Fri 21st Nov 2014 - Fuller’s LfLs accelerate to 6.8% Fuller’s LfLs accelerate to 6.8%: London brewer and retailer Fuller’s has reported managed like-for-like sales growth of 6.5% in the 26 weeks to the end of 27 September. Trading since the period end has accelerated to produce overall like-for-like growth of 6.8% in the first 33 weeks. Adjusted profit before tax was up 8% to £19.6 million (2013: £18.1 million) and revenue was up 10% to £161.6 million (2013: £146.3 million). Ebitda grew 9% to £30.7 million (2013: £28.1 million). Tenanted Inns like-for-like profits increased by 5% and total beer and cider volumes rose by 6%. The company acquired three new managed freehold sites – The Bull Hotel in Bridport, The Harp in Covent Garden and The Windmill in Portishead and opened London’s Pride at Heathrow, Terminal 2 in the period. It reported a ‘good pipeline of openings to come during the rest of the year’. One Over the Ait, a new build site at Kew Bridge, opens today [21 November 2014] with two more riverside pubs due to open. Simon Emeny, chief executive of Fuller’s, said: “It has been an exciting six months for the company and I am pleased to report a strong operational performance in our existing business combined with striking new long term investments for the future. Our business has a clear vision and long term strategy focusing on recruiting and developing the best people, enhancing our premium drinks portfolio, continuous investment in our estate and developing our range of freshly-made seasonal dishes. The result of this strategy is another significant increase in sales and profit. We have seen a positive start to the second half. The company is in robust health and we face the future with optimism and confidence. Our high quality predominantly freehold estate, passionate team and healthy balance sheet put us in an excellent position to continue to deliver good returns for the company and our investors.” Emeny added: “But as well as having a clear strategy, we have also been able to respond to the shifting dynamics of the customer. Today’s consumer is more astute, expects higher standards and has more choice than ever as to where to spend their leisure pound. It is our anticipation of this changing consumer and our ability to evolve accordingly, that has produced consistently industry-leading results. In turn, our continued commitment to invest in our people, properties, brands, food and IT will keep us ahead of the game. As we develop our estate further, there have been some notable highlights. One is the opening of London’s Pride, our first airport pub at Heathrow Terminal 2, which has traded well and has introduced us to a new style of operation. In addition, we have acquired three managed freehold pubs, one in London and two further expanding our trading area into the south and west. And last, but by no means least, we are also delighted to have acquired a 51% share in The Stable – a craft cider and gourmet pizza business that offers excellent development potential.” Numis Securities leisure analyst Douglas Jack issued a ‘Add’ note with a price target of 1100p for the shares. He said: “H1 PBT is up 8% to £19.6m (we forecast £19.0m), driven by strong like-for-like sales and selective expansion, with earnings up 12% after share buy backs and a slightly lower tax rate. We have upgraded our forecasts by 2%. Managed pub/hotel like-for-like sales rose 6.5% (against a 7.9% comp; above our revised 4% full year assumption), with drinks up 5.5%, food up 7.7% and accommodation up 10.4%. Like-for-like sales have benefited from strong trading conditions in London and south east England, improving product range as well as increased focus on food marketing and training. Managed Ebitda margins rose 30bps in H1 despite record levels of refurbishment downtime (80 weeks versus 29 in H1 2014) and higher repair costs (rising to 3.95% from 3.8% of turnover). These factors offset most of the circa 70bps improvement in gross margins due to food cost deflation and the premium drinks strategy. We are maintaining our +20bps Ebit margin full year assumption (vs. +10bps in H1), expecting ongoing gross margin improvement and less dilution from refurbishment downtime in H2. Tenanted like-for-like profits rose 5% in H1 (vs. 1% comp), despite increased investment in repairs. Like-for-like profits were driven by: investment; favourable trading conditions in south east England; a new business management platform; free websites, Wi-Fi and mystery shoppers; improved training and support. Our full year forecast assumption is for like-for-like profits to grow by 1%. Brewing volumes rose 6% in H1, with all channels in growth, ahead of our 3% full year assumption. Although operating profit was up 3%, it would have been up 8% if marketing spend had not increased by £200k.With managed like-for-like sales up 6.8%, tenanted like-for-like profits up 3% and brewing volumes up 4% after 33 weeks, we are upgrading our forecasts by 2% (2015E PBT: from £35.3m to £36.0m; consensus £35.3m). Due to trading and expansion momentum, we believe forecast risk remains on the upside.”