Young’s boss slams ‘ludicrous’ £5m business rates increase: Young’s chief executive Patrick Dardis has criticised a “ludicrous” £5m increase in the company’s business rates bill, a 45% increase on existing levels. The company’s business rates bill will increase by £1.8m in the first year and rise by a total of £5m over five years. He told Propel: “It’ a ludicrous increase – just mad. It’s purely a tax on good businesses that have invested heavily. A £5m increase is the most significant increase I’ve seen in my time.” Dardis said the company will take steps to mitigate some of the increase but part of it would need to be passed on to customers. Panmure Gordon leisure analyst Anna Barnfather said: “We are leaving our 2017E forecasts unchanged but moderating our margin assumptions for 2018E to reflect the greater than anticipated increase in business rates, resulting in a 2.5% profit before tax downgrade.” She added: “Young’s maintains its solid growth trajectory with a well invested freehold estate, backed by ongoing innovation and operational improvement. We maintain our ‘Buy’ recommendation.” Meanwhile, Young’s has moved its Geronimo gastro-pub estate back into growth after re-asserting its British menu credentials. Dardis said: “We thought Geronimo’s direction (last year) wasn’t working and we made some changes at board and senior management level. There is an incredible amount of enthusiasm back for the brand. (We thought) the menu had got a little too French for our liking and we have steered it back.” Young’s reported that half of its 487 bedroom stock is now of a boutique standard – Dardis told Propel that he thought that 75% of the bedroom stock would eventually move to boutique quality. Dardis reported that its first pub in the Cotswolds, the Bell in Stow, was trading at 15% to 20% above the very high levels it achieved before acquisition under two entrepreneurial owners. Its second pub in the Cotswolds, the Blue Boar in Chipping Norton, has also opened to a very strong start. The company is due to open its fist pub in Cambridge in March, located on a business and residential park – and the company would continue to stretch its geographic reach outside of London. The company has also developed a street food variant of its Burger Shack offer, Shack-in-a-Box, which can be erected in an hour to increase capacity in its smaller pub gardens at peak periods. Barnfather added: “Current trading shows 3.0% like-for-like growth, an impressive result given the challenging prior year comparatives (when the Rugby World Cup drove 9.6% like-for-like increase). While the top line outlook remains unchanged, inflationary challenges are mounting with a larger than anticipated step up in business rates adding to the pressures already been felt from the National Living Wage and Apprenticeship Levy. Young’s expect an increase to its rates bill of £1.8m in 2018E and we assume that approximately half of this can be offset through on-going innovation and efficiencies. Examples include; ‘Young’s on Tap’ and, Burger Shack driving sales; and labour scheduling and procurement plans defending margins. Our FY17E forecasts remain unchanged and are predicated on managed like-for-like growth of 4.3% combined with the benefits of 53rd week (2.0%), 50 basis points plus margin improvement to give profit before tax of £39.2m and earnings per share of 64.1p. We are however adjusting our FY18E profit before tax forecasts downwards by 2.5% to reflect the greater than expected increase in business rates. We now expect profit before tax of £39.2m (down from £40.0m) and earnings per share of 64.6p (from 65.5p) – cushioned by a lower tax charge. While flat(ish) year-on-year, underlying growth on a 52 week basis remains robust at 4.0%. Young’s trades on a 2017E price-to-earnings ratio of 20.6 times and an EV/Ebitda ratio of 11.3 times – this is a premium to the pub and restaurant sector average of ratio of 10.0 times, however we believe this is justified reflecting its strong asset backing, low leverage (net debt/Ebitda 2.1 times) and robust trading (average like-for-like more than 5% over last three years.”

Hall & Woodhouse reports profit rise: Dorset brewery Hall & Woodhouse has reported a pre-tax profit of £8.04m was achieved in the 52 weeks to 30 January 2016, up from £7.7m in 2014/15. However, turnover dipped slightly to £108.6m, from £109.5m the previous year. This was the result of a 52-week accounting period in 2015/16, compared with 53 weeks the year before. During the year, the company reported property sales of £6.6m, up from £5.6m, including three further flats developed at St Georges House in Twickenham, as well as a number of pubs not deemed viable in the long term. Hall & Woodhouse, in partnership with the Duchy of Cornwall, also began construction of a new public house in Poundbury, Dorset, named The Duchess of Cornwall. The pub opened its doors during 2016. In his statement accompanying the accounts, chairman Mark Woodhouse said: “I am pleased to report that your company has achieved another year of solid growth with ongoing profits before tax up by 4%. We continue to invest heavily in both our business partnership and managed estates. The investment in the new brewery and offices is nearly complete and we are very much enjoying being in our new home.” Following the year end, the company reopened the Brewery Tap brewery hall and shop in February as part of the wider redevelopment of its facility.