Share price 1070p Mkt Cap £654m NAV / Share 1010p
Another strong set of numbers from Young & Co’s Brewery on Thursday. The Group has two main lines of business: Managed Pubs and Hotels and The Ram Pub Company which is Young’s tenanted pub operation.
Operating metrics look strong for the 53 weeks (note the extra week) with Revenues up 9.4% to £269m, operating profit up 12% to £46m and adjusted EPS +14% to 66.4p. The dividend was raised 6% to 18.5p, a 28% payout ratio, so room to increase the payout in my opinion should the number of inorganic growth opportunities slow. Importantly the dividend was raised for the 20th consecutive year. The NAV / share grew 8.6% to £10.10.
Evolutionary Growth
Youngs managed pubs are unashamedly upper end, individual pubs located predominantly in the South and South East of England with over 85% inside the M25. These 173 pubs benefit from a higher disposable income per head due to location and better transport links, which means they are less effected by drink driving restrictions as patrons can easily get the bus, tube, or taxi home. Managed revenues grew 7% overall and 4.7% on a LFL basis. This is below the 5 year average of 5.7% but 2016 is against a tough comparative which had the Rugby World Cup in 2015. This high level of LFL sales has enabled Youngs to predominantly offset hikes in the National Living Wage, business rates and increases in alcohol duty. I wouldn’t be surprised if the Govt taxed air in pubs soon, so high is the level of tax paid by pubs.
This contrasts sharply with Revolution Bars, which had a limp 1% LFL revenue growth in its most recent period and has had to take its profits forecast down. I think this shows the difference in an established pub format compared to a new bar concept and also the geographical differences in disposable income. The management team should also be applauded for their entrepreneurial spirit, creating pop up BBQs for pubs with small gardens and drinks menu innovation such as the Cocktail Club.
The quality of the estate is of paramount importance so it should be welcomed that £24m was spent on the managed pubs, with a further £12m on acquisitions of 3 new freeholds. Overall £38m was spent on the overall estate.
Tenanted Estate (Ram…
