REG - Fuller,Smith &Turner - Half-Year Results
17/11/2022 07:01
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RNS Number : 6827G Fuller,Smith&Turner PLC 17 November 2022
STRICTLY EMBARGOED
UNTIL 7AM THURSDAY 17 NOVEMBER 2022
FULLER, SMITH & TURNER P.L.C.
("Fuller's", the "Company", or the "Group")
Financial results for the 26 weeks to 24 September 2022
Good momentum - well-placed to deliver long-term growth
Financial and Operational Highlights
Unaudited Unaudited Audited
26 weeks 26 weeks ended 52 weeks ended
ended 25 September 26 March
24 September
2022 2021 2022
£m £m £m
Revenue and other income 168.9 116.3 253.8
EBITDA(1) 28.9 22.8 44.3
Adjusted profit before tax(2) 9.8 4.6 7.2
Statutory profit before tax 10.7 10.6 11.5
Basic earnings per share(3) 13.13p 5.76p 11.59p
Adjusted earnings per share(3) 12.48p 6.09p 9.79p
Dividend per share 4.68p 3.90p 11.31p
Net debt excluding lease liabilities(4) 129.2 131.5 131.9
All figures above are from continuing operations.
1 Pre-separately disclosed earnings before interest, tax, depreciation,
profit on disposal of plant and equipment and amortisation.
2 Adjusted profit before tax is the profit before tax excluding
separately disclosed items.
3 Per 40p 'A' or 'C' ordinary share. Adjusted EPS is calculated using
earnings attributable to equity shareholders after tax excluding separately
disclosed items. Basis EPS includes separately disclosed items.
4 Net debt excluding lease liabilities comprises cash and short-term
deposits, bank overdraft, bank loans, debenture stock and preference shares.
· Revenues grew to £168.9 million (H1 2022: £116.3 million) as the
business recovered from the impact of covid related restrictions on trade
· Like for like sales in the first half have grown by 20% compared to
the prior year, with Central London growing by 67%
· Adjusted profit before tax increased to £9.8 million (H1 2022: £4.6
million) as the benefit of the sales recovery exceeded inflationary increases
in the cost base
· Net debt is at £129.2 million (H1 2022: £131.5 million) with the
cash generated by the business funding investment in the estate and returns to
shareholders
· Significant capacity to invest in growth with a four year £200
million bank facility effective from May 2022
· Interim dividend of 4.68p declared, representing a 20% increase on
last year.
Strategic Highlights
· Sales momentum continues, despite the temporary disruption caused by
ongoing train and tube strikes
· Digital transformation work completed with new look websites and
enhanced consumer marketing capability
· Continued strong performance in our hotels with revenue per available
room ("RevPAR") increasing by 17% against H1 2020 to £94.65
· Implementing a wide range of energy reduction initiatives as part of
our Life is too good to waste programme
· Maintained investment in the estate, with £12 million invested in
the period to enhance capital values and drive further growth
· Impact of new central finance system reflected in more agile decision
making
· Delivering on our long-term strategy while evolving to reflect
changes in consumer behaviour.
Current Trading
· Like for like sales for the seven weeks to 12 November 2022 up 13%
versus prior year despite the challenging environment
· Strong like for like sales growth across Central London - up 20% for
the seven weeks to 12 November 2022
· Christmas bookings are strong and additional uplift expected from the
World Cup
Chief Executive Simon Emeny said:
"Following on from a good first half performance, we have maintained our
forward momentum in the seven weeks post the period end, with like for like
sales up by 13% against the same period last year. As commuters return to
their offices and international tourists once again visit the Capital, our
Central London and City sites have seen like for like sales for the first
seven weeks of the second half rise by 20% against the prior year, despite the
impact of tube and train strikes.
"While we look forward to our first Christmas free of restrictions for three
years, and the added bonus of a FIFA World Cup, we are trading in an
increasingly challenging environment. Cost pressures from energy bills, wage
and food inflation, and increasing interest rates continue to impact us and
all businesses in the hospitality sector. Our teams are working hard to manage
these pressures, while ensuring we continue to deliver an outstanding
experience for our customers.
"We are a long-term business, with excellent foundations both in terms of the
strength of our Balance Sheet and our predominately freehold estate, and we
have the talent, desire and drive to deliver future growth and success."
-Ends-
For further information, please contact:
Fuller, Smith & Turner P.L.C.
Simon Emeny, Chief
Executive
020 8996 2000
Neil Smith, Finance
Director
020 8996 2000
Georgina Wald, Corporate Comms Manager
020 8996 2198
Instinctif Partners
Justine
Warren
020 7457 2010
Notes to Editors:
Fuller, Smith & Turner PLC is the premium pubs and hotels business that is
famous for beautiful and inviting pubs with delicious fresh food, a vibrant
and interesting range of drinks, and engaging service from passionate people.
Fuller's has 208 managed businesses, with 1,043 boutique bedrooms, and 178
Tenanted Inns. The estate is predominately located in the South of England
(44% of sites are within the M25) and stretches from our London heartland to
the Jurassic Coast via the New Forest. Our Managed Pubs and Hotels include
seven stunning hotels in the Cotswolds, and Bel & The Dragon - seven
exquisite country inns located in the Home Counties. In summary, Fuller's is
the home of great pubs, outstanding hospitality and passionate people, where
everyone is welcome and leaves that little bit happier than they arrived.
Photography is available from the Fuller's Press Office on 020 8996 2000 or by
email at pr@fullers.co.uk (mailto:pr@fullers.co.uk) .
This statement will be available on the Company's website, www.fullers.co.uk
(http://www.fullers.co.uk) . An accompanying presentation will be available
from 12 noon on 17 November 2022.
FULLER, SMITH & TURNER P.L.C.
FINANCIAL RESULTS FOR THE 26 WEEKS ENDED 24 SEPTEMBER 2022
CHAIRMAN'S STATEMENT
I am very pleased with the progress the Executive Team and all at Fuller's
have achieved over the first six months of the new financial year. Despite the
turbulent political landscape, inflation at a 40 year high and Putin's
devastating war in Ukraine, Fuller's has driven a 45% increase in revenue,
more than doubled underlying profits and delivered an increased interim
dividend for our shareholders.
While much of the credit for this success is due to the focus and commitment
of the Executive Team, I would like to publicly thank each and every one of
our dedicated team members. They make the real difference to our customers and
to our success. Despite the stop-start nature of the last couple of years, and
the ongoing disruption caused by train and tube strikes that
disproportionately impact the Fuller's business, our amazing team members come
to work, support each other and deliver a great Fuller's experience to our
customers. They are all heroes in their own way.
Across our Managed Pubs and Hotels, we continue to invest in our iconic
buildings and our people. While many competitors may start to rein back on
investments in training and in the fabric and furnishings, we will not.
Fuller's is, and always has been, a company with a long-term strategy and
vision - which means consistently offering outstanding food and drink, in a
beautiful pub with a warm welcome from well-trained team members - and that is
what we do best.
The support we provided for our Tenants from the very start of the pandemic is
reflected in the continued success of our Tenanted Inns. I am delighted that
92% of our Tenants are on a substantive agreement and our Tenanted support
team provides an exceptional level of assistance, help and encouragement for
our entrepreneurial Tenants.
Finally, I am delighted to see the rewards materialising from our investment
in digital transformation and a new central finance system. In today's world,
the best companies need access to detailed information, enabling agile and
quick decision making. The time and money invested in these two large-scale
projects has provided the former - and our talented team is adept at using it
to deliver the latter.
Since the start of the financial year, the country has had two monarchs, three
prime ministers, four chancellors and five rises in the Bank of England
interest rate. Energy prices continue to fluctuate and there is much
uncertainty around the financial markets. In such uncertain times, Fuller's is
a beacon of stability. We have survived turbulent times before, have excellent
clarity of vision and strategy, and I know Simon Emeny and the team are in an
excellent place to maintain and increase Fuller's forward momentum.
