Fuller Smith & Turner PLC (LON:FSTA) shares lost their fizz on Friday as cost pressures and comments on “future economic and political uncertainty” overshadowed a steady rise in half-year sales and profits.
Adjusted profits before tax in the six months ended 30 September grew 4% to £23.8mln (H1 16/17: £22.8mln), on higher revenues of £209.3mln – a 6% year-on-year rise (H1 16/17: £197.6mln).
Following the solid results, investors were rewarded with a 4% hike in the interim dividend to 7.55p (H1 16/17: £7.25p).
Shares down on ‘challenging’ outlook
Shares slumped 5.1% at the opening bell to 915.5p though, with the market picking up on comments that margins are “coming under increasing pressure” which may weigh on profitability going forward.
Indeed, operating margins across the group as a whole fell 50 basis points in the period to 12.8%, and Liberum analyst Anna Barnfather also doesn’t expect cost inflation to ease anytime soon.
Several of Fullers’ peers have highlighted a difficult UK consumer environment in recent months and the brewer echoed those thoughts, saying stagnant wage growth and rampant inflation could cause “further challenges” further down the line.
Second quarter slowdown
The half-year figures also suggest a sharp slowdown in the second quarter. Sales in its managed pubs division had been up 6.6% year-on-year in the first 16 weeks of the new financial year, although they finished the half only 3.6% ahead.
Similarly like-for-like profits in its tenanted inns business were up 5% in that same period but finished the half only 3% up.
A tail-off had been expected with the reliably unreliable British weather stopping playing ball at the end of July.
‘Well-placed’ despite headwinds
“I cannot remember a time when we have faced such an array of additional cost pressures,” said chief executive Simon Emeny.
"Although we have already faced and absorbed a number of prevailing headwinds, future economic and political uncertainty may still cause further challenges, however we are well-placed to face these.”