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Pub chain has £140m warchest

Young’s casting eye over pub targets

Guinea Grill
Young’s owns the Mayfair pub and restaurant the Guinea Grill

Pub group Young’s & Co is looking to snap up a rival chain armed with a £140 million warchest.

The AIM-quoted group, which traces its origins to 1831, has a team of managers seeking potential targets.

Chief executive Patrick Dardis thinks cash-strapped rivals may be weakened by a sudden increase in costs from the business rate hike, National Living wage, and Apprenticeship Levy tipping some over the edge.

He has a shopping list of up to five potential targets.

“We have a team focused on looking for opportunities,” he says. “We have a relationship with three banks who are very keen to lend us more – we have headroom of £40m but could comfortably raise another £100m on top of that tomorrow if the opportunity was right.”

In 2010 Young’s spent £60m buying Geronimo Inns – 26 pubs from entrepreneurs Rupert and Jo Clevely and investment firm Penta Capital, a majority shareholder. It owns a number of high profile outlets in the capital including the Guinea Grill off Berkeley Square and the Lamb Tavern in Leadenhall Market.

“We certainly would like to pick up another Geronimo Inns,’ says Mr Dardis. “We would also like to lift the business up. We have got the headroom our Ebitda to debt is less than two times which is historically low for the industry.

“We would be interested if someone wanted to unload 20 – 30 pubs that we could transform or it could be another Geronimo type acquisition.”

Some of Britain’s biggest pub chains have come together recently. Belhaven owner Greene King has bought Spirit, and Heineken is close to getting agreement from the Competition and Markets Authority to take over part of Punch Taverns.

Young’s also wants to buddy up as consolidation reduces the impact of increased costs and taxes. The National Living wage, Apprenticeship Levy and hike in business rates have hit pubs hard as have food inflation, and the weak pound.

Consumers are choosing to spend more time at home watching box sets and drinking cheap supermarket beer.

“We are always looking we have 4 or 5 target groups that may well be on the market,” says Mr Dardis. “These business rates might be bad in one way but they might offer up opportunities as more businesses might come to market as a consequence.

“I have never seen such unprecedented cost headwinds all at the same time which are all pretty much government taxes in some way. We are a big supporter of the national minimum wage but businesses have got to be allowed to breathe. A business rate increase at the same time is just ludicrous. You can’t burden businesses with seven or eight other taxes it’s just unfair at a time when Brexit is kicking off.”

Young’s has had a bumper year – in May it posted a 13% rise in profit to £37m for the 53 weeks to 3 April on sales of £268.9m.

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