DIVIDEND
The Board is pleased to announce an interim dividend of 4.68p (H1 2022: 3.90p)
per 40p 'A' and 'C' ordinary share and 0.468p (H1 2022: 0.390p) per 4p 'B'
ordinary share. This will be paid on 3 January 2023 to shareholders on the
share register as at 16 December 2022. This payment equates to 60% of the 2019
payment and continues our return to a progressive dividend policy.
Michael Turner
Chairman
16 November 2022
CHIEF EXECUTIVE'S REVIEW
OVERVIEW
We have continued to build momentum since the start of the financial year.
Sales across Central London, a key part of our balanced business, continue to
grow as people head back to their offices and international tourists return -
and although the ongoing rail and tube disputes have temporarily impacted us
disproportionately, we remain confident in the future and resilient in the
present.
A year makes a lot of difference. Looking back to the first half last year, we
have seen revenues increase by 45% to £168.9 million (H1 2022: £116.3
million) and adjusted profit before tax more than double to £9.8 million (H1
2022: £4.6 million). The digital transformation project and roll out of the
new finance system that were completed as we began the new financial year are
delivering the anticipated benefits to the business and, while there are
clearly hurdles ahead, we are in good shape.
The well-documented increases in energy, food, labour and interest costs are
having an obvious impact - but balanced against this we are looking forward to
our first Christmas free of restrictions for three years and the anticipated
boost from the FIFA World Cup.
STRATEGIC AND BUSINESS REVIEW
During the period, the team has focused on the five key strategic pillars that
will deliver our promise to create experiences that nourish the soul. A clear
strategy and long-term vision have always been at the heart of Fuller's
success. They provide clarity across the business and ensure everyone is
working in unison to achieve a common goal.
Delight our customers
Our core customer has certain demographic characteristics that will provide
some protection from the worst of the current financial pressures. Our pub
estate is predominately situated in affluent locations and our typical
customer tends to have a higher household income. We over-index by 48% in
attracting customers with a household income of over £75k. In addition, we
over-index in all groups with a household income over £40k.
A visit to the pub remains an affordable treat and pubs have always proven to
be highly resilient in previous economic downturns. Today's customer expects a
great experience and a good reason to visit and this is an area that we have
focused on for several years with unique and exciting in-pub events such as
the popular Shakespeare in the Garden and, this year, Opera in the Garden.
During the first half, these two programmes alone have delivered over £500k
in incremental sales - and we have similar initiatives planned for the winter
and beyond including a Christmas Concert with Rogue Opera and productions of
the Charles Dickens classic, A Christmas Carol.
While a great pint of London Pride continues to be the mainstay of a Fuller's
pub, thanks to our long-term supply agreement with Asahi, sales of cocktails
continue to rise - growing by 36% in volume terms. These deliver a strong
profit opportunity for pubs and add to the theatre of a visit to a Fuller's
pub or hotel.
Customers are also increasingly aware of the social and environmental impact
of the money they spend - and our continued partnerships with UK suppliers and
social enterprises help deliver on this emotive need. A new partnership with
leading UK winery, Bolney Estate, has led to a number of supper club events
focused around these delicious wines. Meanwhile, our new plant-based burger
with Made in Hackney - a local community food kitchen in East London - has
been well received by customers with 50p for every burger sold going to this
excellent social enterprise.
Inspire our people
Our people remain the key to our success and our commitment to home-grown
talent and a comprehensive training framework continues to underpin all our
activity. During the first six months we have delivered 2,500 training days
with 177 team members currently undergoing apprenticeships.
We have also relaunched our industry-leading Service Coach programme with 176
Service Coaches across our Managed Pubs and Hotels and we are delighted to
have just held our biggest ever graduation ceremony with 300 graduates being
recognised. Their achievements include courses completed in a wide range of
disciplines from back and front of house apprenticeships to Management
Development Training and degree-level programmes.
Retaining our team members is critical and following the launch of our
Happiness Index engagement survey we have made changes to reflect their
feedback. This has included earlier issuing of rotas and improvements to our
benefits package. The roll out of the Medicash Healthcare Cash Plan to all
employees with over one year's service has been particularly well received and
we are unique in our sector in providing a medical benefit of this nature.
The move to Harri as our recruitment system partner has improved our
recruitment process with a 500% increase in the number of applications and a
decrease in the time from enquiry to the potential recruit starting work. We
have also improved our recruitment landing page on our website, with over
150,000 views during the period.
One of the side effects of the pandemic was the decline in the number of over
50s working in our business - with many taking early retirement. Older workers
have always made a valuable contribution to our teams, and we have partnered
with Rest Less - an online community of nearly one million over 50s - to
attract older workers who may feel their retirement decisions were premature.
Enhance our estate
Active management of our property assets is crucial to our long-term success
and the backing of our property portfolio, which is 92% freehold, provides the
financial stability that ensures we can consistently deliver our long-term
vision and strategy. It is worth remembering that our property portfolio is
not recorded in our accounts at current valuation. A Directors' valuation was
completed in March which valued the estate at £995.6 million - around £400
million over the value recorded in the accounts - implying a net asset value
per share of £13.80(1) (#_ftn1) .
Movement between our Managed and Tenanted estates ensures that we can maximise
the profit potential of an individual site. During the period, four pubs moved
into the Tenanted Inns estate. We will also sell a small number of assets
where we do not see long-term value in ownership. In the first half of the
year, we disposed of four properties for a total of £7 million at a premium
to their book value. Post the period end, we have realised a further £6
million from disposals.
We have also acquired three new sites - two during the period and one post
period end. We were delighted to open The Queen's Arms, landside at The
Queen's Terminal, Heathrow, at the end of July - a site which sits perfectly
alongside London's Pride, our airside business at the same terminal. We also
acquired The Rising Sun - an attractive site near New Milton in the New
Forest. Post the period end, we completed the purchase of a wonderful site in
the pretty Cotswold village of Bourton-on-the-Water. This will open in the
spring, following a full refurbishment, as The Willow and is a great addition
to our Cotswold businesses.
During the last recession, we continued to invest in our estate while our
competitors did not - ensuring that we were first out of the blocks as trading
strengthened and consumer confidence grew. We will again continue with our
investment plans and have invested £12 million in the first half including
schemes at The Lord Northbrook in Lee, The Vaults in Southsea and The George
& Dragon in Westerham - a former tenancy which is now part of our Bel
& The Dragon brand, adding another 13 bedrooms to our Managed estate.
Evolve our business
While the pub has retained its role in British life for centuries, businesses
must evolve and the digital transformation project we undertook during
lockdown plays a crucial role in attracting new customers, communicating
reasons to visit to both existing and potential customers, and improving the
digital journey for all.
To support the excellent activities and events that are taking place in our
pubs, we sent out almost six million emails across over 200 campaigns,
ensuring customers hear from Fuller's - or their favourite pub - at least once
a month. The information fed back from our system tells us that customers who
receive email marketing are more likely to visit within 30 days than those who
have not. A tight and well-managed digital journey enables us to track
response rates and associated spend, measure the return on investment,
identify the offers and events that really entice the customers in and help us
build lookalike audiences that we can target through digital ads and targeted
campaigns.
Another element of our digital transformation project is our new hotel booking
engine. This has delivered several revolutionary benefits - especially around
our aim of reducing our reliance on, and the commission paid to, online travel
agents ("OTA"). We have already seen a 20% increase in the value of website
direct bookings against H1 2020, excluding Cotswold Inns & Hotels.
The new platform integrates with metasearch platforms such as Google, Trivago
and TripAdvisor - which means that a customer searching for a hotel in a
certain area can be served via a link to our direct booking site, rather than
being enticed primarily to an OTA. As well as avoiding the financial
commission, this also allows us to build direct contact with our customer -
and to suggest alternative Fuller's hotels if their preferred choice is fully
booked.
The next stage of development for the online hotel journey is through a
loyalty scheme roll out, which will allow regular customers who have signed up
to our loyalty programme to see a bespoke discount on the best online rate.
This will provide another reason to book direct, while ensuring we still
honour our pricing commitments to our OTA partners.
