YOUNG & CO’S BREWERY (YNGA) – Leisure
| Price: 77p -2% | P/E: 12.5x |
| Market Cap: £440m | Yield: 3.1% |
Like FULLER’S (FTSA), AIM-listed pub group Young’s is enjoying a buoyant 2025, posting record revenue and operating profit for the six months to 30 September.
LFL sales were up 5.7% (vs 4.6% at Fuller’s) thanks to a combination of a well-invested premium estate and good weather during late spring and early summer.
Good cash generation together with working capital timing and a delayed investment plan has allowed the group to reduce debt by £26.5 million to £221.8 million excluding leases, which equates to gearing (a net debt to EBITDA ratio) of two times, which is line with the firm’s capital allocation framework.
After a 6% increase in the dividend, the firm has decided to return £10 million to investors through a share buyback.
Our View
Young’s shares were up for most of the day but finished down, and we think the issue is the market doesn’t agree with the capital allocation policy.
Management insists the quality of the estate justifies the gearing, but net debt excluding leases is half the market cap and if anything buying back £10 million of shares exacerbates the situation.
Buybacks mechanically increase EPS by reducing the number of shares in issue, but they do nothing for the valuation (just ask an investment trust). Young’s shares are cheap as chips, but the market clearly doesn’t like the gearing.
Read the press release here: https://www.youngs.co.uk/investors
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