STRICTLY EMBARGOED

UNTIL 7AM WEDNESDAY 15 NOVEMBER 2023

 

 

FULLER, SMITH & TURNER P.L.C.

("Fuller's", the "Company", or the "Group")

Financial results for the 26 weeks to 30 September 2023

 

Strong progress as revenues and profits continue to rise

 

 

Financial and Operational Highlights

	Unaudited		Unaudited		Audited
	26 weeks ended 30 September		26 weeks ended 24 September		53 weeks ended 1 April
	2023		2022		2023
	£m		£m		£m
Revenue and other income	188.8		168.9		336.6
EBITDA1	34.8		28.9		51.8
Adjusted profit before tax2	14.5		9.8		12.7
Statutory profit before tax	14.9		10.7		10.3
Basic earnings per share3	17.65p		13.13p		12.98p
Adjusted earnings per share3	17.16p		12.48p		16.10p
Dividend per share	6.63p		4.68p		14.68p
Net debt excluding lease liabilities4	129.4		129.2		132.8

All figures above are from continuing operations.

1    Earnings before interest, tax, depreciation, amortisation, profit on disposal of property, plant and equipment, and separately disclosed items.

2    Adjusted profit before tax is the profit before tax excluding separately disclosed items.

3    Per 40p 'A' or 'C' ordinary share. Basic EPS is calculated using earnings attributable to equity shareholders after tax including separately disclosed items. Adjusted EPS excludes separately disclosed items.

4    Net debt excluding lease liabilities comprises cash and short-term deposits, bank overdraft, bank loans, debenture stock and preference shares.

 

Financial and Operational Highlights (cont)

 

·    Revenue up 12% to £188.8 million (H1 2023: £168.9 million), driven by strong performances across the estate

·    Like for like sales in H1 up 12.7%, demonstrating market outperformance, substantially ahead of the industry's Coffer CGA Business Tracker

·    Adjusted profit before tax increased by 48% to £14.5 million (H1 2023: £9.8 million) - demonstrating strong profit conversion despite inflationary challenges

·    Net debt is at £129.4 million (H1 2023: £129.2 million) with cash used to enhance the estate and finance shareholder returns

·    Interim dividend increased in line with earnings to 6.63p (H1 2023: 4.68p), representing a 42% increase on last year

·    Completed buy back of one million 'A' shares at an average price of 580p, and today announcing our intention to buyback an additional one million 'A' shares.

 

Strategic Highlights

 

·    An excellent customer experience, resulting in like for like sales growth across all areas during the first half

o  Food sales up 15.5%

o  Drink sales up 10.9%

o  Accommodation sales up 13.4%

·    Continuing to invest for the long-term

o  Enhancing the estate with £9.0 million capital investment

o  Significant pipeline of investments planned

o  Increased investment in our people, including new leadership training programme for all general managers

o  Deployment of numerous ESG initiatives as part of our Life is too good to waste programme   

·    Effective proactive portfolio management with 21 of 23 pubs earmarked for transfer from managed to tenanted completed - remaining sites will complete imminently

·    Further strengthening of the Balance Sheet, with reduced leverage, and headroom for acquisitions to drive long-term growth.

 

Current Trading

 

·    Like for like sales for the 32 weeks to 11 November 2023 up 11.7%

·    Primed for a strong Christmas with bookings already 11% ahead of prior year.

 

 

Chief Executive Simon Emeny said:

 

"We have had a strong start to the year - delivering excellent financial results and building a superb platform for future growth. While there are still a number of macro-economic elements to navigate, certain external factors are moving in our favour with office workers continuing to return to their desks and the City becoming a seven day operation with increased leisure spend at the weekend.

 

"There has been a welcome return of major events. Customers are increasingly seeking premium experiences when they are spending their money, and we have the benefit of the lucrative international tourist trade to come with inbound tourism still below pre-covid levels.

 

"These factors play to our strengths which, combined with our teams' operational excellence, have resulted in our like for like sales rising 12.7% from the prior year - outperforming the market and well ahead of the industry's Coffer CGA Business Tracker. There is demonstrable momentum and positivity in the business, we have an amazing group of dedicated team members, excellent leaders, and a keen focus on continuing to grow profitable sales using all the levers available to us.

 

"We have continued with our strong progress since the period end, with like for like sales for the first 32 weeks of the year growing by 11.7%. Trading in the City continues to grow and although we cannot rule out further tube or train strikes, we are looking forward to a good Christmas with bookings currently 11% ahead of last year.

