Fuller's tops up dividend as growth plans accelerate

Drinks like-for-like sales were up 3.3% while food was up 1.5%, with revenue of £403.6m up 5% compared to the growth of 12% last year, while adjusted pre-tax profit of £43.2m was up 3%, down from last year's 5% growth but bang in line with City analyst forecasts.

The full-year dividend was topped up 4% to 19.55p.

Managed pub LFL sales rose by 2.9%, ahead of the London pubs constituent of the Coffer Peach Business Tracker, which rose by 0.9% over the same period. Managed margins fell by 10 basis points.

Management previously said that LFL sales growth of 4% was needed to hold LFL profits, but cost savings reduced this requirement to 3%. This requirement of 3% has been repeated for 2019.

Tenanted pub profits rose 3% on a LFL basis helped by 13 tenants converting to a new turnover-based franchise agreements, with the roll-out of this strategy expecting 15 more to convert this year.

Brewing volumes were flat over the full year, helped by the February acquisition of Dark Star Brewing, a craft cask brewer in Sussex.

With nine weeks of the new financial year gone, 10 new sites have been acquired, four from We Are Bar Group for the City business and six Bel & The Dragon sites. LFL sales in managed pubs and hotels are up 2.5%, 2% in tenanted inns and total beer and cider volumes down 3% against an exceptionally strong start last year.

"Although we have seen a marginal drop in total beer and cider volumes, it has been a year of progress for the Fuller's Beer Company, which has a clear strategy to return to growth and exciting, achievable plans in place," chief executive Simon Emeny said.

He added: "While we are still in a time of national and global uncertainty - and we do not underestimate the related wider market and economic issues that we will have to navigate over the months ahead - we believe we are in a strong position.

"We have an excellent team of motivated people both at management level and throughout the business, we have pubs that are well-invested and in strong, iconic locations, and we have a bold and proud portfolio of beer and cider brands. These assets are backed by a robust financial position and that puts us in a good place to continue to deliver for our shareholders, our customers and our employees."

Shares in FTSA fell 3% to 942p on Friday.

Analyst at Peel Hunt said they were holding their 2019 forecasts, which assume 2% LFL sales in managed and 2% LFL profits in tenanted/leased, but would upgrade 2020 PBT forecasts by 2% to reflect accelerating expansion.

"We believe the company’s large valuation discount to Young’s (10x vs 12x EV/EBITDA) is unwarranted."

Paul Hickman, analyst at Edison Investment Research, said the results "provide something of an antidote to the stream of bad news from the high street...confirm that people are still eating out and drinking out – in fact drinking out is becoming the predominant trend as seen elsewhere in the industry".

He noted that Fullers invested £28m in its operations out of free cash flow of £51m, "a very substantial re-investment in the quality and sustainability of the company" and said management is "characteristically long-term in its thinking, and have a number of projects in hand to build growth for the future", including the acquisition of Dark Star, 10 new pub sites and three digital projects.

"We see the FY19e P/E of 14.9 times as a fair price for quality, with a reliable yield of 2.1%.”