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31-May-2012: Full Year Results 2012


Financial results for the 52 weeks ended 31 March 2012

Financial Performance

52 weeks (2012) versus 53 weeks (2011)

  • Adjusted earnings per share[1] up 7% to 39.82p (2011: 37.36p);
    five year growth of 44%
  • Revenue up 5% to £253.0 million (2011: £241.9 million)
  • Adjusted profit before tax[2] up 3% to £30.3 million (2011: £29.3.million)
  • EBITDA[3] up 3% to £47.8 million (2011: £46.6 million)
  • Profit before tax (including non-trading items) of £28.8 million (2011: £31.0 million)
  • Basic earnings per share[4] 42.13p (2011: 44.12p)
  • Final dividend4 increased by 8% to 7.60p (2011: 7.05p)

Corporate Progress

  • 30 pubs acquired and major investment in the brewery
  • Managed Pubs and Hotels like for like sales up 4.2%
  • Tenanted Inns profits[5] up 4%
  • Beer Company profits5 up 2%
  • All business divisions in growth
  • Net Debt to EBITDA[6] 2.7 times after capital investment of £75 million
  • Divisional Managing Directors in place

Commenting on the results, Michael Turner, Chairman of Fuller’s, said:

“I am pleased to announce a very positive performance in a year where we have laid strong foundations for future growth following capital investment of £75 million across the business, which included the acquisition of 30 carefully selected pubs.”

“Our adjusted earnings per share rose by 7% to 39.82p (2011: 37.36p). Over the last five years our adjusted earnings per share have grown 44%, which is testament to the success of our long term strategy. Our revenues increased 5% to £253.0 million (2011: £241.9 million) and adjusted profit before tax (excluding exceptional items) improved by 3% to £30.3 million (2011: £29.3 million).”

“As the summer sun chases away the economic gloom, we now look ahead to what promises to be a historic time for the country. This coming weekend we have the Queen’s Diamond Jubilee, followed by the European Football Championships and then the Olympic games. With our pub estate based in London and the South East and London Pride as our flagship beer, we aim to give our customers a wonderful summer to remember.”


For further information please contact:

Fuller, Smith & Turner P.L.C.

Press Office: 0208 996 2048 / 2175

07824 815366



Toby Bates 07876 161314

Paul Downes 07900 244888

Copies of this statement, the Preliminary Announcement and results presentation will be available on the Company’s website, The presentation will be available from 12.00 pm on 31 May 2012





I am pleased to announce a very positive performance in a year where we have laid strong foundations for future growth following capital investment of £75 million across the business, which included the acquisition of 30 carefully selected pubs.

Our adjusted earnings per share rose by 7% to 39.82p (2011: 37.36p). Over the last five years our adjusted earnings per share have grown 44%, which is testament to the success of our long term strategy. Our revenues increased 5% to £253.0 million (2011: £241.9 million) and adjusted profit before tax (excluding exceptional items) improved by 3% to £30.3 million (2011: £29.3 million).

Managed Pubs and Hotels like for like sales increased 4.2%, with total revenues up 6%. After duty rises and the temporary effect of significant development projects on a number of the new houses added in the year, profits[7] rose by 1%. Over the last five years revenues from our Managed Pubs and Hotels have grown 30%, showing that against a backdrop of economic recession, we have continued to make strong long term progress.

Our Tenanted Inns have also performed consistently well over this challenging period for the sector, and this has continued with like for like profits up 2% and operating profits7 4% higher. The Fuller’s Beer Company saw Own Beer volumes rise 1% on a comparable basis, driven by excellent growth in Exports.

Excessive duty increases that total 45% over the last five years continue to impact all parts of the business, and this is demonstrated by a marked difference between domestic and export sales (where UK duty does not apply). The pub industry is a significant contributor to the local communities in which it operates and provides employment for almost 1 million people. However, we continue to shoulder a disproportionate tax burden as a result of the current detrimental tax regime. The Group paid total taxes and other government levies of £114 million for the year, which represents an astonishing 37% of Group revenues including VAT.

Our aim has always been to invest selectively in high quality assets where they are available and we are delighted that last year we had the opportunity to do so. All of the pubs acquired in the year were carefully chosen and have outstanding long term potential. 13 have joined the Managed Pubs and Hotels division and 17 joined the Tenanted Inns division. In addition to the significant development of a number of the new sites, we have continued our programme of enhancing our existing pub estate. We have also made a substantial investment in the brewery, adding 30,000 barrels of bottle and keg beer capacity which will support export growth into the future.


