The tenanted estate saw like-for-like profits grow 3% while the brewing arm reported total beer and cider volumes up by 1%.
Revenue rose 10% to £177.7m in H1 and EBITDA was up 8% to £33.3m.
On a 33-week basis like-for-like sales in managed houses is up 5.8%; like-for-like profits in the tenanted estate have risen 4% and beer and cider volumes are up 1%.
The breakdown of managed performance across H1 shows food sales up 8.3%, drinks sales up 4.9% and accommodation rising by 2.2%.
The company said that in the tenanted estate average EBITDA per pub had increased by 2%, with the company investing £1m in improving the fabric of the pubs.
Fuller’s pointed out that like-for-like beer volumes in the tenanted division were up 5% with like-for-like wine sales up 3%. The company said this showed “the way our tenanted estate is moving to a more premium position, with food sales becoming increasingly important, and we expect this trend to continue”. During the period, it disposed of two tenanted pubs - The Prince of Wales in Hillingdon and The White Hart in Hanwell.
During the period Fuller’s acquired two new freehold pubs, plus the freeholds of three existing sites including The Barrowboy & Banker on London Bridge. It also opened The Stable in Plymouth and Winchester and relocated The Stable in Bath. Since the end of H1 the company has bought The Great Northern Railway Tavern in Hornsey, North London, and The Sutton Arms in Farringdon. It has also opened The Stable in Southampton.
Chief executive Simon Emeny stressed that the company’s strong performance was down “the hard work of our well trained pub teams” and said investment in training had more than doubled in the last two years, with the company on track to deliver around 13,000 training days in this full year.
He said: “As part of this development plan, we now have a full and structured career path for both front of house and kitchen teams from bar staff and kitchen porter to general manager and head chef. We are also identifying the operations managers of the future and building their skills base ready for promotion when a vacancy arises. We are delighted that anyone who is on one of these development programmes is recognised with an increase in pay - a move we have also extended to our service coaches who will all be receiving, as a minimum, the new National Living Wage rate of £7.20 per hour from the end of November, regardless of age.”
On performance in H1 Emeny said: “We have had a strong first half with all areas of the business in growth, demonstrating the clear trading momentum underway in the business. It is particularly rewarding, coming on the back of a good prior year. During the last six months, our Managed Pubs and Hotels have had excellent growth, the Tenanted Division has put in another good performance and the Beer Company has also made progress. Our commitment to providing the best drinks range, the most delicious, freshly-cooked food, fantastic surroundings and service that is second to none continues to deliver good experiences for our customers and good returns for our shareholders.
“While it is our core businesses, Fuller’s Inns and The Fuller’s Beer Company, that have made the largest contributions, the targeted Company investments of the last two years - our acquisition of the Cornish Orchards cider farm and a 51% stake in The Stable craft cider and gourmet pizza restaurants - are delivering ahead of expectations. In addition, the acquisition of the UK distribution rights for Sierra Nevada has also helped to open new doors and give us access to a different customer base, which we have then capitalised on with the innovative craft range launched by our outstanding brewing team.”
The company said that it receives online booking for tables in 90% of its pubs and that it had improved the direct booking process for its hotels. Emeny said: “We have been busy taking a fresh look at our whole customer relationship management system, which has resulted in better targeted emails with relevant offers for a very responsive customer base. In short, this means that we are now attracting the best team members and the most discerning customers - and ensuring that we have the right development plans and career progression for the recruits and the best food, drinks, accommodation, venues and service for the guests. And at the same time as doing all this, we continually watch the market to ensure we are always a step ahead of the competition.”
The group said it continued to work in tandem with The Stable founders, Richard and Nikki Cooper, and was seeing benefits from improved processes, particularly in terms of margin and payroll. It has a full pipeline of sites coming on stream in the coming weeks. Southampton opened earlier this month and Cheltenham, Cardiff and Birmingham are imminent. Its expectation is that it will have 15 Stable sites by the year end.
