A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
A
C
C
O
U
N
T
S
2
0
2
0
F
U
L
L
E
R
,
S
M
I
T
H
&
T
U
R
N
E
R
P
.
L
.
C
.
A
T R A N S F O R M AT I O N A L
Y E A R
Annual Report and Accounts 2020
Fuller, Smith & Turner P.L.C.
A Y E A R O F T R A N S F O R M AT I O N
“It has been a transformational year. The sale of the
Fuller’s Beer Business to Asahi for an enterprise value of
£250 million completed in April 2019 – an exciting move,
full of opportunity, that enables us to reach new heights
as a premium pubs and hotels business.”
— Simon Emeny, Chief Executive
A N D T H E R E H A S B E E N A L O T
O F O T H E R T R A N S F O R M AT I O N
W I T H I N T H E B U S I N E S S . . .
We have been focused on transforming our customers’
experience (page 09), how we manage our portfolio
(page 12), the way we use digital (page 16), and how we
develop our people (page 19) – all part of building for
our long-term future.
Overview
Highlights and Contents
Financial and Operational Indicators
– Revenue and other income from continuing operations up 3%
to £333.0 million (2019: £324.7 million)
– Pre IFRS 16 profit before tax for total Group operations of
£174.5 million (2019: £26.1 million). Statutory profit before tax
for total Group operations of £166.2 million
– Basic earnings per share pre IFRS 16 for total Group operations
of 305.86p (2019: 35.12p)
– Good performance from Managed Pubs and Hotels pre coronavirus
with like for like sales1 growth of 2.3% for the 49 weeks to 7 March
2020 (2019: +4.9%) – ahead of the industry average
– Like for like growth in all areas of the business – drinks sales up 1.7%,
food sales up 1.9% and accommodation sales up 5.9% for the 49
weeks to 7 March 2020
– Steady performance from Tenanted Inns – like for like profits2
declined 3% (2019: +1%) in a tough trading environment
– Net debt pre IFRS 16 reduced by £66.3 million to £178.9 million
at year end
– Strong returns to shareholders during the year, equating to £1.33 per
‘A’ ordinary share3
– £162.4 million profit from the sale of the Fuller’s Beer Business
– Impact of coronavirus on 2019/20 trading is estimated in excess
of £10 million
– Entire pubs and hotels portfolio closed post government coronavirus
directive from 20 March 2020 – phased reopening started 4 July
with 163 Managed Pubs and Hotels and almost all Tenanted Inns open
as of today.
>> For full details of the impact of coronavirus and our plans for the
future, please see page 6.
Key Metrics
Post IFRS 167
2019/20
£m
Pre IFRS 16
2019/20
£m
2018/19
£m
Change
Pre IFRS 16
Revenue and other income
333.0
333.0
324.7
+3%
Profit after income tax
Net debt
EBITDA4
Adjusted profit before
income tax5
Separately disclosed items
before income tax
Profit before income tax
Adjusted earnings
per share6
Basic earnings per share3
161.9
291.8
54.4
168.6
178.9
44.0
19.5
+765%
245.2
59.5
n/a
-26%
18.0
19.7
33.1
-40%
(14.8)
166.2
(8.2)
174.5
(10.1)
n/a
26.1
+569%
21.41p
23.95p
48.40p
-51%
293.70p 305.86p
35.12p
+771%
Overview
02 Chairman’s Statement
04 At a Glance
Strategic Report
06 Our Response to Coronavirus
08 Chief Executive’s Review
26 Our Strategy
28 Financial Review
32 Principal Risks and Uncertainties
35 Section 172 Statement
36 Corporate Social Responsibility
41 Non-Financial Information Statement
Governance
42 Board of Directors
44 Directors’ Report
47 Directors’ Statements
48 Corporate Governance Report
53 Audit Committee Report
58 Directors’ Remuneration Report
Financial Statements
81
Independent Auditor’s Report to the
Members of Fuller, Smith & Turner P.L.C.
89 Group Income Statement
91
Group Statement of Comprehensive
Income
Group Balance Sheets
Group Statements of Changes in Equity
92
93 Company Balance Sheet
94
95 Company Statement of Changes in Equity
96
97 Company Cash Flow Statement
98 Notes to the Financial Statements
Group Cash Flow Statements
Additional Information
159 Directors and Advisors
159 Shareholder Information
160 Glossary
161 Five Years’ Progress
1 Managed Pubs and Hotels like for like sales excludes The Stable.
2 Operating profit before separately disclosed items and head office costs.
3 Per 40p ‘A’ or ‘C’ ordinary share.
4 Earnings before separately disclosed items, interest, tax, depreciation and amortisation from
continuing operations.
