It is 17 consecutive years of dividend growth for Young's & Co Brewery (YNGA:AIM) as the pubs operator raises its shareholder payout by 6.1% at today's half-year results. With 9.9% growth in pre-tax profit and a great start to the second-half period, it is easy to see why shareholders are being rewarded. The share price increases 2% to £10.30.

Young's continues to reap the benefits of targeting the premium end of the market. Its managed house arm – pubs where it dictates pricing, products and food menus – saw a 4.6% rise in like-for-like sales and a 12.2% rise in operating profit. For drinks it is down to an increase in sales volumes as it hasn't put up prices.

Food is a moveable feast when it comes to pricing as all leisure operators can re-engineer menus quickly when certain items become more expensive to buy. Young's says food generated 7.6% like-for-like growth driven by 'quality, menu content and service initiatives'. Food accounted for 29.8% of total revenue for the managed operation, up from 29.1% a year ago.

Like-for-like drink sales were up 3.2% with the most popular drinks being 'premium' brands, defined as being more than 4.3% ABV (alcohol by volume). Wine sales increased by 11.5%.

YOUNG & COBREW'A' - Comparison Line Chart (Rebased to first)

It spent £19.4 million on sprucing up the pub estate including £4.3 million on adding more accommodation. As we discussed in a recent hotel sector report, pubs are increasingly becoming an important source of rooms for consumers. Young's room prices and booking volumes are both going up.

Three London-based tenanted pubs were acquired from Enterprise Inns (ETI) during the period. Young's had a clear out within its tenanted arm a year ago, selling some sites and recruiting better landlords. That transformation is still ongoing with the company spending more money on repairs and refurbishments.

It is considering a new-build pub in Woolwich with real estate expert Berkeley (BKG), extending an existing relationship whereby Young's develops pubs next to the housebuilder's new developments. Chief executive officer Stephen Goodyear says he would like Young's to have a presence in many UK towns and cities but it is a question of timing. 'We've been concentrating hard on the current estate and are doing things in an orderly way.' It mainly has a South East presence but there's a handful of pubs in the West Country, Oxford and Chichester.

Issue Date: 21 Nov 2013