Young's is prepared to grow, but at a measured pace

Despite being flush with cash following the £70m sale of its famous Wandsworth brewery site nearly three years ago, Young & Co, the South London pub operator, said it had seen what it called a "sizeable offer" it made for a package of pubs rejected.

Stephen Goodyear, Young's chief executive, would not comment on the identity of the company with whom Young's placed its bid, nor did he divulge the sum offered.

However, the smart money is likely to have been on Punch Taverns, which has been selling what some describe as its 'crown jewels' in the past few weeks in order to raise cash to pay off some of its debt.

Punch has sold more than 40 pubs recently to the likes of Fuller's, Shepherd Neame, Charles Wells and Frederic Robinson. Yet while seeking to raise funds, Punch is understood to be driving hard bargains before it will part with its top-end assets.

Goodyear was being tightlipped as Young's announced its results for the year to March 28, 2009, which saw overall group turnover rise 3.2 per cent to £126.1m, with operating profit slightly lower than last year at £20.5m.

Adjusted pre-tax profit was 3.1 per cent higher at £19.2m. However, an adjustment relating to a write-down in the value of some of its pubs meant pre-tax profits slumped nearly 64 per cent to £4.2m. The group said it would be recommending a final dividend of 6.63p a share, two per cent higher than last year.

In a position to acquire

Although its recently-tabled bid for the pubs was knocked back, Young's was still in a position to fund acquisitions, Goodyear said. However, he noted the group would not pay over the odds for pubs, adding there was "still caution in the market".

"We made a sizeable offer that was rejected. We are in a good position financially and there are no barriers to further borrowing," he said, noting that group net debt was up £15.3m on the year, at £65.3m.

"However, it is not sensible to chase assets and overpay," he added.

Goodyear said a £10.7m write-down was related to 28 pubs, while the book value of the Young's pub estate was now around the £320m mark, he added. Young's said that while it believed the overall worth of its estate was higher than the 1997 values carried on its books, it had taken the decision to write down the values of the pubs, leaving the book value of its estate at £262.5m.

Revenues across its managed pubs rose 4.5 per cent to £111.4m, "reflecting the acquisitions and investments made in the business over recent years", the group added.

Young's said same outlet like-for-like sales were flat compared with last year, with margins predictably hit by rising costs and increases in excise duty.

Its 122-strong managed pub estate saw operating profit for the year at £25.9m, nearly £1m lower than in 2008, while its earnings before interest, tax, depreciation and amortisation (EBITDA) was little changed at £32.5m.

After spending nearly £10m on upgrading existing and newly acquired pubs in 2008/09, Young's said it planned to scale back capital investment in the coming year.

Young's tenanted pub business saw revenues down 3.3 per cent at £14.3m and operating profit 2.7 per cent lower at £5.8m. Tenanted pub EBITDA was unchanged at £7m.

Self help

On the thorny question of support for tenants in the current recession Goodyear said where licensees were in trouble he was confident his team was on hand to help. But he added that while such support was available, there needed to be "a degree of self-help evident among our tenants".

Overall food sales were now at 26 per cent of total revenues, although the group said it had recently revamped its menus in response to customers' desire for value-for-money offers and to cut down on the number of different menus across its estate.

The 40 per cent stake held by Young's in Wells & Young's, its brewing joint venture with Bedford brewer Charles Wells, contributed £1.9m to Young's adjusted pre-tax profit, a figure the group said was "in line with our expectations".

Sales within Young's managed pubs in the first 13 weeks of the second half were three per cent ahead of last year, "albeit 1.3 per cent behind on a same outlet like-for-like basis", he said.

Noting the potential for another government-backed probe into the beer tie, Goodyear said Young's "did not believe that there is any justification for yet another expensive and distracting enquiry, particularly in these difficult times".

Results at a glance

Turnover: £126.1m +3.2%

Adjusted pre-tax profit: £19.3m +3.1%

Adjusted earnings per share: 27.77p +5.7%

Final dividend per share: 6.63p +2.0%