UPDATE 1-Young's London focus helps lift H1 profits

* H1 pretax profit 12.3 mln stg vs 11.9 mln stg

* H2 1st 7 weeks LFL sales up 0.9 pct

* Says trading 'encouraging' since end Sept

* KBC Peel Hunt upgrades FY profit forecast

(Adds CEO, analyst comment, shares)

By Matt Scuffham

LONDON, Nov 19 (Reuters) - Pubs group Young & Co (YNGa.L) reported a 3.7 percent increase in first-half pretax profit and said sales were growing in the second-half as its upmarket London pubs continued to outperform rivals.

The company, which has 221 pubs based mainly around the capital, made a pretax profit of 12.3 million pounds ($20.69 million) in the first half to Sept. 26, compared with 11.9 million the previous year.

"Young's has turned in a good performance in a period that has seen many challenges for the pub industry," said Chief Executive Stephen Goodyear.

The company has avoided the deep discounting seen at larger rivals such as JD Wetherspoon (JDW.L) and Mitchells & Butlers (MAB.L) and pitched its pubs at the higher end of the market.

"Our strategy is focused on maintaining the premium position of our estate to maximise long-term profitability," said Goodyear. "We have therefore resisted the temptation to chase sales through heavy discounting."

In addition, its focus on the London market where 180 of its pubs are located, has benefited the company as the capital has proved more resilient during the recession than other regions.

"London is trading well and Young's has the right pubs selling the right things to the right people," said Astaire Securities analyst Mark Brumby. "Young's has confirmed that it is possible for some operators at least to perform well in the current environment."

KBC Peel Hunt reiterated its 'buy' recommendation, saying first-half pretax profit had come in ahead of its 11.9 million forecast. The broker upgraded its full-year pretax profit forecast by 4 percent to 18.8 million pounds.

"These results show consistent profitability delivered by a quality operation, central London geography and massive balance sheet strength," said KBC analyst Paul Hickman.

Like-for-like sales at Young's managed pubs fell by 0.7 percent in the first half but were up 0.9 percent in the first seven weeks of the second half.

"Given the current market conditions trading since the end of September has been encouraging and we believe that we are well placed to build on a positive first half performance," said Goodyear. Britain's pubs have been hit hard by the recession, beer duty hikes and competition from supermarkets, leading to record closures of over 50 a week, according to the British Beer and Pub Association.

On Tuesday, Britain's second-biggest pubs company Enterprise Inns (ETI.L) posted a 21 percent fall in full-year profit and forecast a further decline in 2009-10 when it said conditions would be equally challenging. [ID:nLG418628]

In October, Britain's biggest pubs firm Punch Taverns (PUB.L) reported a 39 percent drop in full-year pretax profit. [ID:nLD204338]

Shares in Young's, which have performed in line with the FTSE All Shares Leisure & Travel Index .FTASX5750 over the last six months, were indicated up 1.7 percent to 497.5 pence at 0910GMT.

(Editing by Rhys Jones)

($1=.5946 Pound)