Pub and hotel group Fuller Smith & Turner (FSTA) saw continued recovery from Covid and strike disruptions after reporting full year sales up by a third and adjusted pre-tax profit 76% higher to £12.7 million in line with market expectations.

The company said current trading was very strong with like for like sales up 13.9% in the first 10 weeks of the new financial year to 26 March 2024.

Numis noted the firm was tracking ahead of the market (CGA Peach +10.4% within the M25 in April) and peers such as Young’s (YNGA:AIM) which reported 4.8% in the first four weeks.

Chief executive Simon Emeny said he was more optimistic about the future than before the pandemic while the board declared a 30% increase in the full year dividend to 14.68p per share.

The shares gained almost 3% to 564.7p and are up 18% year to date, but they have a long way to go to reach their pre-pandemic high above £10.

HOW DID THE COMPANY PERFORM?

Sales for the year to 26 March increased 33% to £336.6 million driven by continued recovery from the pandemic with like-for-like sales up 17.5% on the prior year.

As well as increased footfall, sales benefited from higher drink and food prices with the former rising by 6.8% and the latter by 8.3%.  

Like-for-like sales in the group’s central London heartland increased by 40% as people returned to offices and tourism improved.

Despite higher utility and labour costs impacting margins the company increased operating profit by 36% to £25.1 million. Net debt increased slightly to £132.8 million.

Emeny told Shares that the company’s capital allocation priorities were to continue to invest in the estate and to increase shareholder value through increased dividends and share buybacks.

WHAT ARE THE EXPERTS SAYING?

Numis raised its 2024 forecasts, which prior to today’s update assumed managed pub like-for-like sales growth of 4.5% and a margin of 11.7%.

Based on the stronger than expected start to the year, the broker has lifted its assumptions to 6% and 12% respectively which results in a 4.3% upgrade to expected pre-tax profit of £19.4 million.

The broker said: ‘Fuller's offers an attractive combination of income (3%), operational turnaround and value. The current EV (enterprise value) of £578m is just £1.5m per pub, well below replacement cost and under 0.5x NAV (net asset value).’

Leisure and hospitality analyst Mark Brumby at Langton Capital commented: ‘Today’s announcement suggests that trading has delivered positively and that the outlook is improved.

‘The NAV should help to support the shares and, with trading currently positive, the shares may find further support from these levels.’

LEARN MORE ABOUT FULLER’S

 

---