Annual Results

Fuller,Smith&Turner PLC 26 May 2000 FULLER, SMITH & TURNER P.L.C. CHAIRMAN'S STATEMENT 52 WEEKS ENDED 25 MARCH 2000 ANNUAL RESULTS FOR THE YEAR TO MARCH 2000 Whatever You Do, Take Pride Trading profits up 6% to 15.1M London Pride volume up 5% Fuller's Beer Company profits up 27% Fuller's Inns profits up 8 Comparable E.P.S. up 9% Total dividend up 8% CHAIRMAN'S STATEMENT FULLER'S TRADING PROFITS UP 6% ANNUAL RESULTS FOR THE YEAR TO MARCH 2000 I am pleased to report that Fuller's comparable trading profits are up 6% to £15.1m (1999: £14.2m), on an 11% increase in turnover to £142m. Comparable earnings per share on a lower tax charge increased 9% to 41.93p. The comparable trading profits of the two principal divisions, Fuller's Inns and Fuller's Beer Company, were up 8% and 27% respectively. EBITDA (comparable trading profits before interest, tax, depreciation and amortisation) was up 11% at £24.5m (1999: 22.0m). This is a very important measure of the underlying cash generation of our business and indicates the financial strength of the company. Our capital expenditure during the course of the year was £23.3m, a record for the Group, and in consequence gearing rose to 9.5% from 7% in March 1999. We expect further increases in gearing in the next few years as we confidently invest in the business for the future. I am pleased to report that we shall be increasing the final dividend by 9% to 9.36p per 'A' and 'C' £1 Ordinary Share and 0.936p per 'B' 10p Ordinary Share which will be paid on Tuesday, 25th July to shareholders on the Share Register on 23rd June 2000. The underlying profits of the business have again shown steady growth this year but the reported profits before tax at £13.7m (1999: £14.4m) were struck after a number of special accounting adjustments which are detailed below. 2000 1999 £m £m Comparable trading profits 15.1 14.2 Profit on the sale of our retail 1.2 - wine shops Profit on the sale of various 0.3 0.2 properties Depreciation on freehold assets (0.3) - (FRS15) Impairment in value of certain freehold and leasehold properties (1.5) - (FRS11) Provision for onerous leases (1.1) - (FRS12) Profit before tax (as reported) 13.7 14.4 Our exceptional gains arose from selling certain surplus properties and the profit arising on the disposal of our retail wine shops for £8m, including stock. We are re-investing the proceeds of these disposals into our existing businesses. Under FRS15, a new accounting standard, we are required to depreciate our freehold properties and we adopted this in our interim results. The provisions under Accounting Standards FRS11 and FRS12, which were introduced last year, are prudent in line with current trading conditions at certain properties. We of course have many other properties whose values have strengthened over the years we have operated them, but again, under strict accounting rules, we cannot offset their increase in value against those properties where our trading expectations have not been met. FULLER'S INNS Fuller's Inns comprises our Managed and Tenanted Pubs, the Bars Division and the Hotels and falls under the responsibility of Simon Emeny, our Retail Director. Profits for Fuller's Inns were up 8% to £15.7m (£1999: £14.6m) on a turnover increase of 17%. Managed Pubs and Bars Managed Pubs and Bars saw profits up 14% on a turnover up 23% with like for like profits up 2%. We opened twelve outlets including nine in the Bars Division and one Ale and Pie. We had major refurbishments at eight properties this year (1999: 11 properties). The year has had its challenges, with the Minimum Wage and associated wage drift costing us £0.5m and the Working Time Directive on holiday pay costing £0.2m. Our reputation as a retailer this year was rewarded with the Fine Line concept winning Best Retail Design at the Retailer's Retailer of the Year Awards and the Old Joint Stock in Birmingham winning the Birmingham Evening Mail Award for Best Midlands Traditional Pub. Hotels Division Earlier in the year we announced our purchase of a