5 Adjusted profit is the profit before tax and separately disclosed items from continuing operations.
6 Calculated using adjusted profit after tax for continuing operations and the same weighted average number
of shares as for the basic earnings per share using 40p ‘A’ or ‘C’ ordinary share.
7 IFRS 16 Leases replaces IAS 17.
01
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Chairman’s Statement
Michael Turner, Chairman
“Fuller’s is a Company
with time on its side and
our long-term vision has
never been more relevant.
Your Company is in a
position of strength as
we exit lockdown.”
The last financial year has been truly
transformational for Fuller’s – in more ways
than we could have imagined. It started with
the sale of the Fuller’s Beer Business to Asahi
Europe Limited for the enterprise value of
£250 million and culminated with the entire
estate temporarily closed to our customers
and the whole country in a state of lockdown.
Against this backdrop, your Company
delivered a solid performance and is well-
prepared as we start to reopen our premium
pubs and hotels.
As a focused pubs and hotels business, we
have had a good year delivering £333 million
in revenue and other income and £19.7 million
of adjusted profit before tax1. This includes
the detrimental impact of the closure of the
business during the last month of trading.
Prior to the closure of the business, the year
to date financial performance was in line with
the Board’s expectations and the final quarter
was delivering positive results and strong
progress. Profit before tax2 was £174.5 million
including the profit on the sale of the Fuller’s
Beer Business.
1 Profit before tax before separately disclosed items
and IFRS 16 for continuing operations.
2 Profit before tax for total Group, pre IFRS 16.
On a like for like basis, our pubs again
outperformed the industry with sales rising
by 2.3% to 7 March 2020, when we started
to see significant financial impact as our
customers stayed at home due to the
coronavirus outbreak.
Our Balance Sheet remains strong at the
reporting date, supported by a predominately
freehold estate and significant levels of
liquidity. This has been achieved by successive
generations of management, who have stuck
to their long-term focus and have built the
foundations of the business patiently and
carefully to withstand financial shocks,
however they are caused. This position has
been enhanced by the Company being
assessed as Investment Grade by our lenders,
which has enabled us to access the Bank of
England’s Covid Corporate Financing Facility,
under which we have issued £100 million of
commercial paper to free up capacity in the
Company’s revolving credit facilities. We have
also agreed amendments to our lending
covenants in light of the coronavirus pandemic.
The acquisition of Cotswold Inns & Hotels
in October 2019 added 201 bedrooms to our
estate, taking us above the 1,000 mark for the
02
OverviewAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Return to shareholders
£69m
Basic earnings per share
293.70p
Dividend
As previously disclosed, we have taken
the decision not to propose a final dividend
in light of the temporary closure of the estate.
However, during the year the Company has
returned £69 million to shareholders – the
equivalent of £1.25 per ‘A’ ordinary share –
in relation to the sale of the Fuller’s Beer
Business as well as paying an interim dividend
of 7.80p per ‘A’ and ‘C’ ordinary share and
0.78p per ‘B’ ordinary share.
This is the first time in over 70 years that
there has been a reduction in total dividend –
although the monies returned to shareholders
during the year are the highest they have
ever been. These are extraordinary and
unprecedented times and the Board felt it was
prudent not to propose a final dividend. I thank
all our shareholders for their understanding in
these difficult circumstances and look forward
to our normal progressive dividend policy
returning in due course.
Michael Turner
Chairman
30 July 2020
first time. These seven stunning country sites
are a wonderful fit with our existing pubs and
hotels, and we will be able to learn from
their expertise in large scale weddings and
corporate events.
Our Tenanted Inns have not had an easy year,
trading against a very strong prior year that
was bolstered by the World Cup and amazing
summer weather. We have a new leader in this
part of the business, Iain Rippon, and the
expertise he brings from his previous roles in
the leased and tenanted sector are already
making a real difference.
During the year, Richard Fuller – who has been
a member of the Fuller’s team for over 35 years
– stepped down from his role as Corporate
Affairs Director but remains on the Main
Board in a Non-Executive capacity. I would like
to thank him for his contribution, in particular
his extremely successful 17 years as Sales
Director, and I look forward to continuing to
work closely with Richard in the future.
