YNGA Young & Co's Brewery Plc

YOUNG & CO.'S BREWERY, P.L.C.

INTERIM RESULTS FOR THE 26 WEEKS ENDED 30 SEPTEMBER 2024 

STRONG PROFIT PERFORMANCE

SUPPORTED BY CITY PUBS INTEGRATION 

1 Reference to an 'adjusted' item means that item has been adjusted to exclude non-underlying items (see note 2 for adjusted items and note 5 for earnings per share).

2 Net debt to adjusted EBITDA has been calculated based on the last 12 months' actual adjusted EBITDA of £98.2 million and £103.3 million including leases (see note 7 for net debt).

3 The interim dividend, in respect of the period ended 30 September 2024, is expected to be paid on 6 December 2024 (see note 6).

4 Net assets per share are the group's net assets divided by the shares in issue at the period end.

HIGHLIGHTS

·      Total revenue for the period up 27.2% to £250.0 million, and adjusted EBITDA up 23.2% to £59.0 million with managed house EBITDA for the period up 25.1% to £73.8 million.

·      Like-for-like revenue growth of 4.4% (5.2% excluding Easter impact) set against the challenging early spring and summer weather, supported by an excellent EURO 24.

·      Adjusted operating profit up £7.1 million to £38.1 million, driven by a sector leading margin of 15.2%, despite continued National Living Wage increases of almost 10%, utility costs and quarter one dual running costs from the City Pub Group acquisition.

·      £21.7 million of investment in the period, £19.4 million invested in our existing Young's estate, with a further £2.3 million invested in the City Pub Group estate. The value of our freehold estate as at 1 April 2024 was £1.0 billion.

·      Healthy cash generation alongside the planned selective disposal of six pubs has reduced the year end net debt position by £12.0 million to £255.8 million (£346.5 million including leases), with net debt to EBITDA at 2.6 times (3.4 times including leases), in line with our target post the City Pub Group acquisition.

·      Interim dividend of 11.53 pence per share, an increase of 6.0%, reflecting our progressive dividend policy.

·      Like-for-like managed house revenue for the last eight weeks was ahead of last year by 6.0%; and accelerating to 9.2% in the last three weeks, demonstrating the benefit of the Autumn Internationals.

·      Successful integration of City Pub Group into the Young's estate, head office synergies have already been realised, and further food and drink margin benefits progressing in line with the acquisition plan.

Simon Dodd, Chief Executive of Young's, commented:

"We've achieved a huge amount as a business in the last six months, reflected in another strong set of results. The City Pub Group integration has gone well, with the pub teams welcomed into the Young's family and all operational control brought together under one leadership team. Our teams have done a fantastic job, and I'm looking forward to seeing our pubs thrive together"

"I am very pleased with our performance and the progress we have made during the period, which has been achieved despite some challenges. The weather was frustrating yet again, with a wet spring and limited periods of prolonged sunshine during the summer months, however EURO24 and England's successful run to the final, provided a welcome boost to drink sales with our pubs performing exceptionally well on match days"

"The new Government's budget will result in significant increased costs for our industry in the near term through rises in National Minimum Wage and Employer's NI payments. We expect the cost impact to be approximately £11 million on an annualised basis from next April. We will work to see how we can mitigate these headwinds without passing on all the cost to our loyal customers. We would like to see certainty and delivery of real business rate reform which will benefit all hospitality businesses"

"Given the quality of our estate and on-going strategy, we remain confident in our ability to deliver long-term growth, including achieving the planned synergies from the City Pub Group acquisition."

For further information, please contact:

Young & Co.'s Brewery, P.L.C.                                                          020 8875 7000

Simon Dodd, Chief Executive Officer

Michael Owen, Chief Financial Officer

MHP Communications                                                                       07736 464749

            Tim Rowntree/ Robert Collett-Creedy

Peel Hunt (NOMAD & Joint Corporate Broker)                               020 7418 8900

            George Sellar/Lalit Bose

Stifel (Joint Corporate Broker)                                                        020 7710 7600

            Erik Anderson/Francis North

INTERIM STATEMENT

I am very pleased with the performance of our business during the first half of the year. EURO24, and particularly England's successful run to the final, provided a welcome boost to drink sales with our pubs performing exceptionally well on match days. As always, the weather played its part, with spring generally wet, very limited periods of prolonged sunshine during the summer months and September unseasonably rainy and cold compared to last year's brief heatwave. Also, the early Easter meant both Easter bank holiday weekends fell in the prior year.

