A trading statement today from pub and hotels group Fuller Smith & Turner (FSTA) was overshadowed by the announcement that the company had underestimated the costs of transitioning the beer business to Japanese brewer Asahi. The shares slumped 8% to 970p.
Chief executive Simon Emeny says: ‘There have been many moving parts to navigate and we have incurred some greater than anticipated costs as a result which have had a short term impact on our financial performance.’
When Fuller announced the deal with Asahi on 25 January this year it said that ‘net cash proceeds of the proposed disposal are expected to be approximately £205 million at completion, taking into account adjustments and after estimated transaction, reorganisation and separation costs.’
For the first time since the disposal the company mentioned something called the Transition Services Agreement associated with the sale, which is due to end in May 2020. Until that time, Fuller is responsible for paying the overheads of the beer business.
This means that full year profit to 28 March 2020 are now expected to be flat at £31m, a whopping 26% downgrade compared with the consensus expectation. It also indicates that the sale price metrics were not as attractive as investors thought in January.
Adding insult to injury the company also announced that the migration to the new enterprise resource planning (ERP) system had not as yet delivered the expected benefits.
According to broker Liberum ‘the company had not given explicit cost guidance (central or operating) prior to this announcement so should be seen mainly as a reset of numbers post disposal rather than a full blown trading profit warning.’
UNDERLYING BUSINESS TRADING WELL
For the 32 weeks to 9 November revenues grew 5.2% with like-for-like growth of 2.3%, against a tough comparative period, although cost pressures resulted in some margin erosion.