It is an exciting time for Fuller's as we continue to develop the way we
deliver great offers to our customers and promote our fantastic pub and hotel
experiences to the wider world. To take us on the next stage of this journey,
we have also hired an experienced retail marketer and I am delighted that Sam
Bourke will be joining us at the end of November. Sam joins from Wasabi and
has previously held positions at The Restaurant Group and ETM, and I know she
is going to be a great addition to the Executive Team.
Own our impact - because Life is too good to waste
The ESG agenda has been an important part of our strategy for many years, but
energy consumption has never been under such scrutiny as it is today. The work
we started some years ago had already helped to reduce our energy consumption,
but we are now ramping up our investment in energy saving and it is delivering
tangible benefits.
Across the estate, we are to invest £0.5 million over the next 12 months
delivering a wide range of energy saving measures which we expect to reduce
consumption by 5% per annum and save over £0.6 million in the first year
alone. The specific elements include improved cellar controls and remote beer
coolers, more efficient maintenance of fridges and cellars, heat recovery and
the use of an endotherm additive, which improves convection in our hot water
systems.
Supporting this activity is a behavioural change programme as human nature is
still a key factor in energy consumption. Finally, we have also identified a
further 28 kitchens that are suitable for conversion to electricity in the
near future. Our bid to reduce our carbon footprint and achieve Net Zero is
ongoing, but this year has seen us take major steps in the right direction.
The Life is too good to waste programme covers people and communities and we
have made good progress with our programme around diversity with the Executive
Team undertaking an inclusive leadership programme, the launch of our first
menopause policy, and the roll out of a diversity survey so we can identify
areas for improvement.
We have also continued to deliver for our communities with ongoing support for
Special Olympics GB, our key corporate charity, as well as further support for
Onside Hammersmith, a youth facility in West London, and the DEC Ukraine
appeal.
While Special Olympics' key goal is to provide sporting activity for people
with intellectual disabilities, our inclusion strategy also creates an
environment to provide employment opportunities. In a great example of how we
can build a holistic relationship, our recent annual Fuller's football
tournament had unified teams for the first time - with every team including
Fuller's team members and at least one Special Olympics athlete. This helped
to bring down barriers, built confidence on both sides, and brought together
several strands of our ESG strategy.
Tenanted Inns
Our Tenanted Inns continue to be an integral, highly profitable and
cash-generative part of our business - delivering a profit contribution during
the period of £6.8 million (H1 2022: £4.8 million). It provides
opportunities for us to move sites between Tenanted and Managed as and when
deemed appropriate and we can share best practice in both directions.
We have invested £2.0 million in our Tenanted Inns during the period and we
will continue to undertake joint projects with well-funded Tenants. Over 90%
of our pubs are on substantive agreements and we will be taking learnings from
our energy saving initiatives in the Managed estate to roll out across our
Tenanted Inns too.
It is good to return, post covid, to some of the more fun activities that
should be an integral part of any hospitality business and, to that end, it
was great to see so many entering our first Tenants' Glorious Gardens
competition. The winner was The Plough in Norwood Green, a great example of
the way in which an entrepreneurial Tenant builds and personalises their
business.
FINANCIAL REVIEW
Group revenue and other income increased by 45% to £168.9 million (H1 2022:
£116.3 million). The prior year was impacted by covid restrictions on trade
through part of the period, whilst the current year has been affected by the
tube and rail strikes. We estimate that the strike action has reduced sales by
£1.4 million in the first half of the year.
The current trading environment is challenging. The uncertainty over the UK
economy, driven in part by the continued war in Ukraine, has resulted in high
levels of inflation and energy costs increasing exponentially. This in turn
has contributed to increasing interest rates. These factors together have put
additional strain on consumers' disposable income. However, against this
background, the Group has delivered an adjusted profit of £9.8 million, more
than doubling the adjusted profit from the prior year (H1 2022: £4.6
million).
In our Managed Pubs and Hotels business, like for like sales have grown by 20%
compared with the prior year, with total sales increasing by 47%. Compared to
pre-pandemic levels (PY-2), like for like sales were at 96%, as momentum in
the City grew over the period. For the seven weeks post period end they are at
101%, demonstrating continued growth.
While overall EBITDA was £28.9 million, it is worth noting that EBITDA for
the Managed Pubs and Hotels business was £30.0 million, which represents an
increase of 18% from prior year (H1 2022: £25.4 million). However, EBITDA
margin fell from 24.3% to 19.5%. This is predominately for three reasons. The
VAT rate on food and accommodation has increased from 5% in the prior period
to 20% in the current period, utilities has increased by £3.1 million from
the prior year, equating to a 2% decline in margin, and thirdly, in the prior
year we received a number of grants from the Government as well as a business
rates holiday for part of the period. On a like for like basis, EBITDA margin
would have been 24.8% compared with the prior year of 24.3% however, given the
nature of the adjustments, the current reported margin is more reflective of
future expectations for margins.
Tenanted Inns revenue grew from £11.9 million to £15.1 million in the
current period representing a 27% increase in sales. EBITDA margin also
improved from 47.1% to 51.7%. The low cost base of the Tenanted Division means
that it is a highly profitable part of the Group and continues to trade
strongly despite the economic backdrop.
Central costs were £9.2 million in the period which was an increase of £0.7
million on the prior period, mainly due to increased payroll costs as
recruitment was paused during lockdowns. While the quantum of central costs
was up, the percentage to overall revenue was down from the prior period at
5.4% (H1 2022: 7.3%).
During the period, the Group refinanced all its banking facilities and agreed
a new unsecured banking facility of £200 million, split between a revolving
credit facility of £110 million and a term loan of £90 million. These
facilities have been agreed for a tenure of four years through to May 2026.
The new facilities bear interest at a margin dependent on the leverage
covenant plus a base rate of SONIA. During the period, interest rates have
increased sharply with SONIA increasing from 60bps to just over 200bps and
this trend is expected to continue. Therefore, on 2 September 2022, the Group
entered into a zero-premium cap and collar over £60 million of the term
facility. This instrument is in place for a three year period to hedge some of
the variability in interest rates. The Group sold a floor of 310bps and bought
a cap of 500bps which gives some protection should SONIA exceed 500bps.
Net debt (excluding leases) was at £129.2 million (H1 2022: £131.5 million).
This is only a marginal decrease from last year as the Group has delivered on
its capital allocation framework through investment in the estate and returns
to shareholders. A total of £11.8 million was invested in the existing estate
in the period, a dividend of £4.6 million was paid to shareholders, and two
new pubs were acquired - The Queen's Arms at Heathrow's Terminal 2 and The
Rising Sun at New Milton, in the heart of the New Forest. The improvement in
EBITDA has meant that net debt/EBIDTA is now at 3x, which is in line with our
capital allocation framework.
The adjusted finance cost increased to £5.8 million (H1 2022: £5.3 million)
mainly due to the rising base rate in the current period but also in the prior
period the Group had utilised the Covid Corporate Financing Facility ("CCFF")
for the first couple of months which was at a significantly lower interest
rate.
Separately disclosed items before tax were a credit of £0.9 million (H1 2022:
£6.0 million credit) which principally consists of £5.5 million profit on
the disposal of four unlicensed properties net of a cost of £1.1 million on
the surrender of two leases. Other costs included in the separately disclosed
items were reorganisation costs of £0.5 million, which largely relate to the
refinancing and a corporate restructuring, and an impairment charge of £2.7
million in respect of four properties.
Tax has been provided at an effective rate before separately disclosed items
of 21.4% (H1 2022: 19.6%). The increase in the effective tax rate is due to
the movement in deferred tax which has been provided at an effective rate
based upon the higher rate of corporation tax of 25% which is due to come into
effect in April 2023. Disclosure on tax charge is set out in note 5.
The net impact of these items results in the basic earnings per share
increasing by 7.37p to 13.13p (H1 2022: 5.76p) and adjusted earnings per share
increasing by 6.39p to 12.48p (H1 2022: 6.09p).