freehold site in Bristol for a 93 bedroom hotel at a total cost of £8.8m. I am pleased to report that we have received planning approval to increase the number of rooms to 118, with a consequent increase in costs to £10.4m. Work begins next week for a scheduled June 2001 opening. We will also be converting the White Hart at Kingston Bridge into a 37 bedroom hotel. We have several other exciting hotel developments planned which, if all approvals are received, we will be able to announce in due course to shareholders. This week we announced the disposal of the Master Robert Hotel for £6.7m, which will realise a pre-tax exceptional gain in the new financial year of approximately £2m. The purchaser is a private company who will take on all our staff. Although we are sad to lose what was our original hotel development in the Group, we will be re- investing the funds raised into our English Inns hotel business, which targets a different customer base. The Master Brewer and Master Robert Hotels' trading profits were down £0.3m this year and our hotel in Ashford, Kent was closed for re- development during most of the summer. As a result the Hotels Division saw a drop in profits for the year and will have one less hotel in 2000/01. Our yield, which is room rate multiplied by the occupancy, was constant during the course of the year. Our newer hotels have traded well and we are looking at ways to increase the size of two of them and convert other operations to our English Inns Hotel concept. Tenanted Pubs This year we acquired 5 new tenanted pubs at a cost of over £2.1m, which is our first major tenanted investment since 1990. We did, however, transfer a very large tenanted pub, The Turks Head in Twickenham, to our managed estate. This transfer is in line with our policy of maximising the potential of our retail estate. Although overall profits for the tenanted pubs were down on last year, like for like profits were up 1%. FULLER'S BEER COMPANY Another successful year for the Fuller's Beer Company with turnover up 9% and profits rising from £3.2m(restated) to £4.1m, an increase of 27%. These extra profits were achieved by increased volume sales on a fixed overhead cost structure. London Pride volume sales were up 5% which is a very favourable result in a total cask beer market which has dropped in the current year by 12%. Our share of the cask market has risen to 3.7% compared to 3.1% last year. Apart from London Pride increasing sales, the Beer Division also saw Chiswick Bitter sales up 3.3%. Several new products including Jack Frost, a winter seasonal ale and Organic Honey Dew, were launched to critical acclaim. London Porter, a bottled dark beer and previously an export only product, was introduced to the UK due to off-trade demand, following its success at last year's International Beer and Cider Awards. I am delighted to report that at this year's International Beer & Cider Awards, London Pride was voted the supreme champion of all categories and awards were also given to Honey Dew, London Porter and Vintage Ale. Advertising and marketing spend has been maintained in the last financial year with national and regional television advertising. We were sponsors of two high profile events, 95.8 Capital Radio's London Awards in aid of Help a London Child and the UK's first ever Beach Rugby International Challenge in June 1999. Since the year end we have launched our latest London Pride advertising campaign and the four new 30-second television advertisements are designed to broaden London Pride's appeal still further. FULLER'S WINES On 29th February 2000 we announced to shareholders the sale of Fuller's wine shops. We received £4.25m, plus just under £4m for stock in trade and made an exceptional profit of £1.2m. Although our wine shops established an excellent reputation, and for the fourth year running had won the Regional Wine Merchant of the Year award, we could not further develop this business without diverting resources from our two principal trading divisions. Our wholesale wine