The Board recommends that a final dividend of 7.60p per 40p “A” and “C” ordinary share and 0.760p per 4p “B” ordinary share be paid on 24 July 2012 to shareholders on the share register as at 22 June 2012. This is an 8% increase on last year’s final dividend. The total dividend per share of 12.65p per 40p “A” and “C” ordinary share and 1.265p per 4p “B” ordinary share represents a 7% increase on last year, demonstrating our confidence in the outlook for next year and this will be covered more than three times by adjusted earnings per share.


Fuller’s Inns comprises two operating divisions. Managed Pubs and Hotels, where we control all aspects of the business, and Tenanted Inns, where Fuller’s owns the property but the pub is operated by an entrepreneur under the Fuller’s brand. At the year-end we had 174 Managed Pubs and 209 Tenanted Inns, following the 30 acquisitions and the disposal of five properties which no longer matched our criteria.

Acquisition Strategy

Our acquisitions strategy is to continue to enhance the quality of our estate, to increase our London presence and to expand our reach into prosperous areas of the South East. To achieve this, we look at both high quality existing businesses to which we can add value, and those which offer significant development potential. Our key selection criteria for an individual site are the local demographics, the character, the location, the qualities of the underlying property and the opportunity for us to enhance the operation.

The financial year under review has been exceptional in terms of acquisitions for the Group, adding further high quality sites to both our Managed and Tenanted businesses. In addition to this initial investment, we have invested £4.8 million in the year on the extensive redevelopment of four of these sites; with further development planned on a number of the others in the new financial year.

In London, we have added seven pubs to our Managed division and expanded our Tenanted presence with four excellent pubs. The majority of the Managed sites are existing high turnover, drinks led operations in great strategic locations and they have all traded well from day one under our stewardship. In March 2012 we opened the impressive Parcel Yard in Kings Cross Station. This was an exciting new development in a Grade 1 listed building and is now the largest station pub in Britain. In addition, we have completely remodelled the Tokenhouse (formerly traded as Bluu) in Moorgate to capitalise on the premium local market of this excellent city site.

In the South East, we took the opportunity to expand our portfolio in selected affluent areas where we previously had little representation. We have acquired 19 superb freeholds for our estate in these areas, with six Managed and 13 Tenanted pubs. All of the acquisitions are in great locations with a strong customer base and we expect them to respond well to Fuller’s branding and operational style. Within the Managed additions, the White Swan Hotel, Stratford-upon-Avon and the Crown, Bishop’s Waltham were purchased as development sites. These are remarkable historic buildings and, following sensitive restoration schemes that cost more than the buildings themselves, both have already been re-launched to the public.

The pubs acquired in the year are:


The Cabbage Patch, Twickenham

The Pavilion End, Moorgate

The Coach & Horses, Soho

The Plough, East Sheen

The Forester, Ealing

The Seven Stars, Holborn

The Hand & Flower, Hammersmith

The Tokenhouse, Moorgate

The Lamb & Flag, Covent Garden

The Wellington, Waterloo

The Parcel Yard, Kings Cross Station

South East

The Bear & Ragged Staff, Michelmarsh

The Mayfly, Stockbridge

The Boater, Bath

The Old Plough, Stoke D’Abernon

The Crown Inn, Bishop’s Waltham

The Old Thatch Tavern, Stratford-upon-Avon

The Duke of York, Tunbridge Wells

The Ox Row Inn, Salisbury

The Fox & Hounds, Lyndhurst

The Red Lion Hotel, Wendover

The Frog & Wicket, Hook

The Sir John Barleycorn, Cadnam

The George & Dragon, Westerham

The Three Horseshoes, Laleham

The Horse & Groom, Alresford

The White Swan Hotel, Stratford-upon-Avon

The Kingswood Arms, Kingswood

The William Walker, Winchester

The Market Hotel, Reigate

Managed Pubs and Hotels

Revenues for our Managed Pubs and Hotels business increased by 6% from £147.2 million to £155.7 million. Like for like sales grew by 4.2%, the 13 pubs and hotels acquired in the year added 4% and the one week shorter reporting period reduced the figure by 2%. Operating profits before exceptional items rose at a lower rate of 1% to £18.3 million (2011: £18.1 million), resulting from a reduced operating margin. EBITDA grew by 1% to £26.9 million (2011: £26.6 million).