Volumes for The Fuller’s Beer Company increased by 1% during the period, while sales rose 3%, which the company said reflected the change in both its product and sales channel mix. It said it had reinvested this growth into new sales channels, such as Westside Drinks, increased marketing and carried out further developments at Cornish Orchards. This has resulted in profits remaining level.
Emeny said: “The craft beer revolution is well and truly here and the way today’s consumer has so much respect for the skill of the brewer and demand for new flavours and formats provides a good opportunity for Fuller’s. While we continue to focus our marketing activity on London Pride, our other brands are also flourishing. Oliver’s Island has been selling well and this golden ale, which has attracted new people to the ale category, is now our second biggest cask ale brand in the UK.
“Our investment in Cornish Orchards continues to deliver and we are ahead of our investment plan. The cider is well received by consumers, volumes have increased and we have gained new listings. It also provides a valuable addition to our premium portfolio. Our wine division also performed well, with sales up 5% on last year, against an overall decline in wine sales according to CGA data.
“Frontier, our craft lager launched in 2013, has continued to grow. Volumes have doubled year on year and we are gaining a place on the counter in more bars across the UK. We have recently launched the brand in 330ml cans - which has helped to take it to a whole new range of craft beer venues where it can be hard to keep a permanent tap listing for any brand. We have also launched two other brands in 330ml cans - Wild River and Black Cab Stout. Craft beer bars like cans because they are quicker to chill than bottles, are easily recyclable and look fantastic.
“Although the beer market is still a challenging place to operate, as the customer moves towards smaller, lower volume, higher priced brands - while looking for interesting tastes and flavours - we are in a good position to meet this new customer demand. We have a strong range, the industry’s leading brewing team and the heritage and commitment to quality to ensure that the beers we produce will sell, be easy to manage for the bar owner and come in a suitable format for each specific venue.”
The group’s net debt has increased by £28.6m during the period to £191.2m, following strong cash generation from operations, offset by high levels of investment, particularly in “securing the freeholds of great locations for our long term”. Total capital expenditure for the period of £53.4m included acquiring two new pubs, three freehold properties and significant investment in its existing estate.
Of the group’s £200m of facilities arranged last year, £130m has now been extended to August 2020. Of the remaining facility, £20m expires within 12 months and £50m expires in August 2019. The group’s undrawn committed facilities at 26 September 2015 are £28.5m and it said that this, and the freedom to add more funding lines, gives its the flexibility to invest in future opportunities as they arise.
Emeny said that the second half of the year had started well, with a number of the group’s pubs - particularly in West London - benefitting from a boost during the Rugby World Cup.
He said: “For the first 33 weeks, our like for like sales in our Managed Pubs and Hotels have risen by 5.8% and like for like profits in our Tenanted Inns have risen by 4%. Beer and cider volumes have increased by 1% for the first 33 weeks.”
The company has purchased two new sites since the period end. The Great Northern Railway Tavern is in the North London suburb of Hornsey, an area where it is currently under represented. The other is The Sutton Arms, in the City, close to Farringdon Station.
In addition, it opened The Stable in Southampton, in the cultural quarter of this university city. Emeny said the group had an exciting pipeline of acquisitions and will be opening The Sail Loft on Greenwich Reach in January.
He said: “In short, having completed the first half of this financial year, I look forward to the rest of the year with optimism. We have the best team in the industry and iconic pubs, combined with the financial firepower and business acumen to stay ahead of the competition. Fuller’s is a company with clear values, a consistent and well communicated strategy and I know that we will continue to deliver great beer and cider, delicious food and outstanding service to our customers, great careers for our people and solid returns for our shareholders.”
In his statement on the results chairman Michael Turner paid tribute to outgoing tenanted director Mike Clist, saying: “After 15 years at the helm, our Tenanted Director Mike Clist is retiring. He has led an outstanding operation which, on the back of a string of impressive results has, during this half year, seen like for like profits rise by 3%. As well as building the best tenanted business in the industry, Mike has also been instrumental in liaising with Government on behalf of the industry during recent turbulent times and I would like to take this opportunity to give him my heartfelt thanks.”