What's happening at Fuller's?

Freeholds are the way forward

Fuller's was stressing the importance of owning its own freeholds on results day last Friday. Chairman Michael Turner said: "It's in the shareholders' best interests to own the freehold whenever possible." To emphasise the point, the company revealed it had made a provision of £2.1m to cover the cost of disposing of the onerous leases at a handful of sites, believed to be high-street venues.

Prices just keep going up and up

The average cost of a

pint had risen at Fuller's managed pubs by between 15p and 20p in the wake of the Budget's duty hikes. The company insisted its premium market position allowed it to do this. Managed division boss Simon Emeny said pubs were also revising menu prices on a daily basis after seeing food inflation of around 5% or 6%. He forecast food inflation of between 6% and 10% in the coming year. Invested like-for-likes were up 3.6% (uninvested like-for-likes were up by a shade under 3%). Utility costs were up by £600,000, a cost likely to double again next year.

Key to rooms is 'wow factor'

One plan for the past year has been to upgrade pub bedrooms to boutique standards by adding a "wow factor". Like-for-like revenue per available room was up by 8.9% for the year. Turner said some positive benefits of the smoke ban had been coming through, including pubs smelling fresher and the opportunities this provided, like investing in the quality of rooms.

Tough time for lager brands

Fuller's Beer Company boss John Roberts reflected on a bad year for lager. Brands that were being sold at commodity prices in supermarkets were suffering worst, he said. Consumers were reluctant to spend £3 on a pint of Stella Artois that could be bought for 55p at the supermarket. Stella Artois was no longer being sold at the company's Counting House pub in the City of London although it was performing well at wet-led community pubs.

Rise in volumes, cask in growth

Total beer volumes at Fuller's were up 1% to 325,900 barrels. Its own beer saw a 4% increase in volumes to 216,400 barrels, helped by a 21% rise in exports to 20,200 barrels. "Cask ale is in growth," said Roberts. "You can't buy it in the supermarkets." In the wider beer market, premium cask ale sales were in growth. Overall, the on-trade beer market declined by 7%, with cask ale decline slowing to 4%.

Thai curry and a pint, please

Fuller's has franchised Thai food offers at 13 of its managed pubs. The first site was the Churchill Arms, Kensington, which was franchised out in 1990. Emeny said: "It has worked well for us. It's open-book accounting at sites where we think a Thai operator can maximise food revenue; 40% of turnover is on takeaways — customers have a pint while they are waiting for their food."

'Solid' results in tenanted estate

The tenanted estate at Fuller's had performed well in the year, with rent concessions no greater than the previous year. House broker Panmure Gordon's Douglas Jack said: "Tenanted pubs generated a solid performance with like-for-like sales up 0.4%, average sales up 2.4% and profits up 4%. Historically, Fuller's has charged its tenants an effective rental yield below that of its quoted peers. This position, which is a strength, improved in 2008 during which repairs rose 6% (investing in outside areas) and margins fell slightly (despite higher like-for-like sales), again proving Fuller's to be one of the most considerate landlords in the sector."

Turner slams cheap booze

Loss-leading sales of alcohol are "creating huge issues" for the on-trade because it leads to people calling for higher prices across the board, said Turner. "To use cheap alcohol as a traffic builder is a strategy that can't be described as responsible retailing," he added.

Hard period ahead for trade

Chairman Michael Turner was a tad gloomy on economic prospects. "The country's economy is in disarray. The coming year is likely to be as hard as any we can remember."