 

"Our capital investment programme for the year will see us undertaking a number of large projects across the estate during the remainder of this financial year, enhancing our iconic pubs and hotels. We will also continue to invest in further development for our exceptional team members including the roll out of a new online training platform, to support our face to face learning, that will increase engagement.

 

"Fuller's has a long-term vision, strong values and a clear strategy - all underpinned by our predominately freehold estate of iconic pubs in fantastic locations. While there is still a challenging economic environment to navigate, we have had a strong first half and with exciting plans in the pipeline, we are looking forward to the second half of the year with confidence."

 

 

-Ends-

 

 

For further information, please contact:

 

Fuller, Smith & Turner P.L.C.

Simon Emeny, Chief Executive                                                           020 8996 2000

Neil Smith, Finance Director                                                                020 8996 2000

Georgina Wald, Corporate Comms Manager                                020 8996 2198

 

Instinctif Partners

Justine Warren                                                                                       020 7457 2010

 

Forthcoming dates in the financial calendar:

 

Interim dividend payment: 2 January 2024

Trading update: 25 January 2024

Full year results announcement FY 2024: 13 June 2024

AGM: 23 July 2024

Half year results announcement FY 2025: 14 November 2024

 

Notes to Editors:

 

Fuller, Smith & Turner PLC is the premium pubs and hotels business that is famous for beautiful and inviting pubs with delicious fresh food, a vibrant and interesting range of drinks, and engaging service from passionate people. Our purpose in life is to create experiences that nourish the soul. Fuller's has 183 managed businesses, with 1,015 boutique bedrooms, and 193 Tenanted Inns. The Fuller's pub estate stretches from Brighton to Birmingham and from Bristol to the Greenwich Peninsula, including 163 locations within the M25. Our Managed Pubs and Hotels include Cotswold Inns & Hotels - seven stunning hotels in the Cotswolds, and Bel & The Dragon - six exquisite modern English inns located in the Home Counties. In summary, Fuller's is the home of great pubs, outstanding hospitality and passionate people, where everyone is welcome and leaves that little bit happier than they arrived.

 

Photography is available from the Fuller's Press Office on 020 8996 2000 or by email at pr@fullers.co.uk.

 

This statement will be available on the Company's website, www.fullers.co.uk. An accompanying presentation will be available from 12 noon on 15 November 2023.

 

 

 

FULLER, SMITH & TURNER P.L.C.

FINANCIAL RESULTS FOR THE 26 WEEKS ENDED 30 SEPTEMBER 2023

 

 

 

CHAIRMAN'S STATEMENT

 

 

I am very pleased to report that your Company has made excellent progress in the first half of the year. While the cost-of-living crisis, train strikes and conflict across the globe runs on, Fuller's continues to focus on the long-term - delivering growing sales and profits and investing in our people, our properties and a constantly evolving customer offer.

 

I am delighted to see all our key metrics heading in the right direction. Revenues have risen by 12%, adjusted profit before tax is up by 48%, and in order to rebalance the interim dividend as a proportion of the total dividend, we have increased the interim dividend payment by 42%, which also brings it closer to pre-pandemic levels. Simon Emeny and the Executive Team are showing strong leadership and the business is delivering across its strategic pillars.

 

While we are in great shape, the hospitality industry as a whole still needs the support of Government. Forthcoming changes to business rates, including an inflation-linked rise in the all-important business rates multiplier, will hit the industry hard and while well-funded companies like Fuller's have the bandwidth to withstand (albeit reluctantly) these increases, many will not. I urge this Government - and any future incumbent - to consider the important role that pubs play in delivering jobs and tax revenues, and their key role in local communities and society as a whole.

 

One of the highlights of the first half of this financial year was the promotion of our People & Talent Director, Dawn Browne, to the Main Board in July. This was in recognition of the importance of people to our business, and I am pleased to say she is already making an excellent contribution. In addition, her team has undertaken a number of initiatives around leadership training, diversity and inclusion, recruitment, development and retention - with labour turnover rates improving significantly.

 

We are also making good inroads in hitting our Net Zero target by 2030. With a large number of small changes we have already substantially reduced our operational emissions - aided by switching to renewable energy sources - and the accompanying savings in energy have been most welcome. It is in all our interests to operate in a way that reduces our impact on resources and on the planet and I look forward to seeing this work develop further.

 

Finally, I would like to thank the amazing team of people that work at Fuller's for their contribution to these results. They are an inspiration from the bar to the boardroom and it is their joie de vivre that continues to deliver for our customers, for their colleagues, and for our shareholders.

