Leading analyst, Douglas Jack, of Peel Hunt, has said he expects Fuller’s to deliver a strong set of results next week.
He said: “On 9 June, we will receive the results from the General Election and Fuller Smith & Turner. In an uncertain world, the latter should deliver a strong set of results, and continue its track record for setting and exceeding deliverable objectives.
“If the General Election fails to bring a similar result, we believe Fuller’s should be a safer (investment) home than most. We are increasing our target price to 1,200p from 1,100p. Fuller’s managed pub/hotel like-for-like sales rose by 3.7% (vs 5.3% comp) during the 43 weeks to 21 January 2017. This was ahead of the Coffer Peach Business Tracker, which was up 0.7% for managed pubs (1.8% in London; 0.4% outside London) over the same period.
“Managed pub market like-for-like sales picked up to 2.4% (4.5% in London; 1.8% outside) in February-April 2017, during which we expect Fuller’s outperformance to have continued.
“Our forecasts assume that Fuller’s adds two outlets in H2 2017E, which requires no new sites, over the last four months, following three pub openings, four The Stable openings and two transfers during the first eight months.
“Tenanted like-for-like profits fell by 1% during the first 43 weeks and are forecast to fall by 0.5% over the full year, excluding the benefit of 18 tail-end pub disposals, boosting average pub profitability by 4-5% eventually.
“Our forecasts assume minimal change in brewery division trends, albeit with Nectar Imports boosting sales and diluting margins in the short term.
“Managed pubs, restaurants and hotels, which now generate over 60% of group profit, are Fuller’s greatest source of growth and potential upgrades.
“We believe the upside risk rests in the assumption of 2% like-for-like sales in 2018E (versus our 4% forecast for 2017E). Our forecasts assume a slowdown in expansion (caused by a pause at Stable Pizza) even though the company has the balance sheet (2.9x net debt/Ebitda) and the ambition to be more expansive.”
