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Young & Co caters to premium tastes

The pub group delivers sales growth in drinks thanks to premium options, as well as in food despite a competitive environment
May 24, 2018

Consumer tastes can be fickle, but Young & Co (YNGA) has done well to keep up, especially on the drinks front. UK punters’ ongoing love affair with 'mother's ruin' boosted gin sales by a fifth over the year, while cocktail sales increased by 46 per cent. On a more wholesome note, revenue from draught beer improved by 28 per cent thanks to a greater selection of craft beers. Overall, total drinks sales increased by 7.9 per cent. And despite a competitive market for restaurants, food sales were up by 4.9 per cent thanks primarily to the popularity of brunch.

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In a welcome departure from recent updates from pub companies, Youngs did not explicitly mention the impact of snow. But the group certainly wasn't immune to cost increases. Around £4m in additional costs were incurred due to a combination of the national living wage, the apprenticeship levy and rising business rates. Despite the increased burden, operating profit was up 1.9 per cent to £43.5m.

Last November, Young & Co acquired Smiths of Smithfields in London, and chief executive Patrick Dardis said he hopes the location will become the group’s busiest pub by 2020. Young now has 255 pubs in its estate, edging up slightly from the prior year, although Mr Dardis said he’s focused on avoiding the mistakes made by other pub groups, notably over-expansion and poor debt management. To bear this out, Young has one of the lowest leverage ratios in the sector at two times cash profits.

Analysts at Panmure Gordon expect pre-tax profit of £43m in the year to March 2019, giving EPS of 71p, compared with £41m and 67.7p in FY2018.

YOUNG & CO (YNGA)   
ORD PRICE:1,650pMARKET VALUE:£722m
TOUCH:1,650-1,670p12-MONTH HIGH:1,655pLOW: 1,286p
DIVIDEND YIELD:1.2%PE RATIO:27
NET ASSET VALUE:1,123pNET DEBT:26%
Year to 2 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201421126.645.815.5
201522736.155.216.5
201624632.854.717.5
201726937.061.518.5
201827937.661.619.6
% change+4+2-+6
Ex-div:7 Jun   
Payment:12 Jul