The growth in earnings per share has enabled us to declare an interim dividend
of 4.68p (H1 2022: 3.90p), which is an increase of 20% on last year. In
addition to the dividend, we announced on 20 September 2022 our intent to
repurchase one million 'A' ordinary shares, which we expect to complete within
the next few weeks.
The surplus on the defined benefit pension schemes has increased by £6.1
million from the year end and is now showing an accounting surplus of £20.4
million (26 March 2022: surplus £14.3 million, 24 September 2021: surplus
£5.1 million). This is a result of the decrease in the present value of the
scheme liabilities being significantly higher than the decrease in the fair
value of scheme assets. The present value of the scheme liabilities decreased
by £35.8 million to £93.8 million (26 March 2022: £129.6 million), which
was driven by an increase in the discount rate from 3.00% to 5.20%. As the
Group has an unconditional right to refund under the pension trust deed, an
asset of £20.4 million has been recognised at 24 September 2022.
CURRENT TRADING AND OUTLOOK
Following on from a good first half performance, we have maintained our
forward momentum in the seven weeks post the period end, with like for like
sales up by 13% against the same period last year. As commuters return to
their offices and international tourists once again visit the Capital, our
Central London and City sites have seen like for like sales for the first
seven weeks of the second half rise by 20% against the prior year, despite the
impact of tube and train strikes.
While we look forward to our first Christmas free of restrictions for three
years, and the added bonus of a FIFA World Cup, we are trading in an
increasingly challenging environment. Cost pressures from energy bills, wage
and food inflation, and increasing interest rates continue to impact us and
all businesses in the hospitality sector. Our teams are working hard to manage
these pressures, while ensuring we continue to deliver an outstanding
experience for our customers.
We are a long-term business, with excellent foundations both in terms of the
strength of our Balance Sheet and our predominately freehold estate, and we
have the talent, desire and drive to deliver future growth and success.
Simon Emeny
Chief Executive
16 November 2022
Fuller, Smith & Turner P.L.C.
Condensed Group Income Statement
For the 26 weeks ended 24 September 2022
Unaudited - 26 weeks ended Unaudited - 26 weeks ended Audited - 52 weeks ended
24 September 2022 25 September 2021 26 March 2022
Note Before Separately Total Before Separately Total Before Separately Total
separately
disclosed
£m
separately
disclosed
£m
separately
disclosed
£m
disclosed
items
disclosed
items
disclosed
items
items
£m
items
£m
items
£m
£m
£m
£m
Revenue 2 168.9 - 168.9 116.3 - 116.3 253.8 - 253.8
Operating costs 3 (153.3) (3.2) (156.5) (106.4) 1.8 (104.6) (235.3) (2.0) (237.3)
Operating profit 15.6 (3.2) 12.4 9.9 1.8 11.7 18.5 (2.0) 16.5
Profit on disposal of properties 3 - 4.4 4.4 - 4.2 4.2 - 6.3 6.3
Finance costs 4 (5.8) (0.3) (6.1) (5.3) - (5.3) (11.3) - (11.3)
Profit before tax 9.8 0.9 10.7 4.6 6.0 10.6 7.2 4.3 11.5
Income Tax expenses 5 (2.1) (0.5) (2.6) (0.9) (6.2) (7.1) (1.2) (3.2) (4.4)
Profit for the period/year 7.7 0.4 8.1 3.7 (0.2) 3.5 6.0 1.1 7.1
Fuller, Smith & Turner P.L.C.
Condensed Group Income Statement (continued)
For the 26 weeks ended 24 September 2022
Unaudited – 26 weeks ended Unaudited – 26 weeks ended Audited – 52 weeks ended
24 September 2022 25 September 2021 26 March 2022
Note Separately Total Before Separately Total Before Separately Total
disclosed
separately
disclosed
separately
disclosed
Before
items
disclosed
items
disclosed
items
separately
items
items
disclosed
items
Earnings per share per 40p ‘A’ and ‘C’ ordinary share Pence Pence Pence Pence Pence Pence
Basic 6 12.48 13.13 6.09 5.76 9.79 11.59
Diluted 6 12.42 13.07 6.07 5.74 9.73 11.51
Earnings per share per 4p ‘B’ ordinary share
Basic 6 1.25 1.31 0.61 0.58 0.98 1.16
Diluted 6 1.24 1.31 0.61 0.57 0.97 1.15
Fuller, Smith & Turner P.L.C.
Condensed Group Statement of Comprehensive Income
For the 26 weeks ended 24 September 2022
Unaudited
26 weeks ended Unaudited
24 September 2022 26 weeks ended Audited
£m 25 September 2021 52 weeks ended
£m 26 March
2022
£m
Note
Profit for the period/year 8.1 3.5 7.1
Items that may be reclassified to profit or loss
Net gains on valuation of financial assets and liabilities 1.2 0.3 0.5
Tax related to items that may be reclassified to profit or loss 5 (0.3) (0.1) (0.1)
Items that will not be reclassified to profit or loss
Net actuarial gains on pension schemes 11 4.8 7.5 15.5
Tax related to items that will not be reclassified to profit or loss 5 (1.2) (1.8) (3.8)
Other comprehensive income for the period/year, net of tax 4.5 5.9 12.1
Total comprehensive income for the period/year, net of tax 12.6 9.4 19.2
Fuller, Smith & Turner P.L.C.
Condensed Group Balance Sheet
24 September 2022
Note Unaudited Unaudited
At At
24 September 2022 25 September 2021 Audited
£m £m At
26 March
2022
£m
Non-current assets
Intangible assets 29.3 28.9 29.5
Property, plant and equipment 8 591.8 588.4 592.7
Investment properties 1.6 1.9 1.6
Other financial assets 1.0 - -
Right-of-use assets 69.2 77.5 73.8
Retirement benefit obligations 11 22.0 5.1 16.2
Total non-current assets 714.9 701.8 713.8
Current assets
Inventories 4.3 3.2 3.6
Trade and other receivables 17.9 12.4 10.7
Current tax receivable 0.1 3.9 0.6
Cash and short-term deposits 10 20.4 16.2 15.6
Total current assets 42.7 35.7 30.5
Assets classified as held for sale 9 8.3 8.1 5.4
Total assets 765.9 745.6 749.7
Current liabilities
Trade and other payables (63.1) (58.0) (57.1)
Provisions (0.5) (0.5) (0.5)
Borrowings 10 - - (120.0)
Other Financial Liabilities - - (0.1)
Lease Liabilities 10 (6.0) (7.2) (6.8)
Total current liabilities (69.6) (65.7) (184.5)
Non-current liabilities
Borrowings 10 (149.6) (147.7) (27.5)
Lease liabilities 10 (71.6) (76.6) (73.9)
Other financial liabilities - (0.3) -
Retirement benefit obligations 11 (1.6) - (1.9)
Deferred tax liabilities (16.4) (14.2) (12.7)
Total non-current liabilities (239.2) (238.8) (116.0)
Net assets 457.1 441.1 449.2
Fuller, Smith & Turner P.L.C.
Condensed Group Balance Sheet (continued)
24 September 2022
Unaudited Unaudited
At At
24 September 2022 25 September 2021 Audited
£m £m At
26 March
2022
£m
Capital and reserves
Share capital 25.4 25.4 25.4
Share premium account 53.2 53.2 53.2
Capital redemption reserve 3.7 3.7 3.7
Own shares (16.6) (16.7) (16.6)
Hedging reserve 0.8 (0.3) (0.1)
Retained earnings 390.6 375.8 383.6
Total equity 457.1 441.1 449.2
Fuller, Smith & Turner P.L.C.
