Fuller's serves up full measure for half-year
Interim profits at Fuller Smith & Turner fizzed up 4% higher as the brewer and pubco grew sales faster than the wider pub industry but began to see margins squeezed by higher business rates and wages.
Like-for like sales at the core managed pubs and hotels grew 3.6%, well ahead of the market 1.3% growth as per the independent Coffer Peach tracker, while LFL accommodation sales increased 8.2%, food 3% and drink 3.4%.
The managed estate grew revenue 7% to £140.2m, while operating profit rose 6% to £19.0m as margins fell by 20 basis points to 13.6% as the impact of rising costs was broadly offset by the strategy of growing premium sales.
Tenanted inns profit increased 3%, as Fuller's sold 11 pubs as part of the repositioning of the estate to leave five remaining on the block, and helping to lift average EBITDA per pub 7%.
In the brewing arm volumes bubbled up 1% and revenue by 5% to £78.9m but increase in marketing spend, including investing in a rebranding of flagship London Pride brand, repairs and aggressive pricing from larger competitors and smaller brewers benefiting from high levels of progressive beer duty, led to continued margin pressure and a 12.8% drop in operating profit to £3.4m.
Taking sales so far in the second half of the year, managed pubs and hotels LFL sales are up 3.7% for 33 weeks of the year to date, with tenanted profit up 2% and total beer and cider volumes up 1%.
House broker Numis see similar margin downside in the managed business before cost growth starts to normalise in the 2019 financial year, particularly rates.
A 4% LFL assumption for the full year remains, but while the forecast for brewing is cut marginally so is the forecast for interest expense, which overall amounts to a 1% increase in 2018 EPS forecast to 62.1p.