The operating margin reduction from 12.3% to 11.8% can be explained by three main factors. First, lower margins were achieved on drinks as we were unable to pass on the full 7% duty increase in March 2011 to our consumers by raising prices further. If the ill-conceived duty escalator remains in place, we would expect this dilution of margin on drinks to continue. Second, one-off head office investments made to enhance our food development teams, our scheduling systems and our digital presence also had an impact. The final and most significant contributor was the planned, short-term impact of acquisitions that required closures for refurbishment and, in the case of the development sites, were loss-making prior to their transformations.


We have continued to improve our existing estate and in addition to many smaller projects, we have made significant investments in 18 houses this year, totalling £4.2 million. For The King’s Head, Guildford, The Thomas a Becket, Worthing and The Barrel and Horn, Bromley we designed transformational refurbishments to reposition their offer within their respective local markets. The Six Bells, Thame, The Pilot, Chiswick and The Rose and Crown, Ealing, each had targeted investments aimed at developing under-utilised areas of the pub, for example by transforming function rooms or gardens. These investments are already showing good returns.

Four Pillars

Our business is founded on the four pillars of outstanding cask conditioned ales, delicious food, great wines, and engaging service. The elements that we can measure financially, accommodation, food and drinks, all showed strong like for like sales growth in this financial year up by 7.4%, 4.5% and 4.0% respectively.

Engaging service is fundamental to a great customer experience and to strengthen our ability to deliver this consistently, we launched “Connection Week” last October. This initiative saw one team member from every Managed Pub and Hotel invited to an inspiring event where we shared with them our key messages, delivered by guest speakers and our own staff. They were also given the tools to subsequently cascade these messages in every pub, to every employee, within one week. The response to this initiative has been fantastic and has elevated the motivation and engagement levels of our pub teams. We will repeat “Connection Week” in the coming year. We also continue to conduct regular focus groups amongst our employees, which have provided a powerful means of communication.

In our estate growth in cask ale has outperformed growth in lager this year, indicating both a shift in consumers’ tastes, with craft beer the order of the day, and interesting developments in our range. New beers and our own popular seasonals, such as Spring Sprinter and Summer Ale, continue to broaden our range of drinks, catering for every occasion. Our evolving selection of interesting foreign and niche lager brands and exclusive wines also ensure that our pubs satisfy the increasingly varied tastes of their customers.

Investment in our head office food team is already showing a return, driving quality and consistency throughout the estate. We focus on producing the finest food in our pubs, using fresh, seasonal ingredients. The 4.5% like for like sales growth achieved in the year was predominantly the result of increasing the number of covers, rather than price. We also improved margins through holding supplier increases below general food inflation and enhancing kitchen efficiency.


We are excited about the growth potential of our accommodation business in the coming year. Our acquisition and investment programme has added 134 rooms to the estate last year, through a combination of acquiring sites with accommodation and adding rooms as part of a redevelopment. At the year-end we had 620 bedrooms across 28 properties, an increase of 28% over the last year. The 27 rooms added at The Drayton Court in Ealing at the start of the year and upgrades to rooms at the Fox & Goose Hotel, Ealing and the Chamberlain Hotel, Minories have had the expected positive impact on room sales. Like for like sales grew 7.4% last year, largely driven by an increase in average room rate achieved of 3%.

Since the end of the year we have completed the £2.8 million refurbishment of one of our acquisitions, The White Swan Hotel, Stratford-upon-Avon. Part of this magnificent Grade II listed building dates from the 1450s and it features 41 bedrooms which have all been upgraded to the Fuller’s standard, with high quality finishes and bespoke artwork on the walls from local artists.


The digital arena continues to develop rapidly and this has opened up opportunities for us to increase our interaction with customers and drive sales. During the year we have invested in our digital infrastructure and we are delighted to be launching our new pubs and hotels websites today (31st May). Amongst many enhancements, this will assist us in promoting events, allow customers to make table bookings online and transform the customer journey for bedroom bookings. The new sites are smartphone and iPad friendly and are integrated with each pub’s social media activity.

With around 78% of all hotel room bookings now being made online, one objective of our increased digital investment is to improve the numbers of people booking hotel rooms directly through our new websites, decreasing the amount paid in third-party agency fees.

Tenanted Inns

Tenanted Inns’ revenue grew by 2% to £27.5 million (2011: £26.9 million), driven in part by the acquisitions made in the estate earlier in the year, which continue to trade well. Average EBITDA per pub increased by 4%, again as a result of our long term strategy.

