- Pubs-to-hotels group reports increase in sales and underlying profits
- Ongoing organic and acquisitive investment in the estate continues to pay off
- Dividend reaches new all-time high and buybacks continue
- Shares still trade at a modest discount to stated book value per share
“FIFA awarded the 2026 World Cup to America, Canada and Mexico in June 2018, so the concept that the footballing fiesta is in some ways going to sneak up on the stock market and surprise everyone is a bit odd, especially as the competition takes place every four years, but pubs-to-hotels group Fuller, Smith and Turner is hoping for a near-term boost all the same,” says AJ Bell investment director Russ Mould.
“Of greater interest to those investors who focus on the fundamentals of a company’s long-term competitive position, its operational and financial performance and how they compare to the valuation of its shares will be Fuller’s strong performance in the financial year just ended, ongoing investment in its well-tended estate and increased cash returns to shareholders.
“The limited extent to which a major football tournament can make a lasting impact upon a company’s operational and share price performance is exemplified by how Fuller’s stock languishes below the levels at which it traded when the joint US-Canada-Mexico bid to host the 2026 World Cup beat off a rival proposal from Morocco in Moscow eight years ago.
Source: LSEG Refinitiv data
“Since then, Fuller, Smith & Turner, and other pub groups, have had to confront Covid-19 and lockdowns, input cost inflation, volatile energy prices, soggy consumer confidence, higher interest rates, shortages of everything from carbon dioxide to Guinness, train strikes and changes in business rates.
“Higher wages and national insurance costs, to the tune of £8 million on an annualised basis, was the latest challenge to present itself in the last financial year. That sum equates to 2% of the group’s annual sales of £398 million and that two-percentage-point hit to profit margins is a significant one for a company where the full-year operating return on sales was 11.5%.
“Earnings also took a knock from a £5.9 million write-down on the value of assets and properties across 20 sites in the estate. That hit compared to an £18.9 million financial gain in the year to March 2024, booked on the sale of a prime site in Southwark, London.
“Adjusting for those two items meant that underlying profit showed an improvement, no mean feat in the current environment, and this is where long-term strategy and investment in the customer proposition and estate count for more than football tournaments over time.
Source: Company accounts, Marketscreener, analysts' consensus forecasts. Financial year to March.
“Fuller’s continues to invest in its pubs and hotels, and also acquire prime new sites across its core geographic areas in notably London, the South East and South West of England. The estate is also predominantly freehold, and the shares continue to look cheap relative to the company’s assets.
“A stock market capitalisation of £396 million compares to net assets on its balance sheet of £410 million as of the end of the last financial year, so the shares continue to trade at a discount to stated book value.
“Book value should also grow as profits advance. In addition, only £27 million of those net assets are intangibles and the firm has not revalued the bulk of its pub assets for over two decades, so that £410 million figure is a conservative one. This view is supported by how the directors’ own valuation of the company’s tangible fixed assets comes to £991 million compared to the stated value of £594 million and 2025’s healthy capital gain on the sale of the Mad Hatter pub in Southwark.
Source: Company accounts. Financial year to March.
“Management’s confidence in the company’s competitive position, and the company’s ability to turn this into profits and cashflow, is reflected by a further increase in the annual dividend and a new share buyback programme.
“Covid and lockdowns forced management to cancel dividend payments just two years after a bumper special distribution of 125p a share, but the company has patiently regrouped and the full-year dividend for the year to March 2026 exceeds the prior all-time high of 20.2p, distributed seven years ago.
Source: Company accounts. Financial year to March.
“The share buyback scheme also makes sense, given how the shares trade below net asset value and how management is not scrimping on investment in the estate.
“The company had run regular share buyback schemes before the pandemic hit. Between 2011 and 2020 the company returned more than £200 million to shareholders via a mixture of buybacks and dividends.
“The completion of a 2.3-million-share buyback is now to be followed by a one-million-share programme, worth just over £7 million at the current share price. Add that to the consensus forecast dividend for the coming year to March 2027 of 22.25p a share, or £12 million, and Fuller’s is due to return £19 million to its investors in the next twelve months.
“If those forecasts prove correct, the company will have returned some £240 million to its shareholders via buybacks and dividends since 2017, a big sum relative to the prevailing £396 million market cap and one that rewards patient shareholder support.”
Source: Company accounts, Marketscreener, consensus analysts’ forecasts. Financial year to March.