 

 

DIVIDEND

 

The Board is pleased to announce an interim dividend of 6.63p (H1 2023: 4.68p) per 40p 'A' and 'C' ordinary share and 0.663p (H1 2023: 0.468p) per 4p 'B' ordinary share. This will be paid on 2 January 2024 to shareholders on the share register as at 15 December 2023. This payment equates to 85% of the 2019 interim payment and continues our return to a progressive dividend policy.

 

 

Michael Turner

Chairman

14 November 2023

 

 

 

CHIEF EXECUTIVE'S REVIEW

 

 

OVERVIEW

 

We have had a strong start to the year - delivering excellent financial results and building a superb platform for future growth. While there are still a number of macro-economic elements to navigate, certain external factors are moving in our favour with office workers continuing to return to their desks and the City becoming a seven day operation with increased leisure spend at the weekend.

 

There has been a welcome return of major events. Customers are increasingly seeking premium experiences when they are spending their money, and we have the benefit of the lucrative international tourist trade to come with inbound tourism still below pre-covid levels.

 

These factors play to our strengths which, combined with our teams' operational excellence, have resulted in our like for like sales rising 12.7% from the prior year, outperforming the market and well ahead of the industry's Coffer CGA Business Tracker. There is demonstrable momentum and positivity in the business, we have an amazing group of dedicated team members, excellent leaders, and a keen focus on continuing to grow profitable sales using all the levers available to us.

 

While growing sales will generate profits in the near term, we continue to invest in our long-term strategy - delighting our customers, inspiring our people, enhancing our estate through investment, staying one step ahead by constantly evolving our business and owning our impact. This strategy is driven by the Executive Team and we are confident that its successful execution will deliver sustainable growth for the future.

 

 

TRADING UPDATE

 

During the first half, we have ensured that everything we do, every decision we make, and every training course we deliver has the customer at its heart. Irrespective of location, we target a discerning consumer - and pride ourselves on delivering delicious food, a first-class range of drinks, beautiful bedrooms and outstanding hospitality, promoted using data from our digital systems. This delights our customers, keeps them coming back for more and takes market share from our competitors.

 

 

Giving our customers reasons to visit

 

As well as expecting an excellent offer as outlined above, the desire for a premium experience is clear and customers are often looking for that extra something to entice them to the pub. The range of events that we now offer across the estate ensures that our customers have more reasons to visit than ever. These include joint activations with our suppliers, cultural events that bring theatre, opera and even panto to the pub, and an increased focus on ensuring the pub is the best place to watch live sport outside of the stadium.

 

We use all the tools available to us to promote these activities including geo and demographic targeted digital marketing with compelling content, regular communication to our database of 1.7 million engaged customers, and in-pub point of sale to cross-promote future offers and events. We know this is working with pre-booked revenue for the half year rising by 9%.

 

 

Strong growth across food, drink and accommodation

 

We have been delighted to see like for like sales growth across all three main revenue streams - food, drink and accommodation. Food like for like sales have risen by 15.5% and drink by 10.9%. Accommodation like for like revenue is up 13.4%, while RevPAR has risen by 15% and Average Room Rate has increased to £129 (H1 2023: £117).

 

While always delicious, the menu across our varied estate is carefully targeted towards the local market - and we have a customer-driven approach to menu design. I am delighted to see innovative new dishes being rolled out including an exciting children's menu and a new brunch offer that is opening up an additional trading day part in a number of sites.

 

We aim to provide flexibility within a framework for our kitchens, allowing creativity in our food team and exciting options that are tailored for the site, the kitchen and our customers. Dishes are designed through a collaborative process involving chefs, managers, the food team and our suppliers, and are supported by new photography and targeted digital and social marketing, designed to tempt and tantalise the tastebuds of new and existing customers.

 

We continue to leverage the benefits of our long-term supply agreement with Asahi, while also working with a wide range of other suppliers across all drink segments. Our tie up with Mirabeau delivered a real boost to rosé wine sales over the summer, adding an incremental £1m of revenue. We outperform the market in sales of beer and cider and are category leaders in cask ale - a position we are aiming to emulate in wine, premium spirits and cocktails, and this will be an area of development in the second half of the year.

 

Accommodation continues to perform well and the new booking engine we rolled out across our Fuller's sites with rooms, Bel & The Dragon and Cotswold Inns & Hotels is delivering further benefits around upselling and driving direct bookings - which have increased by 18.6% against the prior year.

 

 

Investing for the future in our pubs and people

 

We are very proud of our premium position in the marketplace and during the period we have invested £7.4 million across 80 Managed Pubs and Hotels. We also completed major schemes at The Sanctuary House Hotel and The Admiralty, which were started in the last financial year.