We were also delighted to welcome Robin
Rowland to our Board. Robin is a hospitality
industry legend and I cannot think of a time
when his experience, energy and vision will be
more appropriate and appreciated. As reported
at the half year, Jonathon Swaine and Peter
Swinburn stepped down and we welcomed Fred
Turner to the Main Board as Retail Director.
We were very pleased when Adam Councell
joined us as Finance Director in August.
Throughout the recent crisis, Simon Emeny
and his Executive Team have shown incredible
leadership – not just for Fuller’s, but in
promoting the case for government support
across the industry. I would also like to pay
tribute to the 5,000 team members across
the business, and to all our Tenants, who have
shown great understanding in these difficult
times. I am proud to be your Chairman and I
thank you all for your support.
Fuller’s celebrates 175 years this year. While it
may not feel like a time for celebrations today,
we have survived global recessions, world wars,
the devastating Spanish Flu epidemic and all
manner of unexpected events during our
history. Fuller’s is a company with time on its
side and our long-term vision has never been
more relevant. Your Company is in a position
of strength as we exit lockdown.
03
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. At a Glance
A F O C U S E D ,
P R E M I U M P U B S
A N D H O T E L S
B U S I N E S S
VISION
We create exceptional experiences full of style and spirit
– characterful pubs and hotels where everyone feels they
belong and where people leave happier than when
they arrived.
VALUES
Doing things the right way
– Deep pride and genuine enjoyment
for the business we’re in
– Integrity, quality, care and attention
to detail in everything we do
– Total dedication and passion for
everything we do
– Doing the right thing, not just doing
things in the right way
– Bringing a positive “can do” attitude
to any challenge, always going above
and beyond for our customers.
Being part of the family
– A family business, in the broadest sense
– Bringing a family ethos and feeling to how
we work – one team pulling together,
in each pub and hotel, and also together
across Fuller’s
– A warm sense of belonging – everyone
together, including our customers
– Where every member of the family
is valued for bringing something special
– Looking out for each other, in a warm
environment built on trust and
empowerment
– Supporting and respecting each other…
and challenging when needed
– Taking the long-term view, not always
about short-term gain.
Celebrating individuality
– Nurturing the individuality, spirit and
unique character of each person, pub
and bedroom, because that’s what makes
us special
– Believing that it’s the individuals who
create a great experience… and make that
experience come alive
– Embracing the freedom of thought,
creativity and diverse personalities that
make us who we are
– Where everyone can be who they
are… and make a real difference.
Always asking what’s next?
– Always asking “what’s next?”… for our
people, for our customers, for our pubs
and hotels
– A restless passion to continuously improve,
experiment and make things better
– Encouraging new ideas and creativity
in our people
– Outward looking, in touch with our
market and customers
– Always changing for the better, but
never changing for change’s sake
– Embracing the best from our past,
thinking creatively about our future.
04
OverviewAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. OUR LOCATIONS
96
Managed
14
Tenanted
Bel & The Dragon
6
Fuller’s Managed Pubs, Hotels and Tenanted Inns
379
Cotswold Inns & Hotels
7
MANAGED PUBS
AND TENANTED
HOUSES
(%)
GROUP
OPERATING PROFIT
BY DIVISION
(£m)
ANALYSIS
OF MANAGED
REVENUE
(%)
Fuller’s Managed Pubs and Hotels within
the M25
Fuller’s Tenanted Inns within the M25
Fuller’s Managed Pubs and Hotels
outside the M25
32%
12%
23%
Fuller’s Tenanted Inns outside the M25
33%
Fuller’s Tenanted Inns
£11.8m
Fuller’s Managed Pubs and Hotels
£29.5m
Food
Drink
Accommodation
32%
60%
8%
Room bookings in our Managed Pubs
and Hotels
Cauliflowers used for Sunday
roasts during the year
Employees working in our Managed Pubs
and Hotels
245,300
103,000
4,957
05
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Our Response to Coronavirus
A T H R E E S TA G E P L A N F O R R E O P E N I N G
Our three stage plan
We are undertaking a three stage plan
for reopening.
Stage one, to the end of July, saw us take a
measured approach to reopening the estate
and we began by opening 27 sites on 4 July.
