Young’s chief executive Patrick Dardis has told MCA it’s “probably about time” the company made a group acquisition and said it has the firepower to spend £100m plus on a deal.
However, he insisted Young’s has no immediate intention of entering the casual dining market despite the abundance of opportunities.
He told MCA: “Sticking to our knitting has served us well over 186 years and we would be foolish to ignore that. We are going to look at premium, predominantly freehold or very good leasehold pubs but we will do a flypast on anything and everything.”
Dardis was speaking to MCA on the back of half-year results which showed managed house like-for-likes up 4.6%. Dardis stressed that over the last six years Young’s has delivered average like-for-like growth of just over 5%. He said he was confident that this would continue despite significant headwinds as the group still has “plenty of business levers to pull”.
He also spoke about development plans for the group’s latest acquisition, Smiths of Smithfield, which he described as “the Guinea Grill on steroids”, as well as plans to increase the number of rooms across the estate from 486 to c750, and plans for further investment in the estate, including the former Grand Union sites. He also hit out at “greedy” Government policies that are “decimating the high street and causing pubs to close”.
On the challenge of continued growth in like-for-like sales, he said: “We understand the concerns. The difference in sitting here talking to MCA this morning compared to last year is that back then there was a lot of talk about headwinds – now they are here. We are absorbing the ridiculously high increases in business rates, the apprenticeship levy, National Living Wage and all the other pressures.
“We have been able to manage that and we are confident we can continue to do that but what this shows is that driving the top line is absolutely fundamental. We are looking at new ways of driving growth all the time and pulling all the business levers. Still some to go. We have sufficient business levers to drive sales and maintain margin and absorb headwinds going forward.”
On his message to the Chancellor ahead of the Autumn Budget, he said: “The unintended consequences of the Government using pubs as a cash cow is that it will lead to less jobs and investment and therefore less going to the treasury coffers. The first thing we want is for them to reverse the duty increases and be very clear that taking 66p in every pound taken in pubs is too much, they are too greedy. The second is stop any more increases in business rates until we have a comprehensive review of a system which is decimating the high street and causing pubs to close. The current system is shafting the high street and using pubs as a cashcow. Apart from being very unfair, when the online retailers are let off scot free, it is unsustainable.”
On plans for Smith’s, he said: “It’s unlikely we will roll the brand out. That’s not what we bought it for. The first thing we will do is de-brand the Cannon Street site. Smithfield is iconic and we are very respectful of that but we also know it needs investment because it is a bit tired. The way I see it is – the Guinea in Mayfair is still the best pub steakhouse in the world and Smith’s is the Guinea on steroids. We will invest in but we will retain what is unique about it. There is a great opportunity because with Crossrail coming and the investment in the museum, Smithfield is becoming a Covent Garden of the future.”
He said the group had a good pipeline of investment projects within the estate. The Red Barn in Lingfield will get a new facility for weddings. There are rooms planned for the Dog & Fox in Wimbledon with the adjoining property turning into a standalone wedding venue with up to 14 bedrooms. He said there were “big plans” for the Grand Union sites, the leases of which were brought back into the Young’s fold earlier this year. There are also plans for the King’s Head in Islington, which will incorporate a theatre as well as having additional dining rooms and a roof terrace added.
He said growth in accommodation would come jointly from development of the existing estate and acquisitions.
On plans for further regional development, he said: “We still think there is a lot of opportunity in London but we will look further at the regions. We are in Cambridge and we think there are further opportunities there. We are looking at more in Oxford. We have acquired two in Bristol. We have got lots of gaps to fill there and I think that will keep us busy for the next ten years plus.”
On the appetite for acquisitions, he said: “We have got the facility to invest a £100+m any time to acquire a group. It’s been seven years since we acquired Geronimo so it’s probably about time we did something. But, we will only do it when it’s right. We would predominantly look at freehold. We are not going to jump out of our comfort zone because we have seen some brilliant results from sticking to our knitting. We are not about to jump into casual dining or the high street. We are going to look at premium, predominantly freehold or very good leasehold pubs but we will do a flypast on anything and everything.”
On crossover from the travails of the better burger market and the general slowdown of growth in casual dining, he said: “Not so long ago the only place you could get a sandwich at lunchtime was a pub. Now you can go to the supermarket, to a coffee shop, to a whole host of casual dining places but good pubs which adapt and change are still competing with the best of them. I would suggest that our burgers as good as you would find in the best gourmet burger chain but we have so much more to offer.”
This period’s results were the first not to feature a separate update for the Geronimo estate.
Dardis said: “The Geronimo name and brand still exists and we are growing that but it is part of the same managed house operation and headed up by the same person. That was always the plan. Their performance vs Young’s managed in the half is very comparable.”
