Fuller Smith & Turner PLC (LON:FSTA) saw sales rise 6% in the first half of its financial year, but profits slipped slightly as it invested heavily into its estate ahead of the key Christmas trading period.
The £300mln pubs group, with its focus on drinks, was one of the main beneficiaries of the hot weather and World Cup over the summer months.
READ: Forget gastropubs, ‘wet-led’ pubs are back on top
Some of its sector peers have been held back by their struggling food-led businesses, but Fuller’s places less importance on this, and its pubs tend to have sports screens and beer gardens – big draws for customers over summer.
The group also has a strong presence in city centres, which City broker Liberum recently noted was a part of the industry that has fared “particularly well” of late.
That all helped to push revenue 6% higher to £222.1mln (H1 17: £209.3mln) in the six months ended September 30, although adjusted pre-tax profits slipped 1% to £23.6mln (H1 17: £23.8mln).
New IT system
The drop-off in profitability was largely due to a hike in investment as the company gets ready for the holiday season – an important time of year for pubs and restaurants.
Fuller’s has been upgrading the Wi-Fi and adding more USB charging points as it looks to keep up with the times. Behind the scenes, the company also splashed out almost £3mln on a “once-in-a-generation” upgrade of its core IT system.
On top of those one-off costs, like the rest of the industry, Fuller’s has also had to navigate rises in business rates – an extra £0.4mln in the first half – and higher wage costs.
Investment good for long-run
“While our revenues have continued to grow, we experienced a small drop in group profits - however, this should be taken in context,” said chief executive Simon Emeny.
“We made a conscious decision to front-load our investment programme - impacting our profitability by £0.9mln.
“Although we would have seen profit increase had we not taken this action, we believe this is the right decision and ensures our estate is in the best possible position to benefit from the busy Christmas period and beyond.”
Including the first few weeks of the second half, like-for-like sales in the Managed Pubs and Hotels division are up 4.4%, while like-for-like profit in its Tenanted Inns has risen 2%.
In terms of the total amount of beer and cider sold in the 33 weeks of the year so far, volumes are up by 0.5%.