Overall, we delivered a strong performance for the period, with total revenue up 27.2% to £250.0 million (2023: £196.5 million), driven by a like-for-like performance of 4.4% (5.2% if you exclude the Easter weekend impact), underpinned by continued investment in our existing estate and the full period's revenue from the City Pub Group. These results are a testament to the quality and dedication of our people, and the value added by recent and consistent investment. It demonstrates that our strategy of running premium, individual and differentiated pubs continues to deliver.

Since acquiring the City Pub Group in March, our primary focus has been on integrating the pubs into the Young's estate. Although it is still early days, the integration is complete, bringing all operational control under one Young's structure. When the deal was announced, we outlined several synergies and operational benefits that we aimed to achieve. We have delivered the planned £6.1 million annual overhead synergies, now operating with a single head office and common IT systems. Purchasing synergies are also progressing well, with new beer supply agreements introduced at the end of September on conclusion of the existing contracts and harmonisation on food purchasing underway. Naturally the full operational benefits will take longer to achieve, however we are approaching these in a planned way, ensuring we preserve what's great and learn from the City Pubs, combined with leveraging our best-in-class operating practices, booking platforms and digital technology.

As expected, the integration of the City Pub Group has had a minor negative effect on margins during this period. The purchasing synergies will not commence until the second half of the year, and operating profit for the first quarter has been impacted by £1.7 million due to maintaining the two head office structures. Despite this one-off short-term acquisition impact, the adjusted operating margin of 15.2% remains one of the highest in our sector.

The City Pub Group acquisition was the largest in our history and it was important that we prioritised its integration into Young's ahead of investments and further acquisitions. However, we are committed to maintaining a premium, well-invested estate, which is core to our continued strong performance, and our strong financial position enabled us to invest £21.7 million during the period across our existing Young's estate plus several targeted City Pub investments.

Our achievements this period are fundamentally due to our teams. That's why it's so important for us to have the best possible people working throughout the group. We focus on providing high-quality training programmes and development opportunities to give our people the chance to flourish and further their careers within Young's, and I am extremely proud of the fact that during this period 42% of our operations managers, 86% of general managers and 57% of chefs have been developed and promoted internally.

I would like to take this opportunity to welcome Ian Dyson, who joined the board as a non-executive director on 2 September 2024, with a strong track record in consumer facing industries and PLC experience.

In line with our progressive dividend policy and strong financial performance, the board has decided to raise the interim dividend by 6.0% to 11.53 pence per share (2023: 10.88 pence per share). This is expected to be paid on 6 December 2024 to shareholders on the register at close of business on 22 November 2024.

BUSINESS REVIEW

Total managed house revenue, supported by the City Pub Group acquisition, was up 27.3%, and 4.4% on a like-for-like basis (5.2% excluding the Easter weekend impact) compared to the same period last year. Young's now has a total managed estate of 278 pubs, this includes 55 pubs with rooms and a total room count of 1,051. This translates to a combined revenue mix of 63% for drink, food at 29% and accommodation growing to 7%.

Pub-level synergies from acquiring the City Pub Group will be realised in line with our plan as we enter the second half of this fiscal year. The combined estate has been navigating significant cost pressures, notably the National Living Wage, which rose by another 9.7% year-on-year, and utilities. The Ram Agency, which offers team members the flexibility to select shifts that suit their needs, while helping us reduce dependency on agency staff and manage our cost base, has continued to help mitigate some of these cost challenges. The Ram Agency now accounts for almost 10% of total employees, covering on average across the period 2,880 shifts and 23,812 hours per month. We have yet to implement this across the former City Pubs estate but will do so to support profit growth in the next fiscal year.  

Despite on-going headwinds, total pub EBITDA was up 25.1% to £73.8 million (2023: £59.0 million), Young's pubs delivering £62.1 million and City pubs achieving £11.7 million. On a like-for-like basis, pub EBITDA was up 3.5% to £60.1 million. The total adjusted operating profit for our managed estate was £53.7 million, ahead of last year by £10.9 million, driven by both our like-for-like estate, individual pub acquisitions and the City Pub acquisition.

