Rural performance helps push Fuller back into profit

Fuller, Smith & Turner (FSTA) returned to profit despite pulling pints in a restriction-free trading environment for only a third of the interim period. With a strengthened balance sheet and improved working capital position, the pub and hotel group reinstated the half-year dividend.

Rural pub and hotel sales growth was a standout. Helped by the pandemic ‘staycation’ trend, performance consistently bettered 2019. The recovery of the London estate, meanwhile, was slow and steady: it struggled with the impact of home working and lack of tourists but momentum is growing as the city reopens.

While total revenue was still down by a third from 2019, the direction of travel is encouraging. Like-for-like sales after the half-year period-end to 13 November were 90 per cent against the pre-pandemic comparative.

Net debt, excluding lease liabilities, fell by £87m from the March year-end. The balance sheet was further strengthened by the £52m equity placing and £192m debt facility refinancing in April, and the repayment of state Covid-19 loans in May.

Numis forecasts EPS of 12.5p then 32p for the 2022 and 2023 fiscal years, after 2021’s loss. The broker said that Fuller’s “EV/pub of £1.4m is undervalued” against Young’s (YNGA) £3.9m and CPC’s (CPC) £2.9m.

The valuation certainly looks attractive, with the shares trading at 21 times forward adjusted earnings, according to consensus forecasts from FactSet. This looks good when set against rivals. But, despite positive signs, the short-term trading environment remains uncertain as we move into winter and higher virus cases. Investors can raise a cautious pint. Hold.

Last IC view: Hold, 860p, 8 Jul 2021