Condensed Group Statement of Changes in Equity
For the 26 weeks ended 24 September 2022
Unaudited - 26 weeks ended 24 September 2022 Share Share Capital Own Hedging Retained Total
capital
premium
redemption
shares
reserve
earnings
£m
£m
account
reserve
£m
£m
£m
£m
£m
At 26 March 2022 25.4 53.2 3.7 (16.6) (0.1) 383.6 449.2
Profit for the period - - - - - 8.1 8.1
Other comprehensive income for the period - - - - 0.9 3.6 4.5
Total comprehensive income for the period - - - - 0.9 11.7 12.6
Dividends (note 7) - - - - - (4.6) (4.6)
Share-based payment charges - - - - - 0.1 0.1
Tax charged directly to equity (note 5) - - - - - (0.2) (0.2)
At 24 September 2022 25.4 53.2 3.7 (16.6) 0.8 390.6 457.1
Unaudited - 26 weeks ended 25 September 2021
At 27 March 2021 22.8 4.2 3.7 (17.0) (0.5) 366.3 379.5
Profit for the period - - - - - 3.5 3.5
Other comprehensive income for the period - - - - 0.2 5.7 5.9
Total comprehensive income for the period - - - - 0.2 9.2 9.4
Issue of share capital 2.6 49.0 - 0.2 - - 51.8
Shares released from ESOT and treasury - - - 0.1 - - 0.1
Share-based payment charges - - - - - 0.3 0.3
At 25 September 2021 25.4 53.2 3.7 (16.7) (0.3) 375.8 441.1
Fuller, Smith & Turner P.L.C.
Condensed Group Statement of Changes in Equity (continued)
For the 26 weeks ended 24 September 2022
Share Share Capital Own Hedging Retained Total
capital
premium
redemption
shares
reserve
earnings
£m
£m
account
reserve
£m
£m
£m
£m
£m
Audited - 52 weeks ended 26 March 2022
At 27 March 2021 22.8 4.2 3.7 (17.0) (0.5) 366.3 379.5
Profit for the year - - - - - 7.1 7.1
Other comprehensive income for the year - - - - 0.4 11.7 12.1
Total comprehensive income for the period - - - - 0.4 18.8 19.2
Issue of share capital 2.6 49.0 - 0.2 - - 51.8
Shares released from ESOT and treasury - - - 0.2 - - 0.2
Dividends (note 7) - - - - - (2.4) (2.4)
Share-based payment charges - - - - - 0.8 0.8
Tax credited directly to equity (note 5) - - - - - 0.1 0.1
At 26 March 2022 25.4 53.2 3.7 (16.6) (0.1) 383.6 449.2
Fuller, Smith & Turner P.L.C.
Condensed Group Cash Flow Statement
For the 26 weeks ended 24 September 2022
Note Unaudited Unaudited
26 weeks ended 24 September 2022 26 weeks ended 25 September 2021
£m £m Audited
52 weeks ended 26 March
2022
£m
Profit before tax 10.7 10.6 11.5
Net finance costs before separately disclosed items 4 5.8 5.3 11.3
Separately disclosed items 3 (0.9) (6.0) (4.3)
Depreciation and amortisation 2 13.3 12.9 25.8
28.9 22.8 44.3
Difference between pension charge and cash paid (1.1) (1.2) (2.3)
Share-based payment charges 0.2 0.3 0.8
Change in trade and other receivables (7.4) (1.0) 0.5
Change in inventories (0.7) (1.2) (1.5)
Change in trade and other payables 5.6 28.5 28.8
Cash impact of operating separately disclosed items 3 (0.3) (0.3) (1.9)
Cash generated from operations 25.2 47.9 68.7
Tax received - - 2.5
Cash generated from operating activities 25.2 47.9 71.2
Cash flow from investing activities
Purchase of property, plant and equipment and intangible assets (14.9) (8.4) (25.8)
Sale of property, plant and equipment, investment property and assets held for 6.7 4.8 10.0
sale
Net cash outflow from investing activities (8.2) (3.6) (15.8)
Cash flow from financing activities
Receipts on release of own shares to option schemes - 0.1 0.1
Interest paid (3.9) (2.9) (7.2)
Preference dividends paid (0.1) (0.1) (0.1)
Net proceeds of equity placing - 51.8 51.8
Equity dividends (4.6) - (2.4)
paid
Repayment of commercial paper under CCFF 10 - (100.0) (100.0)
Drawdown of bank loans 3.0 13.1 12.6
Payment of Loan arrangement fees (1.5) (1.2) (1.2)
Surrender of leases (0.4) (1.9) (1.9)
Principal elements of lease payments 10 (4.7) (4.1) (8.6)
Net cash (outflow) from financing activities (12.2) (45.2) (56.9)
Net movement in cash and cash equivalents 10 4.8 (0.9) (1.5)
Cash and cash equivalents at the start of the period 15.6 17.1 17.1
Cash and cash equivalents at the end of the period/year 10 20.4 16.2 15.6
Fuller, Smith & Turner P.L.C.
Notes to the Condensed Financial Statements
For the 26 weeks ended 24 September 2022
1. Half Year Report
Basis of Preparation
The half year financial statements for the 26 weeks ended 24 September 2022
have been prepared in accordance with the Disclosure and Transparency Rules
("DTRs") of the Financial Conduct Authority and with International Accounting
Standard ("IAS") 34, Interim Financial Reporting and should be read in
conjunction with the Annual Report and Financial Statements for the 52 weeks
ended 26 March 2022.
The half year financial statements do not constitute full accounts as defined
by Section 434 of the Companies Act 2006. The figures for the 52 weeks ended
26 March 2022 are derived from the published statutory accounts. Full accounts
for the 52 weeks ended 26 March 2022, including an unqualified auditor's
report which did not make any statement under Section 498 of the Companies Act
2006, have been delivered to the Registrar of Companies.
The Directors have adopted the going concern basis in preparing these accounts
after assessing the Group's principal risks, which are predominately the
uncertainty over the UK economy and the cost pressures impacting the UK from
food inflation, rising staff costs and utility prices and, in turn, the effect
the cost of living crisis is having on consumer spending. The Directors are
confident that the Group has sufficient liquidity to withstand these ongoing
challenges for the 12- month going concern assessment period to November 2023
(the 'going concern period').
The continued uncertainty over the UK economy casts uncertainty as to the
future financial performance and cash flows of the Group. When assessing the
ability of the Group to continue as a going concern, the Directors have
considered the Group's financing arrangements, the pattern of trading in the
first half of the financial year, the possibility of further trading
disruptions caused by the tube and train strikes and the principal risks and
uncertainties as disclosed in the Group's latest Annual Report.
At 24 September 2022, the Group had a strong Balance Sheet with 92% of the
estate being freehold properties along with available headroom on undrawn
facilities of £76.5 million and £20.4 million of cash resulting in net debt
(excluding leases) of £129.2 million. During the period, the Group secured a
new facility of £200 million, split between a revolving credit facility of
£110 million and a term loan of £90 million, for a tenure of four years to
May 2026. Under the new agreement, the minimum liquidity covenant of £10
million tested monthly remains until November 2022. From December 2022 (and
tested quarterly thereafter) the covenant suite will consist of net debt to
EBITDA (leverage) and EBITDA to net finance charges.
The Group has modelled financial projections for the going concern period
based upon two scenarios, the base case and the severe but plausible
('downside'). The base case is the Board approved forecast for FY 2023 as well
as the first eight months of FY 2024 plan which forms part of the Board
approved three-year plan. The base case assumes that costs will be impacted
predominately by the increase in energy prices as well as other cost inflation
currently seen. It also assumes as a result of the cost of living crisis there
will be some impact on consumer confidence and hence volumes. Under this
scenario there would be liquidity headroom and all covenants would be complied
with for the duration of the going concern period.
The Group has also modelled a downside scenario whereby sales in the Managed
Division drop by c5% from that assumed in the base case and inflation
continues at an even higher rate than in the base case, specifically utilities
(12% increase from base in FY 2024) and staff costs increase in order to
retain staff. A similar decline is also assumed in the Tenanted Division. The
model still assumes that investment in the estate will remain at the same
levels as the base, that no further disposals of properties will happen, and a
bonus will still be paid. These are all mitigating factors that the Group has
in its control. Under this scenario the Group will still have sufficient
resources and headroom on its covenants throughout the assessment period.