Our Tenanted Inns acquisition strategy is to further increase the quality of the estate by acquiring pubs with long term potential and disposing of those sites that no longer fit our criteria. The 17 pubs added to the division in the year will significantly increase our average EBITDA per pub, whilst in the year we completed our recent disposal programme with the sale of four tenanted properties.

Operationally our strategy is to continually raise standards and quality, to develop the offer to ensure it fits the Fuller’s brand, and to encourage entrepreneurship in our tenants. During the last year we have trained more tenants than ever, as well as increasing our range of courses; we have introduced a Mystery Shopper service to provide useful customer feedback to our tenants and we also paid for all our tenants to become members of the BII, the leading industry organisation for licensees.

We have continued to invest in our estate throughout the economic cycle, a strategy which benefits both the Group and our tenants. This policy has seen us invest £0.6 million last year across 26 pubs and works have been conducted by Fuller’s and our lessees to upgrade nearly 50% of our pub interiors in the last two years. Wholesale drinks prices rose as higher levels of duty were passed on but, recognising the impact of the current economic climate on our tenants’ businesses, we again capped all RPI linked rent increases to 3%.

The result of this proven strategy is that operating profits before exceptional items increased 4% to £10.3 million (2011: £9.9 million) and like for like profits were up 2%.

Fuller’s prestigious Griffin Trophy for the best pub was again awarded this year to a Tenanted Inn, the Queen’s Head, Farnham, reflecting the high quality entrepreneurial calibre of our tenants.

We are continually developing our proposition and in March 2012 we launched a new Service Charge agreement. This offers complete property compliance, at a Group purchasing price and removes a large administrative burden, freeing up busy tenants to focus on running their business. Early feedback has been very positive and a number of tenants have already signed up. We have also launched the first phase of an extranet for tenants, with the ultimate aim of providing them with a ‘one-stop shop’ for all interaction with Fuller’s, as well as online access to our discounts, promotions, help and advice.


The Fuller’s Beer Company put in a robust performance in what remains a difficult marketplace. Revenues increased by 5% to £109.1 million (2011: £104.1 million). Operating profits increased by 2% to £9.0 million (2011: £8.8 million) as operating costs also increased 5%. Operating margin has been diluted due to both the changing sales mix and the impact of beer duty rises.

On a comparable 52 week basis, total beer volumes increased by 2% and Own Beer volumes were 1% higher than last year, driven by volumes of Own Beer sold in Fuller’s pubs growing 3% and export volumes increasing by 22% in the year. Exports continue to grow strongly and now account for 1 in 6 barrels of Own Beer sold. For the first time we sold more than 10 million pints to our overseas customers. During the year, London Pride increased market share in our core trading area of London, increasing 4% in a level market[8].

Our investment of £4.5 million in new conditioning tanks at the Griffin Brewery in Chiswick has added 30,000 barrels of conditioning capacity for bottle and keg beer. The tanks are now in operation and we have the ability to increase capacity further at a lower incremental cost in the future. This investment allows us to meet the current growing demand for bottle and keg beer, whilst also being flexible enough to produce cask ale should the need arise.

During the last twelve months we have continued to evolve our London Pride marketing, starring James May our brand ambassador. Following on from the “When in London” series of advertising, we are focusing on our London provenance and renowned brewing heritage in the build-up to the Olympics. This latest campaign, running throughout the summer, will be appearing on London taxis, Riverboats and in the capital’s train stations and will be accompanied by related social media activity. This will both reinforce our appeal with Londoners and target the expected five million visitors to the capital, with the posters reaching 20 million potential customers.

Our seasonal ale programme continues to provide our customers with fresh and interesting choices, whilst giving us an excellent testing ground for new products and a breadth of range to suit our different sales channels. A great example of this is Black Cab, where following success as a seasonal cask ale in November, this rich dark stout has been launched in bottle form for our Export and Off Trade markets. Bengal Lancer, a premium India Pale Ale, was originally introduced as a seasonal ale but has gone on to become our fastest growing beer in the past year.

Our brewing team in Chiswick are extremely passionate about brewing excellence and are constantly both fine tuning our existing range and developing new beers. Hope and Glory is our current seasonal ale which is being brewed specially for the Diamond Jubilee using Sovereign hops and Westminster barley from H.R.H. the Prince of Wales’ farm. Following this, in June we are looking forward to launching Wild River, an exciting new mid-Atlantic pale ale brewed using American hops for their citrus aroma and flavour.


Following capital expenditure of £75 million, net debt rose by just under £50 million to £138.2 million (2011: £88.5 million). After the arrangement of £60 million of additional bank facilities in the year, our total bank facilities now stand at £150 million. The facilities all run until May 2015 and at 31 March 2012 we had £34 million of undrawn committed funds.

