The spectre of inflation appears to be returning to the pub sector, with rising electricity prices and soaring rates hitting profits across Young & Co's managed pub estate.
Total group revenue rose 1.5 per cent to £67.2m in the six months to September 26, 2009, with adjusted pre-tax profits up 3.7 per cent at £12.3m. Adjusted earninsg per share rose 2.2 per cent, and the group proposed an interim dividend of 6.24p a share, up nearly two per cent.
The South London-based pubco said its managed pub arm, which accounts for 89 per cent of the group's total revenues, saw revenues up nearly two per cent, but despite maintaining a premium pricing policy across the business profits were dented by rising costs, notably electricity and rates, the group said. Operating profits were 0.8 per cent ahead, or £14.8m.
Chief executive Stephen Goodyear said the inflationary blip related to the first half and he expected costs to come down in the second six months of the financial year.
Young's said that managed pub wet sales performed well, up 2.3 per cent in total, flat on a like-for-like basis, while food revenue rose 3.1 per cent in total, but slipped 0.6 per cent on a like-for-like basis.
Food margins were up 2.9 percentage points, thanks to better buying power.
Young's' tenanted pub business, which accounts for 11 per cent of total turnover, saw tenanted volume and revenue was down 1.8 per cent and 0.5 per cent respectively, the overall tenanted division's operating profit being down 4.6 per cent at £2.8m.
This was in part due to a pub being transferred to the managed division and one being temporarily closed to make way for railway works in the Borough Market area of London.
Young's said its 40 per cent share in brewing partnership Wells & Youngs added £1.8m to its adjusted profits.
Goodyear said the group's net debt was down slightly at £64.9m.
"With gearing at 39.3 per cent, we have avoided the over-leverage that has blighted some operators in the pub sector," he added.
Young's would meanwhile "remain alert" to acquisition opportunities, he said.
While trading would remain "challenging", Goodyear said the first seven weeks of the second half saw total managed house sales up 0.8 per cent and 0.9 per cent on a like-for-like basis.