INTERIM STATEMENT

I am delighted to announce these excellent results following another strong period of trading for us.  

Total revenue for the 26 weeks ended 2 October 2017 was up 6.0% to £144.1 million, led once again by our well-invested and premium positioned managed houses which delivered a 4.6% increase in like-for-like sales.

Our performance for the period speaks volumes about the efforts of all our staff who work tirelessly to execute our growth strategy.  The pub is still the go-to place in Britain for drinking and eating out and, while much has been written about the challenges facing the industry, we believe that providing customers with well invested pubs, a quality offer and outstanding customer service is key to our success. 

By embracing current trends, ranging from our customers' ever-growing interaction with social media to behavioural changes in what and when they eat and drink, we are confident that our pubs will continue to be the venue of choice for our  experience-driven society.

Total Group adjusted operating profit increased to £27.8 million, up 10.3%. Including one-off exceptional items, our operating profit was slightly up at £25.0 million. Our adjusted interim basic earnings per share was up 13.4% to 41.15 pence. We remain a highly cash-generative business, with an operating cash flow of £33.2 million in the six months, enabling us to reduce net debt to £117.7 million (April 2017: £126.6 million) and improve our net debt to adjusted EBITDA ratio to 1.7 times (April 2017: 1.9 times).

In line with our long-standing, progressive dividend policy, the board has raised the interim dividend by 6.0% to 9.41 pence, the 21^st consecutive year-on-year increase.

BUSINESS REVIEW

MANAGED HOUSES

Over many years now, we have outperformed the market with consistently strong like-for-like sales and profit growth. Our managed estate, which comprises 177 pubs (including 23 hotels), again outperformed the sector, with revenue up 6.8% and up 4.6% on a like-for-like basis, resulting in adjusted operating profit growth of 11.1%.  

During these six months, we benefitted from very warm early summer weather in June but, predictably, poor weather followed in August and September. These swings are not unusual and, overall, the British summer of 2017 was fairly typical and simply a reverse of 2016 when warmer conditions in August and September made up for a wetter June and July.

This summer, London was tragically affected by terror attacks. Once again though, Londoners and visitors to our capital showed their resilience in the face of such adversity. As a nation, we stand together to oppose such acts and our spirit remains undented. Similarly, our staff, some of whom found themselves caught up in the attack at London Bridge, remained steadfast in their responsibility to our customers and each other, and I am immensely proud of each and every one of them.

Overall, drink sales were up 7.5% in total and 4.6% on a like-for-like basis during the period.  Our "Great Hop Expedition" initiative, which saw us team up with global and local craft brewers to challenge customers to be daring with their beer choices, helped sales of keg ales increase by 28.3%. We also saw huge growth in rosé wines up 31.9% and cocktails which were up 56.1%, the latter being driven by the ongoing enthusiasm of our Cocktail Collective offer which ensures we maintain a complete range of the most popular cocktails, served perfectly every time.

Food sales increased by 5.3% in total and 4.1% on a like-for-like basis and they now represent 30% of our revenue mix. Despite cost pressures on food, we've worked hard with our local suppliers to source the finest quality ingredients. Our highly talented and skilled kitchen teams are always learning through the power of our "Vegucation" programme, where we aim to bring unusual and lesser known ingredients to the fore each month, challenging chefs to use and interpret ingredients in their own style on their respective menus to ensure that our dishes remain authentic, fresh, natural and seasonal. 

In recent years our hotel division has grown significantly and now stands at 486 rooms with over half of these now being boutique standard.  The hotel estate, which has benefited from refurbishments completed in the previous year, delivered a strong performance that saw average room rates rise 5.7% from £81.19 to £85.85 while maintaining a consistent level of occupancy.  As a result, our RevPAR increased by an impressive 6.6% to £68.01. Further growth opportunities for Young's hotels have been identified and are planned in the years to come.   

We added four pubs to our managed house portfolio during the six month period. We acquired the Chequers (Hanham Mills) in July, transferred the Hope and Anchor (Brixton) and the King's Arms (Wandsworth) from our tenanted division, the Ram Pub Company, and, in conjunction with a £240 million regeneration of Bracknell town centre, opened the Bull, a grade II listed landmark that dates back to the 15^th century. The heritage of the Bull has been restored and we've tastefully combined old and new elements, including a large south-facing terrace and a contemporary glass fronted extension to the rear.  

Including new sites, we invested £12.0 million during the first six months of the year, a slight reduction on the previous year due to the timing of major developments with greater capital spend planned for the remainder of the year.

During the period, we redeveloped the Alexander Pope (Twickenham), Duke of Clarence (Chelsea), Elgin (Ladbroke Grove), Mitre (Bayswater) and the Princess of Wales (Clapton). We also gave the Spotted Horse (Putney) a new vibrant lease of life with a botanical feel throughout and a completely new rooftop bar, the "Juniper Terrace".  It is equally pleasing to see that some of our longer-term investments are progressing as planned: the Nine Elms Tavern, which opened in 2015, is a great example and should flourish even further when the American Embassy opens shortly in Battersea.