At the end of July we had 75% of our Managed
Pubs and Hotels – a total of 163 sites –
open, as well as almost all our Tenanted Inns.
We continue to keep some of our support
centre team on furlough, and use the flexible
furlough scheme where appropriate to help
reduce our cash burn.
Stage two will run from August to October.
We will monitor and evaluate consumer
behaviour and use these learnings as we
continue to open up the rest of the estate,
keeping a close eye on footfall figures in those
areas where trade is dominated by local offices.
Our focus will be on maximising revenues while
keeping costs in check and we will start to
reintroduce rent to our Tenants on a tapered
basis. We look forward to an additional boost
to trade in August from The Chancellor’s Eat
Out to Help Out voucher scheme.
Stage three will take us from November to
March. The estate will be fully open, we will
start refinancing discussions and restart our
capex programme in the new calendar year.
The road to recovery has just started as we issue
this Annual Report – and it is too early to draw
serious conclusions on longer term trading –
but with our long-term focus, robust plans in
place, and the commitment and dedication of
our first-class team of people, we will recover.
We will achieve our goal to exit this crisis in the
strongest possible position.
“ We will achieve our
goal to exit this crisis
in the strongest
possible position.”
The impact of the coronavirus pandemic
started in early March – as consumers started
to fear for their health and offices started to
encourage their employees to work from
home. By the middle of March, the impact was
severe – particularly in our City and West End
sites – and we started to close pubs from the
week of 16 March 2020. On 20 March 2020,
following clear instructions from the Prime
Minister, we temporarily closed the doors on
all of our sites.
The initial response
On the closure of our pubs, we immediately
guaranteed all of our employees’ wages for
the next two weeks, while we awaited the
Government’s response. The Coronavirus
Job Retention Scheme (“CJRS”) provided
welcome support and we furloughed 99% of
eligible employees, retaining a skeleton staff
to run essential support functions.
We also took a decision to suspend commercial
rent for our Tenants from 15 March 2020.
This move was widely welcomed by our Tenants
and beyond. From the very start, we had an
ambition to emerge from this crisis in the
strongest possible position, and we applied the
same ethos to our Tenants. We wanted them
to emerge in a healthy financial position to
seize the opportunity to get their pubs back
up and running.
Decisive action to protect cash
On the financial front we started negotiations
with our banks, took the decision not to
propose a final dividend and our Board and
Executive Team took a temporary pay cut of
25% and 20% respectively. All non-essential
spending was suspended.
We were pleased to be assessed as Investment
Grade by our lenders, which allowed us to
access the Bank of England Covid Corporate
Financing Facility, under which we issued
£100 million of commercial paper to free up
capacity in the Company’s revolving credit
facilities. We have also agreed amendments to
our lending covenants subsequent to year end.
The impact of the coronavirus outbreak on
our 2019/20 results is estimated in excess
of £10 million and our cash burn was around
£4-5 million per month when all our pubs were
closed. Our estate is well-invested, which has
helped to ensure that we do not incur
expensive repair bills as we reopen.
A people first approach
In line with our culture, our people have been
front and centre. Regular video updates from the
Chief Executive, access to a suite of bite-sized
online learning and regular contact with their
peers helped to keep us in close contact with our
teams while our pubs were closed – and keep
them motivated.
As we move forwards, we are working hard to
ensure that we give both our teams and our
customers the confidence to return and
embrace our pubs. For our team members, we
are focusing on ensuring they can travel safely,
have the tools to give them the confidence that
they are safe in the workplace and can keep our
customers safe, and ensure we have any PPE
that they require.
All our sites have been risk assessed, are using
signage to maintain one way systems and social
distancing, have intensive cleaning regimes
implemented and our teams have received
additional training to reduce the chance of
coronavirus being an uninvited guest in our pubs
and hotels. We surveyed both our teams and our
customers to identify areas of key importance
and we are grateful for the Government’s VAT
cut and the Eat Out to Help Out scheme.
We also have plans in place to deal with local
lockdowns, should they occur. It’s going to be
a long journey – but we’ve got the right team,
venues and ethos to make it to the end.
06
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. 07
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Chief Executive’s Review
T R A N S F O R M I N G . . .
Simon Emeny, Chief Executive
“While our long-term
goals remain the same,
our objectives in the short
and medium term have
had to adjust to the
current unprecedented
trading environment.”
