Fuller calls for 'beer tie' to continue after profit fall

By This Is Money
Updated: 07:10 EDT, 5 June 2009

London Pride brewer Fuller, Smith & Turner called for a probe into the controversial 'beer tie' to be abandoned after revealing a 40% fall in profits.

Taking Pride: Fullers says it has been a 'difficult year'.

Chairman Michael Turner said Business Secretary Peter Mandelson should not refer the controversial 'beer tie' to the Competition Commission because it would place the pub industry under more stress.

The beer tie is a pub industry ownership structure in which tenants are tied to taking their beer and drinks from their pub company landlord in return for a more attractive rent.

The tie, which applies in 30,000 British pubs, has been questioned by critics who say pub companies use it to profiteer on beer sales to their tenants.

Turner said: 'The last thing this industry needs at the moment is an awful lot of uncertainty and everything on hold for a two-and-a-half-year investigation. That would be the 19th investigation of the tie since 1966. We are already an overregulated industry and we do not need more legislation. We do not need interference. It is something the industry should be left alone to sort out.'

The group reported that it had made a 'solid' start to trading since the year-end, with comparable sales in its managed pubs and hotels estate up 1.8% in the nine weeks to May 30.

Overall profits tumbled 40% to £14.4m in the year to the end of March after writedowns in the value of previously acquired pubs.

Fuller stressed that with a £6.2m hit to the value of recently bought properties stripped out, underlying profits fell by 1% to £22.8m in the year to March 28.

Overall revenues from Fuller's 359 pubs, six hotels and the brewing operation rose 3% to £210m.

Managed pubs and hotels saw like-for-like sales rise 3%, although the harder-hit tenanted estate saw profits drop 2%.

It pledged ongoing help for struggling tenants, but said it had been selectively lowering rent levels rather than introducing blanket concessions.

The group's beer company and brewery operations had a 'good year' with underlying operating profits up 4% at £8.3m and revenues up 5% to £91.8m.

Fuller said it outperformed the embattled UK ale market, with a fall of 2%, but export business grew 11% as it expanded into Australasia and the Far East.

Share tips: Here's what the Investors Chronicle said about Fullers in April...

It's not a great time to run a pub. But there is a big difference between pub groups with too much debt and too many low-quality pubs, and the groups with high-quality estates and sound balance sheets. Fuller, Smith & Turner is firmly in the latter camp.

The recession is hitting rivals hard and Fuller, Smith & Turner has been able to use its balance sheet to acquire some top-quality premises at knock-down prices. A buy.