I was very pleased for Young's to gain "employer provider" status which enables us to be an official training provider for apprentices. Being 186 years old, training our own staff is nothing new to us, but the role we play in society in providing careers and nurturing talent is now formally recognised. Our in-house training team will now deliver two exciting new chef academy programmes to 70 apprentices over the next 18 months whilst being able to draw down on the funds created by April's introduction of the Apprenticeship Levy. For us, the levy is an opportunity to help fund the growth of our own talent pool.

Young's On Tap, our own App, is growing in both its popularity and functionality and we've now had over 60,000 downloads. Its users are able to do everything from book tables and stays in our hotels to pay their bills and even request their favourite song.

THE RAM PUB COMPANY

Our smaller tenanted division, the Ram Pub Company, produced a resilient like-for-like performance with sales up 1.6%.

The contribution of our tenanted business has been impacted by three transfers into our managed houses and three disposals. In October 2016, our largest tenanted pub at the time, the Woolpack (Bermondsey), transferred into our managed house estate and was followed by the Hope and Anchor (Brixton) and King's Arms (Wandsworth) in May 2017. We also sold three small tenancies which sat at the tail of our estate for combined proceeds of £2.1 million: the Bell (Illminster), Court House (Dartford) and the King's Arms (Epsom). As a result, total sales were down 8.5% and adjusted operating profit was down £0.3 million to £2.4 million.

We operate a continual investment programme that ensures our pubs are maintained to a high standard to attract and retain entrepreneurial tenants. In the past six months we've completed major developments at the Gardeners (Wandsworth), Grand Junction Arms (Harlesden), Heartbreakers (Southampton) and the Robin Hood (Sutton).

INVESTMENT AND FINANCE

Our healthy balance sheet provides a strong core and the financial muscle to maximise opportunities both within and outside our current estate. Our net debt has reduced by £8.9 million to £117.7 million driven by the combination of an increased operating cash generation of £33.2 million and a lower investment of £14.3 million. Net debt as a multiple of the last twelve months' adjusted EBITDA has fallen to 1.7 times (April 2017: 1.9 times) and gearing now stands at 23.0% (April 2017: 25.7%), two of the strongest ratios in the sector.

The majority of the £2.8 million exceptional item expenditure in the period relates to the investment decision to bring two tenanted pubs into our managed house estate. The agreed compensation to terminate the tenants' lease agreements early, under IFRS, has been expensed and is included within exceptional items.

Compared with the last full year, the past six months has witnessed a slight increase in corporate bond yields, the rate at which our pension liabilities are discounted. This has resulted in our retirement benefit deficit decreasing on an accounting basis by £4.9 million to £7.9 million. The coming year-end sees the end of the current triennial review and we are working together with the pension trustee to ensure the pension scheme is appropriately funded.

As a consequence of these results we have increased our interim dividend for the 21^st consecutive year, this time by 6.0% to 9.41 pence per share.  This is expected to be paid on 8 December 2017 to shareholders on the register at close of business on 24 November 2017.

CURRENT TRADING AND OUTLOOK

In recent trading, over the last six weeks, we have continued to perform strongly with sales up 7.0% in total and up 4.9% on a like-for-like basis. The remainder of the year will benefit from the recent acquisitions and transfers including the Lord Palmerston (Tufnell Park) which transferred into managed houses in October and also the acquisition of the iconic 'SMITHS' of Smithfield site and its sister site in Cannon Street, which completed this week. 'SMITHS' of Smithfield is a perfect fit with our premium food and drink offering and will immediately become our largest venue with an average weekly take of over £100,000.  Both 'SMITHS' of Smithfield and the Cannon Street site are leasehold properties with 32 years and 24 years tenure remaining respectively and we are confident that their focus on world class steaks, breakfast and craft beer will perfectly complement our existing estate. We continue to look actively for further opportunities to invest in the business, either by investing further in our existing estate or through our acquisition pipeline throughout the South.   

Despite the strong start to the second half of our financial year, we continue to monitor trading conditions closely.  The political environment remains unpredictable and this ongoing uncertainty is unhelpful when it comes to the strength of the broader economy.  In particular, we remain concerned around the impact that the Brexit negotiations are having on the pub industry, especially in relation to attracting and retaining the best people in our pubs. 

Nonetheless, our expectations for the full year remain unchanged and we remain confident about our long-term prospects thanks to our premium offer, well-invested and prime located pubs, and the talented teams we have in place across our business.  

Patrick Dardis

Chief Executive

15 November 2017

Independent review report to Young & Co.'s Brewery, P.L.C.

Introduction

We have been engaged by the company to review the condensed set of financial statements in the Interim Report for the 26 weeks ended 2 October 2017 which comprises the group income statement, the group statement of comprehensive income, the group balance sheet, the group statement of changes in equity, the group statement of cash flow and the related explanatory notes. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our work, for this report or for the conclusions we have formed.

Directors' Responsibilities

The Interim Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this Interim Report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

Our Responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the Interim Report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim Report for the 26 weeks ended 2 October 2017 has not been prepared, in all material respects, in accordance with the accounting policies outlined in note 1, which comply with IFRS as adopted by the European Union, and in accordance with the AIM Rules issued by the London Stock Exchange.

Ernst & Young LLP

London

15 November 2017