When we released our interim statement in
December 2019, we were on track to finish
the financial year in a good position having
received the proceeds from the sale of the
Fuller’s Beer Business and with a clear
future path laid out before us. It had been
a transformational year for Fuller’s – but we
would never have anticipated that we would
end it in March with the whole hospitality
industry in a state of closure and with no
income stream.
We have to deal with the spectre of coronavirus
before we can move on to review the rest of the
year. The impact on our pubs was severe and
started in the second week of March. There was
a marked shift in consumer behaviour, and we
took the decision to close the most affected pubs
during the week commencing 16 March 2020,
guaranteeing all wages for at least the ensuing
fortnight. On Friday 20 March 2020 we, along
with the rest of the hospitality industry, were
instructed to close our estate completely by the
Prime Minister – which we duly did.
I would like to thank the Government
for the speed with which it provided support
for furloughed employees and the subsequent
additional measures such as the VAT reduction.
We took an early decision to cancel commercial
rent for our Tenants and we implemented a
strategy that focused on being fair to all, be they
team members, Tenants, customers or suppliers,
and we engaged with all our stakeholders.
Among our initial actions, we furloughed
99% of our eligible team members, our Main
Board and Executive Team volunteered to
take temporary pay cuts of 25% and 20%
respectively, and we engaged with our banks to
ensure their continued support in maintaining
our high level of liquidity should the enforced
closure be in place for several months. We also
took the decision not to propose a full year
dividend, to further preserve our cash reserves.
Since then, we have renegotiated our financial
arrangements and worked on a plan that
ensured we started to reopen in the strongest
possible position, with our teams ready and
raring to go.
Against this backdrop, it is easy to forget that
the financial year started in April 2019 with
the sale of the Fuller’s Beer Business to
Asahi Europe Ltd for an enterprise value of
£250 million, followed in October 2019 by the
acquisition of Cotswold Inns & Hotels – seven
stunning hotels in the heart of the Cotswolds –
from existing bank facilities. The decision to sell
the Fuller’s Beer Business at this time has proved
fortuitous and ensured we were in a strong
position, with substantial liquidity headroom,
when the coronavirus pandemic struck. We also
made a voluntary £24 million contribution to the
defined benefit pension scheme in the second
half of the year, reducing our pension deficit to
just £4.7 million at the year end.
08
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. E N R I C H I N G
. . . O U R C U S T O M E R S ’ E X P E R I E N C E
Ensuring “Every Customer Leaves Happy” is what
sets us apart. Whether it’s a chef’s signature dish,
one-off brews or a calendar of big moments and
customer engagement, we will never stop striving
to make any visit to a Fuller’s pub a truly
memorable one.
(Like these Philadelphia Eagles fans
at The Admiralty)
22,500
The number of lights on The Churchill Arms at Christmas and the number
of people who watched the switch on through social media
09
Enriching... Our Customers’ Experience
M E N U S F O R A L L L I F E S T Y L E S
A N D TA S T E B U D S !
During the year, we have also continued to focus on delivering a
wide range of healthier options such as exciting and vibrant low
and no-alcohol drinks and additions to our range of vegetarian
and vegan dishes. The Sunday roasts holds its position of favour
too though, with sales up 4.8%.
10
Enriching... Our Customers’ Experience
. . . A N D E V E N M O R E D R I N K S
T O C H O O S E F R O M
We love making our customers feel special and bespoke
brews, only available in Fuller’s pubs, is a great way to do that.
The customers obviously love it too – we sold over 15,000 pints
every week of Camden Off Menu IPA. There are more
to come with an exclusive on-trade launch of
Beavertown’s Nanobot.
11
S A F E G U A R D I N G
. . . O U R P O R T F O L I O
Our pub estate comprises many of the most
iconic sites in the South of England
and we continue to invest in maintaining
the quality and premium nature of this
predominately freehold estate.
Freeholds in our estate by book value
91%
12
Safeguarding... Our Portfolio
I N V E S T I N G . . . T H R O U G H
T R A N S F O R M AT I O N A L
R E F U R B I S H M E N T S
1,028 bedrooms in our Managed Pubs and Hotels
We have been steadily growing our bedroom stock over the years
and this year we increased our bedroom numbers by over 25%.
Like everything at Fuller’s, each one has its own individuality
and those little touches that help our customers relax and
enjoy their home from home.
