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Fuller, Smith & Turner manages to hold onto profits as transformation continues

The results for the publican's half-year did not include a £164.5mln of profit the company made from the sale of its beer business to Japan’s Asahi which was announced in January

Fuller Smith & Turner - Fuller, Smith & Turner manages to hold onto profits as transformation continues

Publican Fuller, Smith & Turner PLC (LON:FSTA) has managed to deliver flat profits in its first half as it continued a transformation programme following the news that it will sell off its beer business.

For the 26 weeks ended 28 September, the company reported an adjusted profit of £17.9mln, flat on the prior year, while revenues rose 6% to £174.8mln. The interim dividend was also maintained at 7.8p per share.

READ: Peel Hunt downgrades Fuller, Smith & Turner after profit warning

The company reported a “good performance” from its managed pubs and hotels, where like-for-like sales grew 2.7%, although this was slower than the 4.1% growth a year ago.

 The picture was less rosy for the firm’s tenanted inns, where LFL profits were down 3% compared to 4% growth in 2018.

The performance also did not include the £164.5mln of profit the company made from the sale of its beer business to Japan’s Asahi for £250mln.

Fuller is planning to use the cash from the sale to improve its pubs and hotels, while Asahi will continue to supply beer to the firm under a long-term agreement.

Into the second half, Fuller said LFL sales at its pubs and hotels were up 2.1% in the first 36 weeks of the year, while tenanted inn profits were down 2% which the company attributed to “consumer unease reflecting the ongoing political and Brexit uncertainty”.

“The first half of this year has seen the biggest transformation in Fuller's history. It has been a time of unprecedented change - and not without its challenges - but we have made good progress and we have a clear view and plan for the next steps in our journey from vertically integrated brewer and retailer to focused premium pubs and hotels business”, said chief executive Simon Emeny.

"Fuller's is well funded, has a clear vision, a distinctive strategy, a portfolio of extremely high quality assets and an excellent culture - which stands us in good stead to navigate further political and economic turbulence”, he added.

Broker upgrades to ‘add’

In the wake of the results, analysts at Peel Hunt upgraded Fuller to ‘add’ from ‘hold’ and increased their target price to 1,050p from 950p, saying they saw “scope for upgrades if new plans to reduce costs and grow the pub estates are fulfilled”.

“Reflecting this, recent share price weakness and a true asset value that we believe is well above [1,000p per share]”, they added.

In late-morning trading on Thursday, Fuller’s shares were up 0.4% at 933.7p.

Quick facts: Fuller Smith & Turner

Price: 954 GBX

Market: AIM
Market Cap: £527.74 m

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