Investment Column: Yates Bros makes rapid progress

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Yates Brothers Wine Lodges grew out of a 19th-century wine shipper based in Manchester but joined the stock market only three years ago and embarked on a period of rapid expansion. Under the direction of Peter Dickson, a great great grandson of the founder, Yates will increase its trading outlets by an astonishing 40 per cent in the current financial year, and plans to double again over the next four years to 200 sites in all the big towns in the country.

New locations can cost up to pounds 2m to acquire and equip, but they take an average of pounds 20,000 a week, putting them at the very top end of the licensed premises business and move quickly into profit .

Rapid growth costs money, however. Capital expenditure doubled to almost pounds 20m in the first half and borrowings rose to pounds 29m. Yates yesterday hired John Barnes the managing director of the Harry Ramsden fish-and-chip chain as a non-executive director for his expertise with retail brands and tapped another source of capital when it teamed up with Quintain Estates, a South of England property company, to create an investment company specialising in licensed premises and restaurants.

Initially the joint venture will invest pounds 20m in a portfolio of 15 of Yates' premises that will be leased back on 25- year terms, and Yates will raise a net pounds 16m on the deal to fund further expansion.

Profits have risen steadily over the last five years including a 27 per cent increase to pounds 5.1m before exceptionals in the six months to 28 September. But Williams de Broe is still forecasting profits of pounds 12m and earnings of 15.3p for the full year. The shares, unchanged at 378.5p, are on 25 times prospective earnings. High enough for a family-controlled company which might need a rights issue next year.

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