Join our community of smart investors

Young & Co hit by excise and rate hikes

The pub group faces a potential margin squeeze from higher duties, rates and wages
May 30, 2017

Incremental improvement has always been the order of the day at Young & Co's Brewery (YNGA) and the reported full-year figures appear to bear this out. Even with an increase in exceptional charges, the pub group's operating profits were 11 per cent to the good at £42.7m. A surge in cash flows helped to fund the 20th consecutive final dividend increase, while net debt fell to 1.9 times cash profits (Ebitda) from a multiple of 2.2 at the previous year-end. The value of the pub estate increased by nearly £40m and the managed house adjusted operating margin improved by 80 basis points to 24.6 per cent.

IC TIP: Hold at 1343p

Investors might want to raise a glass at this point, but the rate of sales growth at the managed estate slowed from the previous year, when beer sales were boosted by the Rugby World Cup. Nevertheless, the rate of 4.7 per cent, though impressive in itself, was a percentage point down on the five-year average. Of course, that could prove to be a blip, but Young & Co will have to contend with the recently announced hike in excise duty on alcohol, a rise in business rates equivalent to £1.8m overall and the next uplift of the National Living Wage.

Panmure Gordon expects adjusted profits of £39.4m for the March 2018 year-end, leading to EPS of 65p, against £40.4m and 66.4p in 2017.

YOUNG & CO'S BREWERY (YNGA)
ORD PRICE:1,343pMARKET VALUE:£605m
TOUCH:1,316-1,349p12-MONTH HIGH:1,370pLOW: 1,165p
DIVIDEND YIELD:1.4%PE RATIO:22
NET ASSET VALUE:1,010p*NET DEBT:26%

Year to 3 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201319421.433.814.6
201421126.645.815.5
201522736.155.216.5
2016 (restated)24632.854.717.5
2017 **26937.061.518.5
% change+9+13+12+6

Ex-div: 7 Jun

Payment: 13 Jul

*Includes both 'A' and 'B' shares **53-week period