EBITDA increased by 3% to £47.8 million (2011: £46.6 million) and the pro forma ratio of net debt to EBITDA[9] remains low at 2.7 times (2011: 1.9 times), allowing us continued flexibility to invest in future opportunities.

Net exceptional losses before tax of £1.5 million comprised £3.0 million of acquisition costs, a net £0.9 million onerous lease charge and £0.2 million of non-cash losses in relation to financial instruments which are not effective for hedge accounting purposes, offset by a profit on the disposal of properties of £0.6 million and a net reversal of property impairment charges of £2.0 million. After exceptional items, profit before tax was therefore £28.8 million (2011: £31.0 million). We benefitted from a non-cash exceptional deferred tax credit of £2.5 million relating to the reduction in the UK corporation tax rate from 26% to 24% which came into effect on 1 April 2012. The total impact of these items was that basic earnings per share were greater than the adjusted figure at 42.13p (2011: 44.12p).

The accounting deficit for defined benefit pensions has risen by £12.7 million to £19.1 million (2011: £6.4 million). This was driven principally by an increase in the calculated present value of pension obligations from £83.5 million to £98.2 million, largely due to changes in assumptions in line with the fall in double A corporate bond rates.

During the period 1,096,154 ‘A’ ordinary 40p shares were repurchased into treasury for £7.7 million. In addition, 86,009 ‘A’ ordinary 40p shares and 338,614 ‘B’ ordinary 4p shares were purchased for £0.8 million by or on behalf of the Trustees of the Share Incentive Plan and the LTIP Trustees to cover future issuance.


Since last year’s Annual General Meeting Alastair Kerr has joined the Board as a Non-Executive Director and has become Chairman of the Remuneration Committee. Alastair has a wide range of retail experience having previously held roles at The Body Shop, Kwik-Fit and Mothercare, and currently at White Stuff where he is a Non-Executive Director.

On 12 December 2011, Ian Bray joined the Board as Managing Director of The Fuller’s Beer Company. I am pleased to welcome Ian, who joins us from Bunge SA where he was European Marketing Director and brings a wealth of experience with international brands to the Board. On 1 February 2012 Jonathon Swaine was promoted to the position of Managing Director of Fuller’s Inns. Jonathon has been with the Group for six years and was previously one of our Retail Operations Directors.

Fuller’s provides great opportunities for young people looking for a career in our sector and in 2011 we launched our first graduate development programme. The programme provides the opportunity to experience a wide variety of roles, and has been well received among the graduate applicant community, with our second year now underway. We have also successfully implemented a hospitality graduate programme, which will provide an effective development route for graduates to progress to general manager level in our Inns business.

We are expecting an exciting summer and the continued support and enthusiasm from all our staff is crucial to taking full advantage of this fantastic time when the spotlight will be on London. Our success is due to the performance of a passionate team who aspire to the highest standards, and who work unstintingly for the success of the Group. I would like to thank each and every one of them for their hard work and effort over the past year.


We have experienced the most volatile and weather-dependent start to a year that we can remember. April was the wettest on record, whilst last week was glorious. Over the eight weeks to 26 May 2012, our total Managed Pubs and Hotels sales grew 7.2%, while the like for like sales decreased 2.3%. As the summer sun chases away the economic gloom, we now look ahead to what promises to be a historic time for the country.

This coming weekend we have the Queen’s Diamond Jubilee, followed by the European Football Championships and then the Olympic games. With our pub estate based in London and the South East and London Pride as our flagship beer, we aim to give our customers a wonderful summer to remember.

The next Interim Management Statement will be issued on 18 July 2012.

Michael Turner


31 May 2012

[1] Calculated using adjusted profits after tax and the same weighted average number of shares as for the basic earnings per share and using a 40p ordinary share

[2] Adjusted profit measures exclude exceptional items. The Directors believe that this measure provides useful information for shareholders as to the internal measures of the performance of the group

[3] Pre-exceptional earnings before interest, tax, depreciation, loss on disposal of plant and equipment and amortisation

[4] Calculated on a 40p ordinary share

[5] Operating profit before exceptional items

[6] Net debt to EBITDA is adjusted as appropriate for the pubs acquired or disposed of in the period

[7] Operating profit before exceptional items

[8] CGA, cask ale London area, March 2012

[9] Net debt to EBITDA is adjusted as appropriate for the pubs acquired or disposed of in the period

Category: Final Results

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