London Pride brewer and premium-end pubs operator Fuller Smith & Turner (FSTA) rises 3.8% to 983.75p on an impressive set of full-year results triggering upgrades from analysts. Chief executive officer Simon Emeny declares a 10% pre-tax profit boost to £34.1 million following the company's 'best performance for a number of years'. He credits investment in pubs, food and training staff in delivering superior customer service.


House broker Numis wastes no time in upgrading earnings forecasts. Analyst Douglas Jack lifts his pre-tax profit forecasts for the financial year ending March 2015 by 2.5% to £35.3 million, driven by a pick-up in expansion and pubs refurbishment as well as strong trading. Further upgrades look plausible, hints Jack. 'With five new managed pubs already scheduled for 2015E (versus four in 2014), we believe forecast risk remains on the upside.'


The new financial year has got off to a great start with an 8% rise in like-for-like sales at its managed pubs and hotels arm; brewing volumes are up by 10%; and three new freehold sites have been acquired.


Fuller's has steadily been pushing higher-priced products across its 386 sites, half of which are located outside of the M25. That means customers are having to get accustomed to paying more than £5 a pint. Emeny insists this price point isn't excessive, saying punters are happy to cough up for quality products.


Joining the ranks of its top-end range is American pale ale Sierra Nevada, the Chico-brewed drink for which Fuller's has secured the UK distribution rights for both draft and bottled versions. This product, alongside Fuller's own Frontier craft lager and Cornish Orchards craft cider, is among the items being touted to third party high-end bars, restaurants and festivals under a new sales force branded Westside Drinks.


It is not just drink prices that are emptying out consumer's wallets. The average spend per head for a meal in Fuller's increased by 7% in the past financial year to £11.29. Emeny says the use of fresh ingredients in its pubs is a key differentiator against competitors and a reason why consumers are choosing Fuller's as an eating destination.


Fuller, Smith & Turner P.L.C. (3) - Final Results June 2014 - Londons Pride at London Heathrow Terminal 2 The Queens Terminal


While these pricing levels may seem extravagant for many individuals, given that many places in the country can sell you a meal for a fiver and a pint for less than £3, the fact that Fuller's continues to grow earnings illustrates there is a market for higher-priced, higher-quality items in this part of the leisure sector. And that does make for a compelling investment case.


Shareholders are being rewarded with both a rising share price and growing dividend – up 11% to 9.3p in the past financial year. The shares command a high valuation for a good reason: Fuller's has a great track record for growth, even during the past economic downturn.

Issue Date: 06 Jun 2014