 

During the first half, we added six new bedrooms to The Counting House in Cornhill. This fantastic scheme is realising benefits with the rooms opening in early October and achieving occupancy levels of 95%. Post period end, we acquired the freehold of The Crown in Islington, a pub we have operated for many years.

 

We have several large and exciting investment schemes scheduled for the second half of the year. These include projects at The Alice Lisle in Ringwood, The Head of the River in Oxford, The Manor at Moreton-in-Marsh, The Forester in Ealing - which was a recent Tenanted to Managed transfer - The Rising Sun in the New Forest and The Pilot at Greenwich. We look forward to updating on these investments at the full year.

 

I could not be prouder of the amazing teams that work in our pubs and we have increased our training budget by 25% to continue to invest in them. In the first half, we have delivered 2,059 training days, recruited 88 new apprentices, and started the roll out of a new leadership development programme for all general managers across the business. It is always rewarding to be recognised by your peers and we are delighted to be shortlisted in three categories in the forthcoming BII NITA training awards.

 

Ultimately, the success of our activities around recruitment and development is measured in happiness, engagement and retention. Having just completed our latest Happiness Index employee survey, we are very pleased to be reporting an increase in participation rates, happiness and engagement scores for the second year running. Even more pleasing is that labour turnover rates are now below pre-pandemic levels.

 

 

Life is too good to waste

 

Across the business, we have made excellent progress during the half year across our Life is too good to waste programme. We continue to deliver for our corporate charity, Special Olympics Great Britain, and have raised over £122,000 for this excellent cause in the first half. 

 

I am very pleased with the progress we have made around the diversity, equity and inclusion agenda too. We launched our Inclusion Action Plan, completed inclusive leadership development for all senior leaders and operations managers and rolled out menopause training that was accessible to all those in the business.

 

We are making headway on our route to Net Zero by 2030 for Scope 1 and 2 emissions and have had our near-term science-based emissions reduction target for Scope 1, 2 and 3 approved by the Science Based Targets initiative. Our work in this area is underpinned by new systems of measurement including smart meters and energy dashboards in all our Managed Pubs and Hotels. We now have 11 fully electric kitchens in place, we've increased the amount of cooking oil recycling that takes place, progressed refillable water solutions and added 30kW solar panels to the roof of Pier House (our support centre office), as well as a raft of other solutions.

 

While doing the right thing for the planet, we have also seen a decrease in gas usage of 8.5% and a reduction in electricity consumption of 5% in the period, on top of substantial reductions last year. We have been recognised for the work undertaken in this area with a BII Sustainability Award and a Green Tourism Award for five Fuller's sites with rooms, and all seven Cotswold Inns & Hotels sites.

 

 

TENANTED INNS

 

It has been an excellent first half for the Tenanted Inns division, which has delivered revenues of £16.3 million and profits of £6.9 million. We have completed the transfer of 21 of the 23 sites earmarked to move from Managed to Tenanted and the last two transfers are imminent. Moving these 23 sites to the Tenanted model is expected to add £1 million of incremental profit contribution.

 

We continue to undertake joint schemes with our Tenants, with the Company investing £1.6 million across 23 sites in the first half. We now have 54 tenanted pubs operating with turnover based contracts - which allows us to share in non-beer revenues.

 

Finally, we have improved our Tenanted website, specifically improving the listings of pubs to let, and moved to a new recruitment system. These elements in tandem have freed up additional resource in the Tenanted team which will allow us to further support Tenants on turnover agreements to grow their businesses which is, of course, mutually profitable.

 

 

FINANCIAL REVIEW

 

Group revenue and other income increased by 12% to £188.8 million (H1 2023: £168.9 million) and adjusted profit has increased by 48% to £14.5 million (H1 2023: £9.8 million).

 

Managed Pubs and Hotels revenue increased by 12% with like for like sales up by 12.7% compared with the prior year. Operating profit in Managed Pubs and Hotels increased from £18.0 million to £25.4 million with operating margin improving from 11.7% to 14.7% despite the continued inflationary environment. This improvement in operating margin is through a focus on sales growth and operational excellence. 

 

Tenanted Inns revenue improved by 8% to £16.3 million (H1 2023: £15.1 million) and EBITDA increased to £8.3 million (H1 2023: £7.8 million). EBITDA margin slightly declined from 51.7% to 50.9% largely due to one-off costs associated with the transfer of sites from Managed Pubs and Hotels to Tenanted Inns.