The poor spring weather combined with the lack of an Easter weekend in the period, meant that the year got off to a much slower start than the prior year. This was further compounded by very few prolonged periods of warm sunshine during the summer months.  However, EURO24 and England's magnificent journey through to the final added a welcome boost, driving footfall during the key games with our pubs performing exceptionally well. During the key match days Young's like-for-like pubs sold over 850,000 pints, delivering an additional £2.8 million in revenue for the seven England matches, with Estrella, Peroni and Guinness being the drinks of choice. The prior period investment in our pubs was also vitally important in delivering true like-for-like volume growth, with schemes at the Guinea (Mayfair), reopening of the Defector's Weld (Shepherd's Bush) and in particular the Leather Bottle (Earlsfield), which was able to reopen in time to capitalise on EURO24, performing extremely well.

Our Young's rooms revenue continues to deliver a solid performance with like-for-like growth of 2.7%. This builds on last year's strong performance following the launch of our new rooms strategy, 'Young's Rooms', which celebrates the enjoyment and unique experience of staying in a pub. During the period we continued our investment in pubs with rooms, starting schemes at The Windmill (Clapham), Brewers Inn (Wandsworth) and Coach and Horses (Kew), which was crucial to support future growth, but with an effective 17-week closure period, naturally impacted like-for-like performance during the period. Our like-for-like occupancy, which includes the closure periods, dropped marginally by -0.9%, however with an increase of £4.81 to average room rates, overall RevPAR increased by £2.68 to £88.89. Including City Pubs revenue moves the total rooms growth during the period to 37.1%, reflecting the additional 240 rooms from the City Pubs acquisition.

England's journey to the final of EURO24 boosted drink sales and helped deliver 2.8% like-for-like volume growth across the period with total like-for-like drink sales up 5.3% (6.1% excluding Easter impact). We continue to look at ways to invigorate the category, introducing new exciting beers, and have added Deya, Jubel and several seasonal local beers to our range so far this year. However, once again, it is Guinness growth that leads the way, demonstrating that it is genuinely a drink for any occasion and any season, with total volume in the Young's pubs up 29.7%. Compared to the same period last year, total drink sales were up 28.0%, reflecting the added benefit of the City Pub acquisition.

Our Spritz summer cocktail menus this year introduced several new drinks to the Young's bar including Allora Spritz, an aperitivo inspired by Procida, Italy's island of lemons and the hugely popular, modern classic, Hugo Spritz. We also elevated our range of low and alcohol-free drinks to offer customers greater choice for different summer drinking occasions with the Elderflower Elixir, a popular choice containing less than one unit of alcohol and the Pentire 0.0 Coastal Breeze complementing our already very popular, Amalfi Spritz.

Our food sales continue to grow, up 2.9% on a like-for-like basis (3.8% excluding Easter impact) and up 22.8% in total including City Pubs. Our overall food strategy remains unchanged, and within this we have a number of pubs that continue to shine. Both the Oyster Shed and Smiths of Smithfield have retained their one rosette and The Alma, which has seen a 570% increase in its Sunday roasts sales, was nominated by Pierre Koffman as the best Sunday roast in London. Our Executive Chef team continue to support our pubs, helping to mitigate food inflation as far as possible by taking a proactive approach to using seasonal and locally-sourced British ingredients. We are hopeful that as we progress through the rest of the year, we will continue to see this ease, with recent food costs flat compared with this time last year.

With a commitment to give back to our communities, we are in the second year of our Wooden Spoon partnership and have already raised £175k of our £200k target. Fundraising for Natasha's Allergy Research Foundation, Dogs for Good, School of Hard Knocks, Maddy's Mark and Pass the Plate is well underway, including endurance walks, dog pageants, rugby player hosted dinners, sustainable fashion swap shops or supplier supported supper clubs.

Following the completion of the City Pub Group acquisition in March, it has naturally been a quieter period for investment. Nevertheless, during the period we have invested £19.4 million in our existing estate and an additional £2.3 million in City Pubs. In July, we reopened the Red Lion (Radlett) after a major scheme that included a complete redesign and refurbishment of the bar area and full rooms refresh, creating a pub with rooms that the local area can be proud of. Another major scheme that was completed during the period was the Albert (Kingston), closed for 8 weeks before reopening showcasing a traditional pub feel, unique touches and a new outside terrace.