Given the uncertainties surrounding the UK economy, the Group has also
performed a reverse stress test to assess at which point the Group would
breach its covenants or not have sufficient liquidity in the assessment
period. To cause a breach in the covenants in June 2023, a decline in EBITDA
of 41% would be required from the base case forecast which would represent a
significant decline in sales combined with additional increase in costs beyond
the downside assumptions, the Directors believe that this combination of
adverse factors is implausible at the current time. The reduction in sales or
increase in costs to breach the covenant any earlier is thought to be too
remote as the covenant is tested on a rolling 12 months and therefore most of
that period has been actualised. The model does not assume there would be any
disposals. At no point through the assessment period would the Group not have
sufficient liquidity.
The Directors have concluded that in both the base and downside scenarios, the
Group has sufficient debt facilities to finance operations for the going
concern assessment period and it would not be in breach of any of its
covenants and that the combination of adverse events that would trigger a
covenant breach are highly unlikely at the current time.
After due consideration of the matters set out above, the Directors are
satisfied that there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the going concern
assessment period to November 2023.
The half year financial statements were approved by the Directors on 16
November 2022.
New Accounting Standards
The accounting policies adopted in the preparation of the half year financial
statements are consistent with those followed in the preparation of the
Group's annual consolidated financial statements for the 52 weeks ended 26
March 2022. The Group has not early adopted any standard, interpretation or
amendment that has been issued but is not yet effective.
Taxation
Taxes on income in the interim periods are accrued using the tax rate that is
expected to be applicable to total annual earnings for the full year in each
tax jurisdiction based on substantively enacted or enacted tax rates at the
interim date.
2. Segmental Analysis
Unaudited - 26 weeks ended Managed Pubs Tenanted Unallocated(1) Total
24 September 2022
and Hotels Inns £m £m
£m £m
Revenue
Sales of goods and services 135.2 10.8 - 146.0
Accommodation income 17.8 - - 17.8
Total revenue from contracts with customers 153.0 10.8 - 163.8
Rental income 0.8 4.3 - 5.1
Revenue 153.8 15.1 - 168.9
Segment result 18.0 6.8 (9.2) 15.6
Operating separately disclosed items (3.2)
Operating profit 12.4
Profit on disposal of properties 4.4
Net finance costs (6.1)
Profit before tax 10.7
Other segment information
Additions: property, plant and equipment 12.9 2.0 0.1 15.0
Depreciation and amortisation 12.0 1.0 0.3 13.3
Impairment of property 2.7 - - 2.7
EBITDA 30.0 7.8 (8.9) 28.9
Unaudited - 26 weeks ended Tenanted Unallocated(1) Total
25 September 2021
Managed Pubs Inns £m £m
and Hotels £m
£m
Revenue
Sales of goods and services 92.0 8.9 - 100.9
Accommodation income 10.5 - - 10.5
Total revenue from contracts with customers 102.5 8.9 - 111.4
Rental income 1.9 3.0 - 4.9
Revenue 104.4 11.9 - 116.3
Segment result 13.6 4.8 (8.5) 9.9
Operating separately disclosed items 1.8
Operating Profit 11.7
Profit on disposal of properties 4.2
Net finance costs (5.3)
Profit before tax 10.6
Other segment information
Additions: property, plant and equipment 5.8 0.4 - 6.2
Depreciation and amortisation 11.8 0.8 0.3 12.9
EBITDA 25.4 5.6 (8.2) 22.8
1 Unallocated expenses represent primarily the salary and costs of central
management.
2. Segmental Analysis (continued)
Audited - 52 weeks ended Managed Pubs Tenanted Unallocated(1) Total
26 March 2022
and Hotels Inns £m £m
£m £m
Revenue
Sale of goods and services 205.1 17.9 - 223.0
Accommodation income 21.9 - - 21.9
Total revenue from contracts with customers 227.0 17.9 - 244.9
Rental income 1.8 7.1 - 8.9
Revenue 228.8 25.0 - 253.8
Segment result 24.7 11.1 (17.3) 18.5
Operating separately disclosed items (2.0)
Operating Profit 16.5
Profit on disposal of properties 6.3
Net finance costs (11.3)
Profit before tax 11.5
Other segment information
Additions: assets held for sale, property, plant and equipment 20.2 2.3 2.6 25.1
Depreciation and 23.3 1.8 0.7 25.8
amortisation
Impairment of property, right-of-use assets, and goodwill 3.0 0.3 - 3.3
EBITDA 48.0 12.9 (16.6) 44.3
1 Unallocated expenses represent primarily the salary and costs of central
management.
3. Separately Disclosed Items
Unaudited Unaudited
26 weeks ended 24 September 2022 26 weeks ended 25 September 2021 Audited
£m £m 52 weeks ended 26 March
2022
£m
Amounts included in operating profit:
Reorganisation costs (0.5) (0.3) (0.8)
Impairment of properties, right-of-use assets and intangible assets (2.7) - (3.3)
Release of provision on final settlement of Beer Business - 2.1 2.1
Total separately disclosed items included in operating profit (3.2) 1.8 (2.0)
Profit on disposal of properties 4.4 4.2 6.3
Separately disclosed finance costs:
Finance credit on net pension surplus (note 11) 0.2 - -
Finance charge on the write down of arrangement fees (0.5) - -
Total separately disclosed finance costs (0.3) - -
Total separately disclosed items before tax 0.9 6.0 4.3
Separately disclosed tax:
Profit on disposal of properties (0.7) (1.1) (1.3)
Change in tax rates - (5.1) (3.3)
Other items 0.2 - 1.4
Total separately disclosed tax (0.5) (6.2) (3.2)
Total separately disclosed items 0.4 (0.2) 1.1
The reorganisation costs of £0.5 million during the 26 weeks ended 24
September 2022 (25 September 2021: £0.3 million, 26 March 2022: £0.8
million) were largely incurred as a result of the Group corporate restructure,
mainly due to Group refinancing in the period. The tax impact of the
reorganisation costs is recognised in other items.
The profit on disposal of properties of £4.4 million during the 26 weeks
ended 24 September 2022 (25 September 2021: £4.2 million, 26 March 2022:
£6.3 million) consists of £5.5 million for the disposal of four unlicensed
properties which had been classified as assets held for sale prior to the
sale, net of £1.1 million of costs associated with the surrender of leases on
two properties.
The property impairment charge of £2.7 million during the 26 weeks ended 24
September 2022 (25 September 2021: £Nil, 26 March 2022: £3.3 million)
relates to the write down of four licensed properties to their recoverable
value.
The cash impact of operating separately disclosed items before tax for the 26
weeks ended 24 September 2022 was £0.3 million cash outflow (25 September
2021: £0.3 million cash outflow, 26 March 2022: £1.9 million cash outflow).
4. Finance Costs
Unaudited Unaudited
26 weeks ended 24 September 2022 26 weeks ended 25 September 2021 Audited
£m £m 52 weeks ended 26 March
2022
£m
Finance costs
Interest expense arising on:
Financial liabilities at amortised cost - loans and debentures (4.2) (3.6) (8.1)
Financial liabilities at amortised cost - preference shares (0.1) (0.1) (0.1)
Financial liabilities at amortised cost - lease liabilities (1.5) (1.6) (3.1)
Total finance costs before separately disclosed items (5.8) (5.3) (11.3)
Finance credit on net pension surplus (note 11) 0.2 - -
Finance charge on the write down of arrangement fees (0.5) - -
Total finance costs (6.1) (5.3) (11.3)
5. Taxation
Unaudited Unaudited
26 weeks ended 24 September 2022 26 weeks ended 25 September 2021
£m £m Audited
52 weeks ended 26 March
2022
£m
Tax on profit on ordinary activities
Current income tax:
Current tax on profit for the period 0.5 0.1 0.2
Adjustment for current tax on prior periods - - 0.6
Total current income tax 0.5 0.1 0.8
Deferred tax:
Origination and reversal of temporary differences 2.0 1.9 2.2
Change in corporation tax rate - 5.1 3.3
Adjustments for deferred tax on prior periods 0.1 - (1.9)
Total deferred tax 2.1 7.0 3.6
Total tax charged in the Income Statement 2.6 7.1 4.4
Tax relating to items charged to the Statement of Comprehensive Income
Deferred tax:
Valuation gains on financial assets and liabilities 0.3 0.1 0.1
Net actuarial gains on pension scheme 1.2 1.8 3.8
Tax charge included in the Statement of Comprehensive Income 1.5 1.9 3.9
Tax relating to items charged/(credited) directly to equity
Deferred tax:
Share-based payments 0.2 - (0.1)
Tax charge/(credit) included in the Statement of Changes in Equity 0.2 - (0.1)
The taxation charge is calculated by applying the Directors' best estimate of
the annual effective tax rate to the profit for the period/year.
