- Subject to shareholder approval, the pub group has raised £54m from issuing 6.5m new ‘Class A’ shares
- It has been burning though £4m-5m of cash during each month of full lockdown
Fuller Smith & Turner (FSTA) has raised just under £54m from a placing of 6.5m new ‘Class A’ shares. Subject to shareholder approval, the shares will be issued at 830p each, a 5 per cent discount to the pub group’s closing mid-market price on 30 March.
In addition to the placing – which equates to 20 per cent of Fuller’s current issued share capital – the group has also offered up 4.4m new ‘Class B’ shares to existing shareholders, and directors including chairman Michael Turner have applied to acquire 132,528 of these shares.
The fundraise comes as little surprise given the impact of Covid-19 trading restrictions on the UK’s pubs. Peers Mitchells & Butlers (MAB) and J D Wetherspoon (JDW) tapped their shareholders for funds earlier this year.
Amid the repeated lockdowns, Fuller’s revenue for the year to 28 March plunged by 80 per cent. The group says that between 20 March 2020 and 12 April 2021 – the date when restrictions in England will be eased – its pubs will only have been open 27 per cent of the time.
Net debt has also risen during this crisis, climbing by 15 per cent since the September half year-end to £216m (excluding lease liabilities), and Fuller’s has been burning through an average of £4m-5m of cash in each month of full lockdown.
Conditional upon the placing completing, the group’s lenders have agreed to extend the maturity date of its loans from August 2021 to February 2023, and the financial covenants have also been amended such that Fuller’s now only has to maintain a minimum level of liquidity until March 2022. Without these changes, the group has warned that it may have to resort to more expensive debt financing or dispose of some of its freehold pub assets.
Fuller’s says that the revised debt facilities and proceeds of the fundraise will strengthen its balance sheet so that it can “take full advantage” of the economy reopening and any potential growth opportunities. They will also enable the group to repay £100m drawn from the Bank of England’s Covid Corporate Financing Facility (CCFF) and provide additional liquidity in the event that lockdown restrictions are reintroduced.
As the debate rages on around the use of ‘Covid status certificates’, Fuller’s is planning a phased reopening of its estate, aiming to have most of its managed pubs and hotels up and running by 17 May. It is hoping to become cashflow positive from the middle of next month and to return to pre-pandemic debt and pro forma leverage levels by early next year.
The group will likely benefit from pent-up demand. Indeed, the partial reopening last summer saw sales across its pubs return to 78 per cent of normal levels by August. Its rural locations should also receive another boost from the shift towards ‘staycations’ as international holidays remain off the table.
With the hospitality sector’s prospects looking up, Fuller’s’ shares have rebounded strongly to within touching distance of their pre-pandemic levels. The group does have a high degree of exposure to London, however, which could slow down its recovery. Hold at 840p.
Last IC View: Hold, 678p, 02 Dec 2020
