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UK: Young & Co managed to boost beer sales despite smoking ban
Hard-drinking Londoners and banning smoking in a quarter of its managed pubs helped boost like-for-like sales at pubs group Young & Co, which it said rose almost 10 percent at the start of the year, Reuters reported May 31.
Young's has undergone drastic change recently, selling the brewery building it had occupied for almost two centuries, and putting its brewing operations into a joint venture, Wells & Young's, in which it has 40 percent.
The London firm, which runs 216 pubs, said on Thursday adjusted full-year pretax profits rose 18.5 percent to 12.0 million pounds ($23.69 million) in the 12 months to end March, while it raised its dividend 50 percent to 37.35 pence a share.
On a like-for-like basis, Young's said sales in the first eight weeks of its new financial year rose 9.6 percent.
Pub firms in London have seen brisk trade, as city bonuses and spiralling house prices keep its inhabitants happy and an unusually warm April has encouraged people to head to the pub for a drink to quench their thirst.
"London is booming. The Food & Drink Company and M&B (MAB.L: Quote, Profile, Research have both confirmed that view in the last two weeks but a 9.6 percent increase uninvested is particularly good." said BlueOar Securities analyst Mark Brumby.
Young's has spent around 5 million pounds over the last couple of years refurbishing its patios, beer gardens and outside areas ready for a smoking ban in England, which comes into force on July 1.
Despite industry fears a ban would hit pub profits by alienating smokers, Chief Executive Stephen Goodyear told Reuters that revamping pubs and then banning smoking had fuelled a substantial rise in sales in those pubs.
"Where we have already gone non-smoking it's been to our benefit."
"They (pubs that have been revamped and have gone non smoking) are within those where we have got 70 to 80 percent growth," finance chief Peter Whitehead said.
"Where we have gone no-smoking but not invested any money they are probably in line, I don't think we have gained anything but we certainly haven't lost anything ... It's quite encouraging," said Goodyear. He said the firm would sell pubs that suffered as a result of the smoking ban.
"We look at every pub on an individual basis ... We haven't got many duffers but if they are not performing we are quite happy to let them go."
He said current prices for pubs were corseting any acquisition ambitions, as a rush to buy up pubs with gardens inflated prices,
"We've got the firepower if we need it but the market is pretty top-heavy at the moment, prices are high."
Goodyear also ruled out splitting the group to take advantage of low-tax REIT status for property companies.
"I don't believe it's what the great bulk of our shareholders are interested in."
"You'd have to move the properties out into a listed vehicle ... I can't see a structure that will allow you to continue with property and be on AIM."
Young's said cash receipts from the sale of its Ram Brewery site in Wandsworth, south London, are due in the current financial year.
The shares, listed on London's Alternative Investment Market, have risen around 40 percent in the last year, were trading 3,488 pence at 0855 GMT, valuing the business at around 384 million pounds.
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