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04 June 2020

A Pint in Waiting

Saul Fulda, Investment Analyst, Redmayne Bentley

Those craving a pint are being made to wait until 3rd August according to Young & Co’s Brewery latest set of results. The full-year results only included ten days of pub closures, and as such, should be taken with a pinch of salt, but the company still estimates that closures have resulted in a £13m shortfall in revenue and a £7.7m hit to profits, leaving a bitter taste.
 
Nevertheless, the business has exploited the Government’s furlough scheme, together with the business rates holiday, with the latter due to save Young £14.5m. Alongside the scrapping of the final dividend, the new £50m banking facility, and the £30m commercial paper issue, this should diminish investors’ worries surrounding liquidity. 

Management have been stressing the importance of the five pubs acquired in early March, but although they may fit with Young’s premium offering, the timing is questionable - preserving capital is key, especially with net debt of around £200m. 

Social distancing will provide a challenge once pubs reopen, but under a one metre rule, management seem to believe pubs could reach around 70% of capacity which should be more than enough to achieve breakeven. The group has set the 2022 full year as the date for normalisation, and although the outlook remains clouded, this seems sensible. 

Young’s simple strategy, premium exposure and flexible capital structure, together with its impressive long-term track record in growing sales, profits and margins, should ensure it regains momentum in the long run. 

Please note that investments and income arising from them can fall as well as rise in value and you may lose some or all the amount you have invested. Past performance and forecasts are not reliable indicators of future results or performance. Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the companies mentioned. 
 
A Pint in Waiting
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