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FWIW:
| 13:14, Thur 6 June
2002 |
| Guinness Peat prepares another
attack on Young |
As if a 14% fall in profits was not
bad enough, Young & Co, the pubs and brewing company, looks set to
face yet another attack from aggressive shareholder Guinness Peat, reports
Meera Selva.
Guinness Peat (GPG), which owns 10.06% of the company’s A
(YNGA)shares promises to launch a fifth attack on
the company before its agm later this summer.
It has long
complained that Young & Co’s share structure gives the Young family
too much control over the way the business is run, and Blake Nixon, the UK
executive director of Guinness Peat told Citywire he was determined to
force the company to change the way it operates.
‘It’s like a
diamond. If you keep tapping in the right place it may not crack first
time but eventually it will smash to smithereens,’ he said.
Guinness Peat has tried different tactics, from trying to make
company to change the voting rights attached to its A and B (YNGN) shares, to asking the Young family to buy out other
shareholders and make the company private, and this time it promises a
change of tactic.
Nixon told Citywire the company needs a new
boss. ‘They don’t have a real MD in the business sense. They need a
45-year-old, seasoned, hardened guy who’s going to take it forward,’ he
said.
But Patrick Reid, chief executive of Young, told Citywire he
had no plans to change to company’s share structure to appease Guinness
Peat. ‘They know what the voting structure was when they bought the stake
in the company,’ he said. ‘We are always reviewing our options but at the
moment have no plans to change the structure.
Like every other
pubs and hotels business, Young & Co has had a terrible year, as foot
and mouth disease kept walkers away from the countryside and 11 September
kept tourists away from its inns.
The bad news knocked pre-tax
profits by 14% to £8.8 million on sales up 9.6% to £106 million. The
company also took a £250,000 hit on profits through the introduction of
the minimum wage, which increased staff costs at a time when the industry
was at its weakest.
‘The minimum wage affected us in October, when
trading conditions were so tough we didn’t really feel we could pass the
extra cost on to our customers,’ said Reid.
Conditions are still
tough, and Reid pointed out that people still felt insecure about their
jobs, and are spending less in pubs and inns. The international political
scene is still uncertain, and tourism has still to fully recover from
earlier problems.
It is odd then that during this difficult year,
the company should have continued with its expansion plans, spending £5.7
million last year on seven new properties, and £8.7 million refurbishing
existing sites. It insists it has ample resources to keep building the
business, but unless trade picks up, this expansion will hit rather than
enhance earnings.
Citywire Verdict:
Young & Co shares
fell 25p to 787.5p today, indicating that investors were disappointed with
the performance. The shares have had a good run since the beginning of the
year, but at 15 times earnings they look fully valued. They are not worth
buying but the impending corporate action from Guinness Peat may drive
shares in the short term, so existing investors may want to hold on to see
what happens.
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See IRG research reports