13
Safeguarding... Our Portfolio
T H E A C Q U I S I T I O N O F
C O T S W O L D I N N S & H O T E L S
+201 bedrooms
In October 2019, we were delighted to acquire Cotswold Inns & Hotels –
seven stunning venues in the Cotswolds, each individual, but all offering
exceptional levels of food, accommodation and hospitality. Roaring fires in
the winter and lush gardens and outside space in the summer. Perfect.
14
Safeguarding... Our Portfolio
AT T R A C T I N G . . . A W H O L E
N E W C U S T O M E R B A S E
Weddings are part of the heart and soul of the Cotswold Inns &
Hotels business – and what bride wouldn’t want a special day in a
truly special venue. In an average year, The Bay Tree alone often
plays host to over 100 happy couples. Here comes the bride!
15
I M P R O V I N G
. . . H O W W E U S E D I G I TA L
At Fuller’s we have a very clear goal
to ensure that all digital activity
drives increased footfall, frequency
of visit or spend per head.
Customers on our single customer view database
1.1 million
16
Improving... How We Use Digital
“ I c a n n o w r e a d
t h e m e n u c o m p l e t e l y
i n d e p e n d e n t l y ”
B E I N G A C C E S S I B L E
T O E V E R YO N E
In another addition to the role digital communication plays in
our business, we launched Good Food Talks in early September.
This is an app-based talking menu service aimed at allowing
anyone with a visual impairment or dyslexia to independently
browse and order from the menu. It has been very well received
and was used over 7,500 times in the first six months.
17
Improving... How We Use Digital
E V E N S H A K E S P E A R E
( I N T H E G A R D E N )
78% purchased their tickets online
This year’s Shakespeare in the Garden saw 32 pub gardens play host to
Romeo & Juliet and The Merry Wives of Windsor. This year included
free shows for our charity partners. An audience of 6,258 came to
see the show and many in the audience purchased their tickets online.
The perfect blend of modern technology with a classic piece
of theatre written over 400 years ago.
18
B U I L D I N G
. . . C A R E E R S A N D O P P O R T U N I T I E S
Our people are the key to delivering the
exceptional experience our customers expect and
we take great pride in supporting and developing
them through their Fuller’s journey.
Apprentices recruited
during the year
120
19
Building... Careers and Opportunities
T H R O U G H P R O G R E S S I O N ,
T R A N S I T I O N
. . . O R L E A D E R S H I P T R A I N I N G
6,595
Number of training courses undertaken in our
Managed Pubs and Hotels either online, in situ
or at a class during 2019
20
The sale gave us an opportunity to build on
the most profitable elements of our business
– our premium pubs and hotels. With this
focus, we restructured our Executive Team,
honed our vision and strategy, and invested in
Pier House, an outstanding new home for our
support team in our Chiswick heartland on the
banks of the River Thames at Strand-on-the-
Green. We also took the decision to impair the
goodwill recognised on the acquisition of The
Stable Pizza & Cider business, which we
subsequently sold to Three Joes.
Both Bel & The Dragon and Cotswold
Inns & Hotels have now been fully integrated,
reducing head office costs across the business,
and in April 2020 we completed the Transitional
Services Agreement (“TSA”) with Asahi.
The Enterprise Resource Planning (“ERP”)
system was bedded in, we had replaced some
old legacy IT systems with a cloud-based
solution and all pub General Managers and
support centre team workers had been migrated
to Office 365. We also started the process of
identifying a new finance system, suitable for a
focused premium pubs and hotels business.
At the beginning of March 2020, we were
trading in line with expectations and had just
opened two fantastic new freehold sites.
In Christchurch, Dorset, we completed the
£2 million transformational refurbishment
of The Bear of Burton, and we opened The
Windjammer – a stunning new site over two
floors with views across the river, overlooking
the Thames Barrier in Royal Docks.
Our capital refurbishment programme was on
track, with new schemes at a number of pubs
including The Mayfly on the River Test near
Stockbridge, and we were on site at The White
Horse in Wembley, where we were due to open
in June for the Euro 2020 championships.
We were about to go on site at The Coach &
Horses in Soho and The Trinity in Borough.
Finally, we had also just sold the freehold of
The Castle in North Acton for £10.3 million to
the company redeveloping this whole area, but
with a licence to continue to operate it for the
next 12 months.