Elsewhere, we are on site with major schemes at the Hope and Anchor (Brixton), Libertine (Bournemouth), Brewers Inn (Wandsworth) and Coach and Horses (Kew). Of the City Pubs, we have invested in the Roundhouse (Wandsworth), Phene (Chelsea), Market House (Reading) and are currently on-site at the Pontcanna Inn (Cardiff). These investments start the process of ensuring that City Pubs are elevated to the very highest standard. Consistent with our goal to reduce debt and focus on future growth, we disposed of six non-core pubs during the period for total proceeds of £5.8 million.

FINANCE

At the period end, our debt reduced by £12.0 million to £255.8 million from £267.8 million at the year-end, driven by continued strong cash generation of the combined business and the planned disposal of 6 pubs. Our net debt including lease liabilities sits at £346.5 million (1 April 2024: £359.6 million). Based on the last twelve months' adjusted EBITDA of £98.2 million (£103.3 million including lease liabilities), our net debt to EBITDA ratio has reduced to 2.6 times (1 April 2024: 3.2 times). Our net debt to EBITDA ratio including lease liabilities has reduced to 3.4 times (1 April 2024: 3.9 times). Our drawn down net debt of £258.9 million (including amortised fees) provides us with debt headroom of £76.1 million. 

The adjusting items of £3.0 million (2023: £3.5 million) relate to £2.9 million restructuring costs as part of the City Pub Group acquisition, fees related to the acquisition of £0.9 million, and City Pub Group related integration costs of £0.3 million. This was offset by a gain on disposal of properties of £1.1 million.

The methodology and assumptions prescribed for the purposes of IAS 19 Pensions accounting mean that the balance sheet surplus or deficit are inherently volatile and will vary greatly according to investment market conditions at each accounting date. In the interim period the net pension scheme surplus has increased to £1.1 million (1 April 2024: £0.1 million).

Our adjusted earnings per share is up 1.8% to 36.72 pence (2023: 36.08 pence), reflecting the strength of our top-line trading performance. On an unadjusted basis, earnings per share is 32.21 pence, up 8.3% (2023: 29.75 pence).

CURRENT TRADING AND OUTLOOK

Recent trading has been strong, with like-for-like trading in the last eight weeks up by 6.0% and accelerating to 9.2% in the last three weeks. We've welcomed back the rugby Autumn Internationals, boosting sales in our south-west London heartland. Christmas bookings are already looking strong, with confirmed bookings up 33% on this time last year, and a real focus on maximising the benefit of City Pubs across the festive period.

Since the period end, we have opened the Tellers Arms, a former bank which has been transformed into a beautiful pub with a rooftop terrace and nine boutique bedrooms right in the heart of Farnham. In the first seven days of opening it took just over £73k. Later this year we will also open Tattenham Corner, overlooking Epsom racecourse, which has been closed since its acquisition last year. The continued investment in our existing estate will also see us complete several major schemes over the next month, including the Hope and Anchor (Brixton), Libertine (Bournemouth) and the rooms refresh at The Windmill (Clapham).

In the second half of the year, we will see further benefit from the City Pub Group acquisition, with the new beer range contributing to improved margins, new food menus and improved operational rigour ensuring we are on track to achieve our planned synergy benefits in full. We will also continue with our targeted investment programme across the entire combined estate, balancing our focus on reducing debt levels and our long-term winning strategy of operating a premium, individual and well invested estate.

The good start to the second half of the year and our future plans provide confidence in our winning strategy. However, the macroeconomic environment together with the latest government budget and the impact this could have on consumer sentiment remains unpredictable. Yet again, we are very conscious of the significant impact new underground rail strikes could have on trade in the lead up to Christmas, a key time of year for the hospitality sector. Despite this we remain focused on delivering the benefits from the City Pub Group acquisition and building on our premium position within the pub and bedrooms sector and are confident in our winning strategy of operating premium, individual and well-invested managed pubs and bedrooms.

Simon Dodd

Chief Executive

14 November 2024

Group income statement

For the 26 weeks ended 30 September 2024

Group statement of comprehensive income

For the 26 weeks ended 30 September 2024

Group balance sheet

At 30 September 2024

Group statement of changes in equity

For the 26 weeks ended 30 September 2024