6. Earnings Per Share
Continuing operations Unaudited Unaudited Audited
26 weeks ended 24 September 2022 26 weeks ended 25 September 2021 52 weeks ended 26 March
£m £m 2022
£m
Profit attributable to equity shareholders 8.1 3.5 7.1
Separately disclosed items net of tax (0.4) 0.2 (1.1)
Adjusted earnings attributable to equity shareholders 7.7 3.7 6.0
Number Number Number
Weighted average share capital 61,712,000 60,762,000 61,264,000
Dilutive outstanding options and share awards 275,000 204,000 413,000
Diluted weighted average share capital 61,987,000 60,966,000 61,677,000
40p 'A' and 'C' ordinary share Pence Pence Pence
Basic earnings per share 13.13 5.76 11.59
Diluted earnings per share 13.07 5.74 11.51
Adjusted earnings per share 12.48 6.09 9.79
Diluted adjusted earnings per share 12.42 6.07 9.73
4p 'B' ordinary share Pence Pence Pence
Basic earnings per share 1.31 0.58 1.16
Diluted earnings per share 1.31 0.57 1.15
Adjusted earnings per share 1.25 0.61 0.98
Diluted adjusted earnings per share 1.24 0.61 0.97
For the purposes of calculating the number of shares to be used above, 'B'
shares have been treated as one-tenth of an 'A' or 'C' share. The earnings per
share calculation is based on earnings from continuing operations and on the
weighted average ordinary share capital which excludes shares held by trusts
relating to employee share options and shares held in treasury of 1,741,713
(25 September 2021: 1,766,681, 26 March 2022: 1,744,564).
Diluted earnings per share is calculated using the same earnings figure as for
basic earnings per share, divided by the weighted average number of ordinary
shares outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares.
Adjusted earnings per share is calculated on profit before tax excluding
separately disclosed items and on the same weighted average ordinary share
capital as for the basic and diluted earnings per share. An adjusted earnings
per share measure has been included as the Directors consider that this
measure better reflects the underlying earnings of the Group.
7. Dividends
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022
£m £m £m
Declared and paid during the period
Interim paid in the period for 2022 - - 2.4
Final dividend paid in period for 2022 4.6 - -
Equity dividends paid 4.6 - 2.4
Dividends on cumulative preference shares (note 4) 0.1 0.1 0.1
Pence Pence Pence
Dividends per 40p 'A' and 'C' ordinary share
declared in respect of the period
Interim 4.68 3.90 3.90
Final - - 7.41
4.68 3.90 11.31
The pence figures above are for the 40p 'A' ordinary shares and 40p 'C'
ordinary shares. The 4p 'B' ordinary shares carry dividend rights of one-tenth
of those applicable to the 40p 'A' ordinary shares. Own shares held in the
employee share trusts do not qualify for dividends as the Trustees have waived
their rights. Dividends are also not paid on own shares held as treasury
shares.
The Directors have declared an interim dividend for the 40p 'A' ordinary
shares and 40p 'C' ordinary shares of 4.68p (2022: 3.90p) and 0.468p (2022:
0.390p) for the 4p 'B' ordinary shares.
8. Property, Plant and Equipment
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022
£m £m £m
Net book value at start of period/year 592.7 590.2 590.2
Additions 15.0 6.2 22.7
Impairment loss net of reversals (2.7) - (3.3)
Transfers to assets classified as held for sale (3.9) (1.5) (1.5)
Transfers from assets classified as held for sale - 2.4 2.5
Depreciation provided during the period (9.3) (8.9) (17.9)
Net book value at end of period/year 591.8 588.4 592.7
During the 26 weeks ended 24 September 2022, the Group recognised a charge of
£2.7 million (25 September 2021: £nil million, 26 March 2022: £3.3 million)
in respect of the write down in value of its properties to their recoverable
value.
The Group considers each trading outlet to be a cash generating unit ("CGU")
and each CGU is reviewed at each reporting date for indicators of impairment.
Where trading is not in line with the FY 2023 budget because of the current
challenging trading environment, this has been determined as an indicator of
impairment. In assessing whether an asset has been impaired, the carrying
amount of the CGU is compared to its recoverable amount. The recoverable
amount is the higher of its fair value less costs to sell ("FVLCS") and its
value in use.
The Group uses a range of methods for estimating FVLCS which include applying
a market multiple to the CGU EBITDA and, for leasehold sites, present value
techniques using a discounted cash flow method. A Directors' valuation was
performed, using these techniques, as at 26 March 2022 whereby 20% of the
properties were independently verified by a third party. That valuation has
been used as the basis for the FVLCS as at 24 September 2022.
For the purposes of estimating the value in use of CGUs, management have used
a discounted cash flow approach. The calculations use cash flow projections
based on the following plans covering a five-year period.
The key assumptions used by management are:
· A long-term growth rate of 2.0% (26 March 2022: 2.0%) was used
for cash flows subsequent to the five-year approved budget/forecast period.
· An EBITDA multiple is estimated based on a normalised trading
basis and market data obtained from external sources. This resulted in an
average multiple of 10.5x (freehold 11.8x) and the Managed estate and 10.9x on
the Tenanted estate.
· The discount rate is based on the Group's weighted average cost
of capital, which is used across all CGUs due to their similar
characteristics. The pre‑tax discount rate is 9.5% (26 March 2022: 8.6%).
Impairments are recognised where the property valuation is also lower than the
CGU's carrying value for those determined to be at risk of impairment. This is
measured as the difference between the carrying value and the higher of FVLCS
and its value in use. Where the property valuation exceeds the carrying value,
no impairment is required.
8. Property, Plant and Equipment (continued)
The value in use calculations are sensitive to the assumptions used. The
Directors consider a movement of 1.5% in the discount rate and 0.5% in the
growth rate to be reasonable with reference to current market yield curves and
the current economic conditions. The additional impairment/(reversal) is set
out as follows:
£m
Increase discount rate by 1.5% 16.2
Decrease discount rate by 1.5% (8.3)
Increase growth rate by 0.5% (2.8)
Decrease growth rate by 0.5% 3.9
The additional CGUs that would need to be considered for impairment would have
their FVLCS determined in order to conclude on whether an impairment is
required. A general decrease in property values across the portfolio would
have a similar effect to that set out above i.e. any reduction in property
values would lead to assets being at risk of impairment. In the current year,
a decrease of 5% in the FVLCS would have led to an additional impairment of
£1.2 million for the CGUs where recoverable amount has been assessed on
FVLCS.
9. Assets held for sale
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 26 weeks ended
24 September 25 September 26 March
2022 2021 2022
£m £m £m
Assets held for sale at the start of the period/year 5.4 9.6 9.6
Assets disposed of during the year (1.0) (1.7) (4.6)
Assets transferred to property, plant and equipment - (2.4) (2.5)
Assets transferred from investment property - 1.1 1.4
Assets transferred from property, plant and equipment 3.9 1.5 1.5
Assets held for sale at the end of the period/year 8.3 8.1 5.4
10. Analysis of Net Debt
Unaudited - 26 weeks ended 24 September 2022 At Cash Non At
26 March
flows
cash(1)
24 September
2022
£m
£m
2022
£m
£m
Cash and cash equivalents:
Cash and short-term deposits 15.6 4.8 - 20.4
15.6 4.8 - 20.4
Financial liabilities
Lease liabilities (80.7) 4.7 (1.6) (77.6)
(80.7) 4.7 (1.6) (77.6)
Debt:
Bank loans(2) (120.0) (1.5) (0.6) (122.1)
Debenture stock (25.9) - - (25.9)
Preference shares (1.6) - - (1.6)
Total borrowings (147.5) (1.5) (0.6) (149.6)
Net debt (212.6) 8.0 (2.2) (206.8)
On 27 May 2022, the Group secured a new facility of £200 million, split
between a revolving credit facility of £110 million and a term loan of £90
million, for a tenure of four years to May 2026. The new facilities bear an
interest rate margin dependent on leverage covenant plus SONIA. Under the new
agreement, there is a minimum liquidity requirement of £10 million until
November 2022. From December 2022, there will be a covenant suite which will
consist of net debt to EBITDA (leverage) and EBITDA to net finance charges to
be tested quarterly.