In summary, the business was in great shape
and perfectly poised to start the new financial
year with all elements primed and ready to go.
While our long-term goals remain the same, our
objectives in the short and medium term have
had to adjust to the current trading environment.
Our immediate priority is to minimise our cash
burn, while steadily building trade, as we reopen
our estate. In the medium term, we are learning
“ We are proud to be 175 years old this year
and with our balanced and well-invested estate,
prudent approach to finance and amazing team
of dedicated people, we will still be here for
generations to come.”
– Simon Emeny, Chief Executive
. . . T H R O U G H T H E D E L I V E R Y
O F O U R S T R AT E G Y
Happy Teams, serving Happy Customers
1. To deliver a distinctive
customer experience
across the whole
Fuller’s estate
3. To build a leaner cost
base by investing and
improving processes
2. To grow by carefully
targeted acquisitions
and developments
that enhance our
premium business
4. Supporting these
objectives by
recruiting, developing
and investing in the
best people
>> Learn more on pages 26 and 27.
21
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Chief Executive’s Review
Continued
from the earlier openings and monitoring
footfall in those areas where pubs are still closed
– especially Central London and the City.
In addition, we have accelerated a number of
digital initiatives such as order and pay at table
and using wifi logins as a way of capturing data in
support of the NHS Test & Trace scheme.
Looking to the future, we are in a strong position.
Fuller’s has always taken decisions for the long
term and our predominately freehold estate,
coupled with low levels of debt, ensure we can
withstand the impact of coronavirus. The sale of
the Fuller’s Beer Business gives us the financial
resources to continue to invest in the estate and
take advantage of any suitable opportunities that
may arise. This hiatus in trading as a result of
coronavirus presented a unique opportunity to
review the whole business and ensure we are in
the best possible position to take advantage of
future growth opportunities.
But that is the future – and as we head into
that future, we do so on the back of solid
trading for the full year to mid-March 2020
and some great initiatives that we have been
delivering across the business. We kept our
pubs and our people match fit during lockdown
and we have already started the journey to
fully reopen our pub estate.
Managed Pubs and Hotels
Our Managed Pubs and Hotels have had a solid
year with revenue rising 2% (5.8% to week 49)
to £299.6 million (2019: £293.8 million).
Pre coronavirus like for like sales grew by 2.3%
(2019: 4.9%) for the 49 weeks to 7 March 2020
and, for another year, we have outperformed the
industry1. We have also continued our rolling
investment programme to ensure our pubs
maintain their premium position.
These results are delivered against the continual
pressure of rising costs – through further
increases in the National Living Wage, pension
costs and the excessive cost of business rates.
We hope that, in light of the impact of the
coronavirus pandemic on the hospitality sector,
the Government will take the economic cost of
the crisis into account when setting wage rates
and will press ahead with its reforms of the
outdated business rates system.
1 Source: Peach Tracker Index.
Putting our people at the heart
During the year, we took a holistic view of the
way we recruit, develop and retain our people,
which resulted in a new Designed for Life career
pathway. This aims to put a stronger focus on
in-role leadership.
Through a combination of online learning
workshops and bespoke training programmes
for all levels, the training journey for any
Fuller’s employee is tailored to the individual
– from a new core induction right through to
a degree level apprenticeship in operational
leadership. We were delighted to see our
commitment to apprenticeships at all levels
recognised when we took the award for Best
Apprenticeship Programme at the BII’s National
Innovation in Training Awards. We also took
the silver award in the same category at the
Training Journal Awards – where we were up
against apprenticeship programmes in all
sectors of industry and commerce.
As well as more formal learning, our digital
learning and communications platform,
Fuse, allows us to promote a high number
of short, online courses for personal
development covering topics such as business
English, presentation skills and managing
emotions. Many of our team members have
undertaken such courses of their own volition
during lockdown.
We recognise that not everybody who joins as
a kitchen porter or member of part-time bar
staff wants a long-term career in our sector
– but we still want to help them fulfil their
potential and play a role in their personal
journey. They may begin with us – and many
will become our managers of the future –
but we also want to ensure that we deliver
a nurturing environment if their aspirations
take them beyond Fuller’s. Offering tailored
development programmes allows us to achieve
that and will build our employer brand and our
status as the industry employer of choice.
In total, during the year over 3,300 formal
training days took place, with an additional
5,300 online courses undertaken. The results
speak for themselves with our promotion
ladder working well and 64 of the 71 General
Managers appointed this year having come via
this internal career path.
