Fuller's aims for Olympic gold

With consumers under the cosh, and input costs and tax rising, few pub companies have much to look forward to in 2012. However, Fuller, Smith & Turner is an exception. While not immune to tough economic conditions, the concentration of its pub estate in affluent parts of London and the south east, combined with its focus on quality, leaves it looking resilient.

Indeed, helped by comparisons with dire December weather in 2010, the group reported a 5.1 per cent like-for-like rise in managed pub and hotels sales in the nine weeks to 21 January. Meanwhile, over a 42-week period like-for-like managed sales were ahead 4.1 per cent, there was a 1 per cent increase in like-for-like profits at its tenanted pubs, and its brewery’s own beer volumes rose 1 per cent. The group also has every reason to hope for a significant summer fillip thanks to the Olympics and the Diamond Jubilee celebrations, which should make for an extremely busy capital. Fuller's could do especially well from this increased footfall given its status as the capital’s "only long-standing brewer".

The group is attempting to take further advantage of the opportunity with a number of pub acquisitions. It has bought 14 pubs in total in its current financial year and has been busy refurbishing others to get them up to scratch for the summer. Despite this expenditure, the group's strong cash flows means net debt has increased by as relatively minor £16.9m to £110m between the half-year and end-December.

Numis Securities says...

Add. Trading has continued to be strong and ahead of our full-year forecast assumptions for EPS of 38.6p, rising to 41.5p in 2013. The recent step-up in the managed pub acquisition activity and strong sporting calendar leave our 2013 forecasts at risk of needing to be upgraded. Managed pub margins are improving and there should be more to come in 2013 as the drag from acquisitions needing refurbishment reverses, and investment in additional head office resource pays back. Tenanted pub profits are being helped by investment and new initiatives such as mystery shoppers.

Peel Hunt says

Buy. A strong third quarter illustrates the benefit of being in the best pub trading market in the UK and prospects are bright for London pub companies in the year ahead. Apart from the obvious boost from the Olympics and Jubilee celebrations, London and the south east are already clearly outperforming the rest of the country. London's advantage can only increase during 2012. Fuller's is also supported by its quality retail operation and beer product, as well as a valuable property asset.