The Investment Column: Yates Brothers

SHARES IN Yates Brothers Wine Lodges, the pubs and bars group, have had a rocky ride over the past year. They have been in decline since peaking in August at 513.5p, closing at 327.5p ahead of yesterday's interim results. But the group, which posted half-year sales up 19 per cent at pounds 67m and operating profits up 15 per cent at pounds 7.1m, has at last started to please the market.

While like-for-like sales headed downwards, the group says there are signs the trend here is reversing.

Since the year end, Yates has adopted an aggressive pricing policy in the pursuit of market share. And despite the price campaign, margins are improving.

Meanwhile, Yates's development plans for its flagship wine lodges, Watling Street Inns and Ha! Ha! Bars & Canteens, are ahead of schedule. The group is to spend around pounds 45m this year on organic expansion. Peter Dickson, chairman, is also looking to acquire a chain of licensed premises to expand the Watling Street concept.

Analysts upgraded forecasts on yesterday's numbers. Morgan Stanley Dean Witter expects full year pre-tax profits of pounds 16.7m and earnings of 21.8p per share, putting the shares, up 10p yesterday, on a forward p/e ratio of 15.

For a leisure company, the rating is steep, but Yates has some of the best quality pub assets in the industry which are beginning to show their worth. The swing of the pendulum is heading upwards. Buy.