- Return to progressive dividend policy
- City workers return to offices
- Retirement of expensive debt
With investors starved of good income in recent years, news that pub and hotels group Fuller, Smith & Turner (FSTA) has returned to a progressive dividend policy with the half year payout up 20% is welcome news.
Fuller’s CEO Simon Emeny is cognisant that providing a steady and rising income is important to investors. Emeny told Shares that building the payout back to pre-Covid levels was a key leg of the firm’s asset allocation priorities.
For reference, the company paid a dividend of 20.2p per share in 2019 and analysts have penciled in a 15.1p per share for the year ending 26 March 2024.
FESTIVE CHEER
Speaking from one of the City’s iconic pubs, The Counting House, Emeny said he expected one of the busiest days of the year as Christmas bookings hit their stride and city workers returned to offices.
While the economic storm clouds gathering Emeny takes a cautious approach to debt with a focus on good cash generation, to fund investment in the estate and people which maintains the high quality of its offering.
EXPENSIVE DEBT ROLLING OFF
Fuller's has £25.9 million of expensive debenture debt some of which is due to expire in December 2023 (£6 million) and the rest in April 2028. The former pays 10.7% interest a year while the latter pays 6.875%.
Debentures are a form of debt with no collateral which means they rely on the credit worthiness of the issuer. The rolling off of the debt will provide Fuller's with more cash to use in the business and save on interest costs.
In May, the company secured a four year £200 million bank facility to invest in growth.
Correction: The original article made reference to retirement of preference shares which was incorrect.