At Cash Non At
27 March
flows
cash(1)
25 September
2021
£m
£m
2021
£m
£m
Unaudited - 26 weeks ended 25 September 2021
Cash and cash equivalents:
Cash and short-term deposits 17.1 (0.9) - 16.2
17.1 (0.9) - 16.2
Financial liabilities
Lease liabilities (89.9) 4.1 2.0 (83.8)
(89.9) 4.1 2.0 (83.8)
Debt:
Bank loans(2) (107.9) (11.9) (0.4) (120.2)
CCFF (99.8) 100.0 (0.2) -
Debenture stock (25.9) - - (25.9)
Preference shares (1.6) - - (1.6)
Total borrowings (235.2) 88.1 (0.6) (147.7)
Net debt (308.0) 91.3 1.4 (215.3)
10. Analysis of Net Debt (continued)
Audited - 52 weeks ended 26 March 2022 At Cash Non At
27 March
flows
cash(1)
26 March
2021
£m
£m
2022
£m
£m
Cash and cash equivalents:
Cash and short-term deposits 17.1 (1.5) - 15.6
17.1 (1.5) - 15.6
Financial liabilities
Lease liabilities (89.9) 8.6 0.6 (80.7)
(89.9) 8.6 0.6 (80.7)
Debt:
Bank loans(2) (107.9) (11.4) (0.7) (120.0)
CCFF (99.8) 100.0 (0.2) -
Debenture stock (25.9) - - (25.9)
Preference shares (1.6) - - (1.6)
Total borrowings (235.2) 88.6 (0.9) (147.5)
Net debt (308.0) 95.7 (0.3) (212.6)
1 Non-cash movements relate to the amortisation of arrangement fees,
arrangement fees accrued and movement in lease liabilities.
2 Bank loans net of arrangement fees and cashflows include the payment of
arrangement fees.
11. Retirement Benefit Obligations
The amount included in the Balance Sheet arising from the Group's obligations Unaudited Unaudited Audited
in respect of its defined benefit retirement plan
At At At
24 September 25 September 26 March
2022 2021 2022
£m £m £m
Fair value of Scheme assets 114.2 155.7 143.9
Present value of Scheme liabilities (93.8) (150.6) (129.6)
Surplus in the Scheme 20.4 5.1 14.3
The net position of the defined benefit retirement plan for the 26 weeks ended
24 September 2022 shows a surplus of £20.4 million. In accordance with IFRIC
14, the Group is able to recognise an asset as it has an unconditional right
to a refund of any surplus in the event of the plan winding down.
Included within the total present value of Group and Company Scheme
liabilities of
£93.8 million (25 September 2021: £150.6 million, 26 March 2022: £129.6
million) are liabilities of
£1.6 million (25 September 2021: £2.1 million, 26 March 2022: £1.9 million)
which are entirely
unfunded. These have been shown separately on the Balance Sheet as there is no
right to offset the
assets of the funded Scheme against the unfunded Scheme.
Key financial assumptions used in the valuation
of the Scheme
Rate of increase in pensions in payment 3.65% 3.50% 3.75%
Discount rate 5.20% 1.85% 3.00%
Inflation assumption - RPI 3.70% 3.55% 3.80%
Inflation assumption - CPI (pre 2030/post 2030) 2.8%/3.7% 2.65%/3.55% 2.9%/3.8%
Mortality Assumptions
The mortality assumptions used in the valuation of the Scheme as at 24
September 2022 are as set out in the financial statements for the 52 weeks
ended 26 March 2022.
Assets in the Scheme Unaudited Unaudited Audited
At At At
24 September 25 September 26 March
2022 2021 2022
£m £m £m
Corporate bonds 19.8 29.2 25.0
Index linked debt instruments 18.6 37.9 26.0
Overseas equities 31.1 30.9 31.5
Alternatives 41.6 39.3 56.5
Cash 0.6 14.5 1.6
Annuities 2.5 3.9 3.3
Total market value of assets 114.2 155.7 143.9
11. Retirement Benefit Obligations (continued)
Movement in surplus/(deficit) during period Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
24 September 25 September 26 March
2022 2021 2022
£m £m £m
Surplus/(deficit) in Scheme at beginning of the period 14.3 (3.5) (3.5)
Movement in period:
Net interest cost (note 0.2 - -
3)
Net actuarial gains 4.8 7.5 15.5
Contributions 1.1 1.1 2.3
Surplus in Scheme at end of the period 20.4 5.1 14.3
On 1 January 2015 the plan was closed to future accruals.
12. Post Balance Sheet Event
Following the period end, the Company has entered into an arrangement to
repurchase up to one million of 'A' ordinary shares in the Company.
Post the period end, the Company completed the purchase of a site in the
Cotswold village of Bourton-on-the-Water for £2.5 million. The Company has
also disposed of an unlicenced site for £5.5 million.
13. Principal Risks and Uncertainties
In the course of normal business, the Group continually assesses and takes
action to mitigate the various risks encountered that could impact the
achievement of its objectives. Systems and processes are in place to enable
the Board to monitor and control the Group's management of risk, which are
detailed in the Corporate Governance Report of the Annual Report and Financial
Statements 2022. The principal risks and uncertainties and their associated
mitigating and monitoring controls which may affect the Group's performance in
the next six months are not substantially different from those detailed on
pages 34 to 39 of the Annual Report and Financial Statements 2022, and are
available on the Fuller's website, www.fullers.co.uk.
The most significant risk is the current economic downturn which has been
moved from an emerging risk into the main risk register. The economic
downturn within the UK and global uncertainty created by the impact of covid
and the ongoing war in Ukraine impact many of our identified principal risks,
including increased inflationary pressure, supply chain uncertainty and
emerging and continuing changes to consumer demand. The controls and
mitigations we have in place to address our risks remain effective in reducing
the impact on the business. We are well placed to withstand these pressures
and ultimately withstand long periods of uncertainty through the strength of
our Balance Sheet. Our strong financial position supports our long-term
strategy that focuses on ensuring we develop and retain the best people, build
strong relationships with our suppliers and deliver a premium experience with
the agility to respond to both short and long-term changes in consumer
behaviour.
14. Shareholders' information
Shareholders holding 40p 'C' ordinary shares are reminded that they have 30
days from 17 November 2022 should they wish to convert those 'C' shares to 'A'
shares. The next available opportunity after that will be June 2023. For
further details, please contact the Company's registrars, Computershare, on
0870 889 4096.
15. Statement of Directors' Responsibilities
The Directors confirm, to the best of their knowledge, that this condensed set
of financial statements gives a true and fair view of the assets, liabilities,
financial position and profit or loss of the issuer or the undertakings
included in the consolidation as a whole and has been prepared in accordance
with IAS 34, Interim Financial Reporting, as adopted by the United Kingdom.
The interim management report herein includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
first six months and their impact on the financial statements and a
description of the principal risks and uncertainties for the remaining six
months of the financial year
· disclosure of material related party transactions in the first
six months and any material changes to related party transactions.
By order of the Board
MICHAEL TURNER
SIMON EMENY
CHAIRMAN
CHIEF EXECUTIVE
16 NOVEMBER 2022
(1) Excludes the impact of deferred taxation
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