business, which is being retained, sells not only to our own retail pub outlets, but has a thriving free trade business and continues to grow. The wholesale business will now form part of The Fuller's Beer Company. PROSPECTS Last year we invested record sums in the business. This year we intend to spend considerably more in our pubs, bars and hotels as well as in new brewery equipment to ensure that we continue to maintain a competitive and efficient operation. Our new hotel developments in Bristol, the City and Kingston will open in 2001 and therefore the interest cost of the development funds will have to be covered by other trading profits in the course of the new financial year. We have had a good start, and we expect 2000/01 to be another year of progress for the Group. A.G.F. FULLER CBE Chairman For further information contact: Michael Turner Managing Director Paul Clarke Financial Director Telephone 020 8996 2000 FULLER, SMITH & TURNER P.L.C. UNAUDITED GROUP PROFIT & LOSS ACCOUNT FOR THE 52 WEEKS ENDED 25 MARCH 2000 52 weeks 52 weeks to 52 weeks to 25 March to 25 March 2000 25 March 2000 2000 Continuing Discontinued Total Operations Operation £000 £000 £000 TURNOVER 118,416 23,940 142,356 Operating costs (105,397) (23,438) (128,835) OPERATING PROFIT BEFORE EXCEPTIONAL COSTS 15,674 502 16,176 EXCEPTIONAL COSTS (2,655) - (2,655) OPERATING PROFIT 13,019 502 13,521 Exceptional Profits 1,544 Interest Payable (net) (1,373) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 13,692 Taxation (4,166) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 9,526 Preference dividends (120) ATTRIBUTABLE TO EQUITY 9,406 SHAREHOLDERS Ordinary dividends (3,364) RETAINED PROFIT FOR THE FINANCIAL YEAR 6,042 EARNINGS PER SHARE* Basic 37.62 p Fully diluted 37.27 p Comparable basis 41.93 p 52 weeks 52 weeks to 52 weeks to 27 March to 27 March 1999 27 March 1999 1999 Continuing Discontinued Total Operations Operation £000 £000 £000 TURNOVER 103,536 24,299 127,835 Operating costs (88,901) 23,784 (112,685) OPERATING PROFIT BEFORE EXCEPTIONAL COSTS 14,635 515 15,150 EXCEPTIONAL COSTS - - - OPERATING PROFIT 14,635 515 15,150 Exceptional Profits 167 Interest Payable (net) (938) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 14,379 Taxation (4,496) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 9,883 Preference dividends (113) ATTRIBUTABLE TO EQUITY SHAREHOLDERS 9,770 Ordinary dividends (3,107) RETAINED PROFIT FOR THE FINANCIAL YEAR 6,663 EARNINGS PER SHARE* Basic 39.17 p Fully diluted 38.87 p Comparable basis 38.50 p * CALCULATED ON THE £1 'A' ORDINARY SHARE UNAUDITED GROUP BALANCE SHEET 25 MARCH 2000 At At 25 March 27 March 2000 1999 £000 £000 FIXED ASSETS Tangible assets 166,056 156,715 Investments 54 10 166,110 156,725 CURRENT ASSETS Stocks 4,329 7,543 Debtors 12,955 9,130 Deposits at financial 8,977 15,497 institutions Cash, at bank and in hand 4,237 1,979 30,498 34,149 CREDITORS: Amounts falling due within one year 23,455 24,685 NET CURRENT ASSETS 7,043 9,464 TOTAL ASSETS LESS CURRENT 173,153 166,189 LIABILITIES CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Debenture stock 26,952 26,941 PROVISION FOR LIABILITIES AND 1,680 596 CHARGES 144,521 138,652 CAPITAL AND RESERVES Called up Share Capital Equity 25,118 25,019 Non Equity 1,600 1,600 Share Premium Account 2,337 2,087 Revaluation Reserve 31,925 33,011 Profit and Loss Account 83,541 76,935 144,521 138,652 UNAUDITED GROUP CASH FLOW STATEMENT FOR THE 52 WEEKS ENDED 25 MARCH 2000 52 weeks to 52 weeks to 25 March 27 March 2000 1999 £000 £000 NET CASH INFLOW FROM OPERATING ACTIVITIES 22,633 21,760 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Preference dividends paid (120) (113) Interest received 1,247 743 Interest paid (2,188) (1,777) (1,061) (1,147) TAXATION Corporation tax paid (including advance corporation (5,313) (4,105) tax) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire tangible (23,316) (20,049) fixed assets Payments to acquire fixed asset investments (212) (10) Receipts from sales of tangible fixed assets 1,541 553 Receipts from sale of wine 4,285 - shops (17,702) (19,506) EQUITY DIVIDENDS PAID (3,168) (2,879) TOTAL NET CASH OUTFLOW BEFORE THE USE OF LIQUID RESOURCES (4,611) (5,877) AND FINANCING MANAGEMENT OF LIQUID 6,520 4,265 RESOURCES* FINANCING Issue of equity shares 349 694 Repayment of debenture stock - (750) 349 (56) MOVEMENT IN CASH IN THE YEAR 2,258 (1,668) *Management of liquid resources is the movement in cash on short term deposit at financial institutions. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES Operating Profit 13,521 15,150 Depreciation 8,351 6,863 Profit on disposals of tangible fixed assets (33) (3) Impairment of retail properties 1,571 - Provision for onerous leases 1,084 - 24,494 22,010 (INCREASE)/DECREASE IN WORKING CAPITAL Stocks 3,214 (21) Debtors (4,258) (190) Creditors (817) (39) NET CASH INFLOW FROM OPERATING 22,633 21,760 ACTIVITIES OTHER UNAUDITED GROUP PRIMARY STATEMENTS FOR THE 52 WEEKS ENDED 25 MARCH 2000 52 weeks to 52 weeks to 25 March 27 March 2000 1999 £000 £000 Group Statement of total recognised gains and losses Profit on ordinary activities after taxation 9,526 9,883 Unrealised surplus on revaluation of property - 3,281 Impairment of retail (522) - properties Total recognised gains for the 9,004 13,164 period 52 weeks to 52 weeks to 25 March 27 March 2000 1999 £000 £000 Group Historical Cost Profits and Losses Reported profit on ordinary activities before taxation 13,692 14,379 Realisation of property revaluation gains of previous 564 74 years Historical cost profit on ordinary activities before 14,256 14,453 taxation Historical cost profit for the period retained after taxation 6,606 6,737 OTHER UNAUDITED GROUP STATEMENTS FOR THE 52 WEEKS ENDED 25 MARCH 2000 52 weeks to 52 weeks to 25 March 27 March 2000 1999 £000 £000 RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET DEBT Movement in cash in the year 2,258 (1,668) Cash outflow from decrease in - 750 debt Cash inflow from the movement in liquid resources (6,520) (4,265) Amortisation of issue costs (11) (11) Movement in net debt in the (4,273) (5,194) year Net debt at beginning of the (9,465) (4,271) year Net debt at end of the year (13,738) (9,465) At Other At 27 March Cash non-cash 25 March 1999 Flow movements 2000 £000 £000 £000 £000 ANALYSIS OF NET DEBT Cash, at bank and in 1,979 2,258 - 4,237 hand Debenture stock (26,941) - (11) (26,952) Deposits at financial institutions 15,497 (6,520) - 8,977 Total (9,465) (4,262) (11) (13,738) 52 weeks to 52 weeks to 25 March 27 March 2000 1999 £000 £000 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Profit attributable to equity shareholders of the Company 9,406 9,770 Ordinary dividends (3,364) (3,107) Other recognised gains and losses for the year Revaluation of fixed assets - 3,281 Impairment of retail (522) - properties New share capital subscribed 349 694 Net addition to shareholders' 5,869 10,638 funds Opening shareholders' funds 138,652 128,014 Closing shareholders' funds 144,521 138,652 NOTES TO THE ACCOUNTS 1. ANALYSIS OF TURNOVER, PROFITS AND ASSETS EMPLOYED BY DIVISION Continuing operations Fuller's Inns Beer Company 2000 1999 2000 1999 (Restated)* Turnover £000 £000 £000 £000 Total sales 84,892 72,424 55,881 51,146 Inter-segment sales - - (22,357) (20,034) Sales to third parties 84,892 72,424 33,524 31,112 Comparable Profits 15,732 14,564 4,058 3,202 FRS 11/12/15 (2,952) - 30 - Profits 12,780 14,564 4,088 3,202 Central costs Operating profit Interest payable net Profit on ordinary activities before exceptional profits Exceptional profits Profit on ordinary activities before taxation Assets employed 138,708 129,755 18,332 15,896 Unallocated net liabilities Total net assets Discontinued Operation Retail Wine Shops Total 2000 1999 2000 1999 (Restated)* (Restated)* Turnover £000 £000 £000 £000 Total sales 23,940 24,299 164,713 147,869 Inter-segment sales - - (22,357) (20,034) Sales to third parties 23,940 24,299 142,356 127,835 Comparable Profits 528 515 20,318 18,281 FRS 11/12/15 (26) - (2,948) - Profits 502 515 17,370 