Warm weather boosts beer sales for Fuller

By Andrew Oxlade
Updated: 05:50 EDT, 21 July 2009

Fuller, Smith & Turner shook off the recesion to reveal a weather-related boost to sales today.

However, the West London-based brewer and pub owner warned of an uncertain outlook for the year ahead.

It said much also depended on how consumers would react to impending tax rises, most notably the reversal of last December's VAT cut in January 2010.

A reduction from 17.5% to 15%, introduced last December, was only a temporary measure and was offset by a rise in duty on alcohol.

In the meantime, Fuller, brewer of London Pride bitter, has enjoyed a strong start to its financial year, with like-for-like sales in its managed pubs and hotels up 2.9% for 16 weeks to 18 July 2009, with the recent heatwave boosted sales. It is up from growth of 1.8% in early June.

Like-for-like profits in its tenanted pubs were down 1%, while the company's own brewed beer volumes grew by 2%, helped by the popularity of its Organic HoneyDew beer.

Chairman Michael Turner said he was 'pleased' with the performance adding: 'As the sun has shone, our customers have defied the economic gloom to come and enjoy our outstanding cask conditioned ales, delicious food, great wines and exemplary service.

'Our long-term strategy of focusing on quality, cash generation and a strong balance sheet continues to prove to be resilient and, we believe, is the right strategy for our shareholders.'

Fuller, based at the Griffin Brewery in Chiswick, revealed in June that full-year profits were down 40% in to £14.4m in the year to the end of March, following writedowns in the value of pubs it had bought earlier.

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 the end of March. 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.

Overall revenues from Fuller's 359 pubs, six hotels and the brewing operation rose 3% to £210m. It pledged ongoing help for struggling tenants, but said it had been selectively lowering rent levels rather than introducing blanket concessions.

The company also pleaded with the Government not to 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.

Fuller shares, which have recovered from a recent low of 304p last November, were up 8.75p at 485p by mid-morning. They peaked at 760p in the summer of 2007 after an impressive run from around 180p in 2003.

The next market update will be half-year results on 20 November.

Broker Charles Stanley upgraded the stock from 'add' to 'buy'. It pointed out that while net debt is up slightly to £112m due to recent pub acquisitions from Punch Taverns, the company remains one of the lowest geared in the sector. The broker retained a price target of 575p.

Share tips: Fuller

Investors Chronicle 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. Buy.

Daily Telegraph in June: Fuller's 'impressive' sales growth and its low debt, which is one third of the industry average, were highlighted. Buy.