Young & Co
Non Voting shares: 1020p
A Shares 1321p

Young & Co's H1 results last week were rather overshadowed by The Donald booking his stay for the next 4 years in the White House. However Young's results themselves were dependably good, just like the beer Young's serves.

Around 90% of Group operating profits are generated by the 172 managed houses and LFL sales rose 5.5% helping to offset increases in the cost base from the National Living Wage. This is the 5th year in succession that LFLs in the managed estate have risen over 5% and that is despite the positive effect of the Rugby World Cup in the prior year. The tenanted division returned to growth with LFLs up 3.8%. Overall turnover grew 7.7% after the effects of new openings and individual pub acquisitions is taken into account.

Group Operating margin edged up to 18.3% from 17.9% and EPS grew 7% and the dividend was raised 6%, a 20th consecutive raise at the interim stage. Pity not all companies are this consistent.

The cashflow and balance sheet really stand out to me compared to other pub companies. Net debt at £127m fell by £3m as the Group generated cashflow, despite investing 2x Depreciation into the estate and buying more pubs. Debt to annualised EBITDA is 2.1x and Gearing is only 28%, so this is a very conservatively financed business. Compare this to Greene King with 5x ND/EBITDA or Enterprise Inns with £2.7bn of debt and EBITDA of only £297m = 9x !!

Valuation has risen since I first wrote about Youngs, with the Non Voting shares now on 17x PE March 2017, rather than the 14x in prospective in March 2015. However for me, I continue to own the Non Voting shares given its a cash generative business that generates enough cash to pay off its loans, invest and improve its estate, pay a dividend and buy new pubs. It is also asset backed, trading on roughly 1.1x TNAV. Again I think the TNAV is likely to prove v conservative, so I feel well underpinned here. A good share for an ISA in my opinion. Just leave it and come back to it in 3 or 5 years time.

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