18,281 Central costs (3,849) (3,131) Operating profit 13,521 15,150 Interest payable net (1,373) (938) Profit on ordinary activities before 12,148 14,212 exceptional profits Exceptional profits 1,544 167 Profit on ordinary activities before 13,692 14,379 taxation Assets employed - 6,820 157,040 152,471 Unallocated net (12,519) (13,819) liabilities Total net assets 144,521 138,652 *Following the disposal of the Retail Wine Shops, the Wholesale wine operation is now included in the Beer Company. Accordingly the above segmental analysis has been restated to reflect the revised structure. In 1999 the Wine Company's results (including Wholesale wine) were as follows: 27 March 1999 £000 Sales to third parties 27,676 Profits 1,029 Assets employed 8,874 2. EXCEPTIONAL PROFITS 25 March 27 March 2000 1999 £000 £000 Profit on sale of surplus 370 167 properties Profit on sale of wine shops 1,174 - 1,544 167 3. TAXATION Owing to the Group's level of capital expenditure, corporation tax payable on the profits after interest but before pre-operating exceptional profits has been provided at a rate of 30.4% (1999 - 31.6%). The exceptional charge to operating profits has tax relief of £334,000 but there is no tax payable on exceptional profits on sales of properties owing to the availability of rollover relief (1999-£nil). 4. DIVIDENDS 25 March 27 March 2000 1999 Pence Pence Interim 4.05 3.82 Final 9.36 8.60 13.41 12.42 The pence figures above are for the £1 A ordinary shares. The unquoted 10p B ordinary shares carry dividend rights of 1/10 of those applicable to the £1 A ordinary shares. Dividends on the unquoted £1 C ordinary shares are the same as the listed £1 A ordinary shares. 5. EARNINGS PER SHARE 25 March 27 March 2000 1999 £000 £000 Profit attributable to 9,406 9,770 equity shareholders Adjustment in respect of exceptional profits (1,544) (167) Pre-exceptional earnings attributable to equity shareholders 7,862 9,603 FRS 11 Impairment of retail properties 1,571 - FRS 12 Provision of onerous leases less tax 750 - relief FRS 15 Depreciation of freehold buildings 302 - Comparable profits attributable to equity 10,485 9,603 shareholders Weighted average share 25,003,000 24,943,000 capital Dilutive outstanding 236,000 189,000 options Adjusted weighted average share capital 25,239,000 25,132,000 Basic* 37.62 p 39.17 p Fully diluted* 37.27 p 38.87 p Comparable earnings per 41.93 p 38.50 p share* * Calculated on the £1 A ordinary share. Earnings on the unquoted 10p B ordinary shares are 1/10 of the figures for the £1 A ordinary shares, earnings on the unquoted £1 C ordinary shares are the same as the listed £1 A ordinary shares. The calculation is based on earnings (after deducting preference dividends) and the average weighted ordinary share capital. Comparable earnings per share excludes all exceptional profits, FRS 11 impairment of retail properties, FRS 12 provision for onerous leases and FRS 15 depreciation of freehold buildings. 6. TANGIBLE FIXED ASSETS Financial Reporting Standard 15 Tangible Fixed Assets, has been adopted by the Company for the year ended 25 March 2000. As a result, the Company's accounting policy for freehold and long-leasehold buildings is now as follows: i) Freehold properties have not been revalued since 27 March 1999. The gross value of all previously revalued assets still held at 25 March 2000 have been carried forward from earlier periods without further amendment (apart from additions at cost). ii) Freehold and long-leasehold buildings are now depreciated down to their estimated residual value over their estimated useful economic lives. 7. ACCOUNTS The above financial information does not amount to full accounts within the meaning of S.240 of the Companies Act 1985. Full accounts for the year ended 27 March 1999, which received an unqualified auditors' report, have been delivered to the Registrar of Companies. The statutory accounts for the year to 25 March 2000 will be delivered to the Registrar of Companies.

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