Leading analyst Douglas Jack, of Numis, has forecast a 6% rise in pre-tax profits for Fuller’s to £36m ahead of the company’s full year results on Friday.
He said he expected the company to report a slight slowdown on the 8% pre-tax profit growth recorded for H1, in line with trends across the sector.
He said: “Fuller’s managed pub/hotel LFL sales rose 6.8% (vs 7.7% comp) during the 43 weeks to 24 January 2015. About half of Fuller’s pubs are in London, with the other half in southern England. London managed pub market LFL sales rose 3.4% vs 0.6% for the rest of the country (source: Peach Tracker) between April 2014 and February 2015. In March-April 2015, managed pub market LFL sales slowed to an average of 1.4% inside the M25 vs -0.3% outside.
“At our recent conference, CGA Peach showed how premium products are outperforming in the on-trade market with volumes growing at 21% for craft beers, 8% for world lager and 6% for premium cider. Thus, Fuller’s is well positioned, extending its premium range, whilst continuing to invest in amenity, food marketing and training.
“We believe at least six managed pubs opened in 2015E, with up to four Stable Pizza restaurants and one Thames riverside pub already scheduled to open in 2016E.
“Tenanted LFL profits rose 4% during the first 43 weeks (vs 2% comp) driven by investment as well as improved IT systems, training and support. The estate is relatively well-positioned due to a high orientation to London (around half of sites) and food (at c.30% of sales).
“Brewing volumes rose 4% over the first 43 weeks, with all channels in growth. Long-term growth should be assisted by new premium products (such as Oliver’s Island) and higher marketing spend, albeit with exports outperforming.
“We believe our 2016E forecasts are conservative assuming: 2.5% LFL sales and no margin growth in the managed estate; 1.5% tenanted LFL profits; and 2% brewing volume growth. They also cautiously assume a slowdown in expansion to just two new managed pubs pa from 2016E, even though the company has the balance sheet (2.6x net debt/EBITDA) and the ambition to be more expansive.”