Fuller’s preparations for Christmas eat into profits, despite revenue receiving a World Cup boost

Profits at pub chain Fuller's Brewery have fallen as the firm attempted to brace itself for the Christmas period, despite rising revenues after a long summer and England's performance in the World Cup.

Its share price fell more than 1.2 per cent as markets opened this morning.

The figures

Revenue for the six months to the end of September rose six per cent to £222.1m, up from £209.3m in the same period last year.

Adjusted profit before tax fell one per cent to £23.6m, from £23.8m in 2017. Fuller's said this was the result of "a conscious decision to front-load our investment programme" ahead of the busy festive period, accounting for £900,000 in costs as closure weeks for renovations more than doubled.

Managed pubs and hotels, which account for almost 70 per cent of Fuller's profits, saw like-for-like sales increase 4.1 per cent over the period. Revenue rose seven per cent to £149.4m, up from £140.2m in 2017.

In its brewery division, revenue rose seven per cent to £84.65m, up from £78.9m last year, as sales growth was driven by newly-acquired brand Nectar and a strong performance from its premium beer brands.

The interim dividend has been raised to 7.80p, up three per cent from last year's half-year dividend at 7.55p.

Why it's interesting

Fuller's put a heavy focus on preparing its network of bars and pubs for the Christmas period, which put profitability for the first half of the year out of its reach.

Aside from the costs of renovation, and rising wages and business rates, 10 new pubs were added to the portfolio over the period, including the £19.2m acquisition of six Bel and The Dragon country pubs across the home counties. In London, four We Are Bar sites in the City and Whitechapel's The Stable were also fully acquired, with the firm hoping to open its newest spot The Signal Box at Euston Station in December.

Finance director James Douglas also stepped down from the board over the period, leaving the business last week as his family moves abroad.

Accendo Markets analysts Mike van Dulken and Artjom Hatsaturjants said the hefty front-loading in investment should deliver good Christmas returns for the business, despite the immediate market reaction turning sour.

Fuller's also noted the impending Brexit deadline in March, which is scheduled to fall shortly before the end of its financial year. The pub chain's chief executive Simon Emeny suggested market uncertainty made it difficult to predict an impact on the business, however said it was "ready and able to face the future".

What Fuller's said

Emeny said:

"I am pleased to be reporting another good performance. Each division is delivering growth and we continue to benefit from having a well-balanced business."

"While our revenues have continued to grow, we experienced a small drop in group profits – however, this should be taken in context… Although we would have seen profit increase had we not taken this action, we believe this is the right decision and ensures our estate is in the best possible position to benefit from the busy Christmas period and beyond."

"It would be impossible to look forward to the second half of the year without reference to Brexit, which is due to happen on the penultimate day of our financial year. Facing uncertainty is never easy, but Fuller's is an exceptionally well-established operation and benefits from a balanced business model which is designed to be flexible enough to adapt to changing trends and markets yet resilient enough to weather any storm."