transferred from managed to tenancy, taking the division to 104 pubs. Four London sites were currently being refurbished.
The company said it was halfway through a five-year refurbishment programme at its hotels arm that would see all 359 rooms upgraded. During the six months 70 rooms were refurbished, with overall RevPar (revenue per available room) rising 14% to £42.59. It said it was looking at various projects that would add substantially to the number of rooms across its estate.
In an announcement to the stock market, the company said: “The second half has a number of uncertainties. How the smoking ban might affect trade over the colder winter months remains to be seen.
“It has also still to be seen whether the summer’s economic problems result in a dip in consumer confidence, which in turn could affect leisure spending.”
Despite this the company said it remained confident in the outlook for Young’s for the year as a whole.
