Fuller's warns of "significantly tougher" times ahead

London brewer and pub operator Fuller Smith & Turner has reported interim profits up nearly 20 per cent, but has warned the second half of its financial year will be "significantly tougher" than the first.

The return to VAT of 17.5 per cent would be one of a number of pressures being exerted on the consumer in the coming months, the group said, although a good offer and the ability to keep costs under control meant Fuller's was "well-placed to meet these challenges".

The Chiswick-headquartered outfit said total turnover for the six months to September 26, 2009 rose 10 per cent to £116.9m, while pre-tax profits jumped 18 per cent to £14.1m.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose nine per cent to £22.7m, while earnings per share were up 17 per cent at nearly 18p.

Fuller's was recommending an interim dividend of 4.50p, which included underlying growth of five per cent to 3p, and a rebasing of 1.5p.

On current trading, Fuller's said its managed estate was 2.9 per cent up for the 33 weeks to November 14, 2009.

Fuller's chairman Michael Turner said the first half had "challenging", but despite the recession profits had been generated through the group's core business; boosted by the pubs it had bought recently, and by lower costs of borrowing.

However Turner warned the factors that had aided this performance may not be repeated or could even go into reverse in the coming months: "incremental earnings from acquisitions, record low interest rates, a pay freeze and better weather.

"We remain cautious about the outlook for the UK economy and we expect our second half to be significantly tougher than the first," he said.

Fullers managed pubs saw like-for-like turnover up 2.8 per cent, and taking into account pubs acquired from Punch Taverns and Mitchells & Butlers this uplift figure rose to 12 per cent (£71.6m).

Pre-exceptional operating profits grew 20 per cent to £9.5m.

Food sales across the managed estate grew 18 per cent and now represented 28 per cent of sales, versus 27 per cent in the previous year.

Across its tenanted pub estate turnover rose two per cent to £13.3m, with operating profits down two per cent to £5m.

Rental income fell one per cent due to downward pressure on inflation.

Fuller's beer company had what Turner described as "an excellent summer", with total beer volume growth of two per cent during the period.

Turnover was up nine per cent at £49.4m, with operating profits up 15 per cent to £3.9m.

Fuller's said it planned to spend a total of £40m on capital projects throughout the year, including "committed acquisitions".

The group said its net debt rose by £12.5m to £106.7m, and that "based on an active dialogue" with its banks it was confident it could refinance its existing bank facilities when they come up for renewal in November next year.