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Morning Briefing for pub, restaurant and food wervice operators

Fri 5th Jun 2015 - Fuller's reports Ebitda up 8%
Fuller’s reports Ebitda up 8%: Fuller’s has reported sales rose 12% to £321.5m in the year to 28 March with profit before tax up 7% to £36.4m. Ebitda rose 8% to £58.5m. Managed like for-likes were up 6.3% in the year. Eight new pubs were opened in the year, including two on the River Thames and two in transport hubs. The first nine weeks of the current financial year has seen like-for-likes up 5.5% in its managed division. Tenanted like-for-like profit has risen 2% whilst total beer and cider volumes are 2% down. The company has also acquired the King’s Head in Earl’s Court Village. It reported at least more Stable artisan pizza and cider venues are set to open this year after a site on the Waterfont in Plymouth opened its doors. Chief executive Simon Emeny said: “It has been another year of excellent progress for the company and I am delighted to be reporting growth in all three areas of the business. Our Managed Pubs and Hotels business continues to outperform the industry, the Fuller’s Beer Company has seen growth in all channels and our Tenanted business has had an outstanding year. We have a robust business that has continuously evolved over time, keeping us at the forefront of our industry and providing a base for us to always look for new opportunities to keep the business fresh, relevant and in a strong position to grow for the future. These opportunities have to complement our overall vision to provide a first class experience for discerning customers. The new financial year has got off to a good start with solid sales for the nine weeks to 30 May 2015. Like for like sales in our Managed Pubs and Hotels have risen by 5.5% and like for like profits in our Tenanted Inns have risen by 2%. Beer and cider volumes have decreased by 2%. We have taken on new companies, new brands and new ideas over the last two years and while they have all started well, the best is yet to come. We are looking forward to completing the integration of these new businesses and building for our future. We will also continue to invest heavily in our existing pub estate and develop our range of brands. We have a successful business model, interesting fledgling opportunities, a first class, predominately freehold estate, a team with passion and ability and a very healthy balance sheet. This gives me confidence that we will continue to deliver strong results for our customers, our employees and our shareholders.” Chairman Michael Turner added: “This year sees the 170th anniversary of the Fuller, Smith & Turner partnership – and I’m delighted to announce that we are celebrating with another set of excellent results and a business that is in great shape to embark on the next chapter in our story. The team has yet again delivered in all areas and I congratulate them all for their dedication, creativity and hard work. By continuing to focus on our clear vision, to create and operate the most stylish pubs and hotels whilst brewing Britain’s most coveted premium brands for discerning customers both at home and abroad, we have seen total revenue increase by 12% to £321.5 million (2014: £288.0 million) and a resulting increase in adjusted profit before tax of 7% to £36.4 million (2014: £34.1 million). One of the key figures for our shareholders is adjusted earnings per share, which I am pleased to say has risen by 10% to 51.51p (2014: 46.94p). Once again, we have outperformed the market with our Managed Pubs and Hotels, which have seen total sales grow 15%, like for like sales increase by 6.3%, and profits rise by 11%. We have invested significantly in our estate and added eight new pubs in a variety of interesting locations including our first airside pub, at Heathrow Terminal 2, and two new sites on the River Thames. A new recruitment website has improved the way we attract and hire team members and, having invested in our training and development programmes for some years, I am delighted to see some high profile internal promotions during the year. Our Tenanted Inns have been star performers with exceptional results and like for like profits rising by 5%. Total profits have risen by 2% and this has come during a difficult period for the tenanted model. Tenanted Director Mike Clist has played a lead role in representing both Fuller’s and the wider industry in recent negotiations with Government and I was delighted to see his commitment honoured when he was recognised for his Outstanding Contribution to the Industry at the Publican Awards. It has also been a good year for the Fuller’s Beer Company, with total beer and cider volumes rising by 4% and profits rising by 2%. The Made of London campaign for our flagship ale London Pride has driven sales, we launched a delicious new golden ale, Oliver’s Island, grew Frontier Craft Lager sales to make it our second biggest brand in the UK and expanded distribution of the premier American craft beer, Sierra Nevada. I would also like to thank The Chancellor for his third consecutive cut in beer duty, which has done much to reverse the damage done by the dreaded duty escalator.”

Douglas Jack upgrades Fuller’s forecast: Numis Securities leisure analyst Douglas Jack has upgraded his Fuller’s forecast after this morning’s full-year results – he has an ‘Add’ recommendation and a 1200p target price. He said: “Full year PBT rose 7% to £36.4m (we forecast £36.0m), with earnings and dividends both up 10%, following a 6% rise in managed LFL sales and a 5% rise in tenanted LFL profits in H2, well ahead of the market. We are upgrading our 2016E PBT forecast to £38.5m from £38.0m and our target price to 1200p from 1150p. Fuller’s managed pub/hotel LFL sales rose 6.3% (vs 8.3% comp), with food up 7.8%, drink up 5.6% and accommodation up 7.3%. It outperformed a London managed pub market that generated 3.2% LFL sales over the same period (Peach Tracker). Fuller’s is benefiting from extensions to its premium product range, estate investment, as well as increased food marketing and staff training. Eight managed pubs and six Stable Pizza restaurants were added. This helped managed pub sales to rise by 11%. We estimate managed margins would have been up c.50bps without additional refurbishment downtime/repairs and initial dilution from the Stable Pizza acquisition. Reported margins fell 40bps. Tenanted LFL profits rose 5% (vs 2% comp) aided by investment as well as improved IT systems, training and support. Brewing volumes rose 4% (vs 1% comp), with all channels in growth, driven by the Made of London (London Pride) campaign, the successful launch of Oliver’s Island, strong growth in Frontier Craft Lager and a doubling in the distribution of Sierra Nevada. We are upgrading our forecasts by 1-2%, supported by 2015 being ahead and managed pub/hotel LFL sales being up 5.5% and tenanted LFL profits being up 2% during the first nine weeks of 2016E. For 2016E, we assume: 2.5% LFL sales and 15bps margin growth in managed; 2% tenanted LFL profit growth; and 1% brewing volume growth. We reiterate our Add recommendation. We believe Fuller’s has plenty of investment and operational initiatives to maintain its momentum. Also, with net debt/Ebitda at 2.7x, there is scope for our 2016E expansion assumptions to be exceeded: we forecast two new managed pubs and six new Stable Pizza restaurants, and all these sites are already found and scheduled to open.”

Easyhotel acquires Manchester site: Easyhotel, the owner, developer, operator and franchisor of “super budget” branded hotels, has conditionally acquired a freehold building in Manchester, which it intends to convert into an Easyhotel. Built in the 1800s, the building is located at the junction of Dale Street and Newton Street. The purchase of the property is subject to Easyhotel obtaining planning consent for a hotel. Bradley House, locally known as “The Flatiron” building because of its unique shape, is situated in the centre of Manchester, in the city’s Northern Quarter, and is approximately ten minutes’ walk from both Manchester Piccadilly and Victoria stations, as well as the main shopping areas in Manchester. The group plans to convert the building into a 114-bedroom Easyhotel, which is planned to open in summer 2016. Total cost of the purchase and conversion of the building is estimated at £6 million. Simon Champion, chief executive, said: “Following so soon after our recent success in securing premises to develop an Easyhotel in Liverpool, we are delighted to be investing in another vibrant city. Manchester has substantial international tourism, good economic growth potential, a large population and successful, internationally-renowned universities. We expect this new Easyhotel to attract a variety of leisure and business customers looking for good quality accommodation at an affordable price and look forward to being a part of the city’s ongoing success.”

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