 

The Group has unsecured banking facilities of £200 million, split between a revolving credit facility of £110 million and a term loan of £90 million. During the period, the Group agreed with its lenders to extend these facilities for a further year through to May 2027. The Group also has £26 million of debentures, £6 million of which is due for repayment in December 2023 and will be repaid out of the Group's current facilities. The Group's undrawn committed facilities at 30 September 2023 were £86.5 million, with a further £10.2 million of cash held on the balance sheet.

 

Net debt (excluding leases) was at £129.4 million (H1 2023: £129.2 million) and was down £3.4 million from net debt at year end. The Group has delivered on its capital allocation framework through investment in the estate and returns to shareholders. A total of £9.0 million was invested in the existing estate in the period, a dividend of £6.1 million was paid to shareholders, and £3.5 million was used for share buybacks as part of a one million share buyback programme which completed in November.

 

The Group has continued to strengthen its Balance Sheet during the period with a ratio of net debt to pro forma EBITDA reducing to 2.6 times (down from 3.0 times at year end) and significant headroom on its facilities. This will be further boosted with the sale of The Mad Hatter, Southwark, in July 2024 which will realise £20 million in value.

 

Adjusted finance cost increased to £6.9 million (H1 2023: £5.8 million) with average cost of borrowing increasing from 5.4% to 7.6% due to the increase in Bank of England base rates. The Group has a zero-premium cap and collar over £60 million of the term facility. This instrument is in place for a three-year period to September 2025 to hedge some of the variability in interest rates. The Group sold a floor of 310bps and bought a cap of 500bps which has given some protection from the Bank of England rate since it increased to 525bps on 3 August 2023.

 

Separately disclosed items before tax were a credit of £0.4 million (H1 2023: £0.9 million credit) which principally consists of a release of a VAT provision of £1.1 million on settlement of a claim, £0.4m credit received as part settlement of an ongoing legal claim, and £0.4 million interest credit on the Group's pension surplus. Net of this is an impairment charge of £1.5 million recognised in relation to the write down of three properties and one right-of-use asset to their recoverable value.

 

Tax has been provided at an effective rate before separately disclosed items of 28.3% (H1 2023: 21.4%). The increase in the effective tax rate is mainly due to the increase in the corporation tax from 19% to 25% which came into effect in April 2023. The main driver of the increase in effective tax rate on adjusted profits over the standard rate of tax is a result of non-deductible depreciation on assets that do not qualify for capital allowances. Disclosure on tax is set out in note 5.

 

The net impact of these items results in the basic earnings per share increasing by 4.52p to 17.65p (H1 2023: 13.13p) and adjusted earnings per share increasing by 4.68p to 17.16p (H1 2023: 12.48p).

 

The growth in earnings per share has enabled the Group to declare an interim dividend of 6.63p (H1 2023: 4.68p), which is an increase of 42% on last year, in line with the 38% increase in adjusted earnings per share. In addition to the dividend, the Group announced in July 2023 the intent to repurchase one million 'A' ordinary shares, which it has just recently completed. Today, the Group has announced its intention to buyback an additional one million 'A' ordinary shares.

 

The surplus on the defined benefit pension schemes has decreased by £1.5 million from the year end and is now showing an accounting surplus of £13.1 million (1 April 2023: surplus £14.6 million, 24 September 2022: surplus £20.4 million). This is predominately as a result of a decrease in the fair value of scheme assets from £113.4 million to £103.8 million. The present value of the scheme liabilities also decreased due to an increase in the discount rate from 4.75% to 5.60%. As the Group has an unconditional right to refund under the pension trust deed, an asset has been recognised at 30 September 2023.

 

 

CURRENT TRADING AND OUTLOOK

 

We have continued with our strong progress since the period end, with like for like sales for the first 32 weeks of the year growing by 11.7%. Trading in the City continues to grow and although we cannot rule out further tube or train strikes, we are looking forward to a good Christmas with bookings currently 11% ahead of last year.

 

Our capital investment programme for the year will see us undertaking a number of large projects across the estate during the remainder of this financial year, enhancing our iconic pubs and hotels. We will also continue to invest in further development for our exceptional team members including the roll out of a new online training platform, to support our face to face learning, that will increase engagement.

 

Fuller's is a great company with a superb team of dedicated people at all levels. We have a long-term vision, strong values and a clear strategy and all of this is underpinned by our predominately freehold estate of iconic pubs in fantastic locations.

 

While there is still a challenging economic environment to navigate, we have had a strong first half. With exciting plans in the pipeline, we are looking forward to the second half of the year with confidence.

 

Simon Emeny

Chief Executive

14 November 2023