22
Revenue for Managed Pubs and Hotels
£299.6m
Increase in like for like sales for Managed
Pubs and Hotels
+2.3%
TRANSFORMING OUR OFFICES
We were delighted to secure new
premises for our offices with the freehold
acquisition of Pier House next to Kew
Bridge at Strand-on-the-Green. Light,
airy, open plan and kitted out to a very
high standard, the premises give us a new
home in our Chiswick Heartland. Fuller’s
has always been by the River Thames,
and Pier House has great character and
history (just like Fuller’s) and offers
stunning riverside views.
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. A pub estate to be proud of
During the period, we completed the major
acquisition of Cotswold Inns & Hotels for an
enterprise value of £40 million, adding seven
outstanding freehold country inns and two
vibrant bars in Birmingham to our portfolio.
These sites bring a new dimension to our
business, with the addition of 201 bedrooms,
a focus on traditional Cotswolds hospitality,
and expertise in weddings and corporate
functions that provides shared learning
across the Fuller’s estate.
We have completed a number of major
refurbishments including a new build site
overlooking the Thames Barrier at Royal Dock
called The Windjammer, and transformational
refurbishments at The Mason’s Arms in
Battersea, The Chamberlain Hotel in Minories
and The Old Bank on Northcote Road in
Clapham.
Outside London, we have also delivered a major
investment at The Bear of Burton, just outside
Christchurch in Dorset, a refurbishment at
The Bishop on the Bridge in Winchester, an
outstanding scheme at The Mayfly overlooking
the River Test near Stockbridge, and the
addition of 10 new bedrooms at The White
Hart, also in Stockbridge.
We are on site at The White Horse – a
new build site in the heart of an extensive
residential development in the shadow of
the iconic Wembley Stadium – which should
now benefit from the delay of the European
Football Championship to June 2021.
In addition, we will imminently complete
work at The Coach & Horses, a truly iconic
pub in Soho, and are close to finishing a
major scheme at The Trinity in Borough – an
impressive site we acquired in August last year.
We have also taken advantage of lockdown to
undertake a further 11 projects in Bel & The
Dragon and Cotswolds Inns & Hotels sites.
We have disposed of two sites during the
period – The Red, White & Blue, a tenanted
pub in Portsmouth, and The Castle in Acton.
The latter of these is located in an area that is
undergoing substantial redevelopment and the
site has been sold as part of this scheme for
£10.3 million.
Finally, we acquired new offices for our
support team at Pier House. This site, which
has been fitted out and is ready for full
occupation as business returns to normal,
retains the Fuller’s head office within the
London W4 postcode that has been our
home for 175 years.
>>
TRANSFORMING OUR TEAM
To deliver our plans and ambitions as
a focused premium pubs and hotels
business, we need a well-balanced
Executive Team that combines technical
skills with vision, drive and a commitment
to Fuller’s values and the overriding
ambition to deliver our vision.
From top to bottom:
Simon Emeny (Chief Executive),
Adam Councell (Finance Director),
Fred Turner (Retail Director),
Jane Jones (Marketing Director),
Dawn Browne (People and Talent Director),
Peter Turner (Property Director) and
Séverine Béquin (Company Secretary)
The right offer on the bar and on the menu
The sale of the Fuller’s Beer Business has
opened up new opportunities to work with
suppliers and provide our customers with
an increasingly premium, exciting and varied
drinks range. Our commitment to Fuller’s
beers, through the long-term supply
agreement we have with Asahi, remains
and we will always hero classic Fuller’s
brands like London Pride.
Across the board, the range changes we
have implemented already have driven further
premiumisation with strong growth in sales
of Asahi Superdry, Meantime Anytime and
Beavertown Neck Oil. Camden Brewery has
also proved popular with Camden’s Off Menu
IPA, which was exclusive to Fuller’s, driving sales
of over 15,000 pints every week. An exclusive
on-trade launch for Beavertown’s new Nanobot
– a 2.8% pale ale – was planned for the spring
but will now take place later this summer.
Spirits sales also continue to grow, with a like
for like rise of 8.3%, driven by sales of cocktails
and gins, which were up by 17.3% and 16.5%
respectively on a like for like basis. We work
closely with our suppliers and leverage these
relationships to provide interesting and
bespoke events and experiences for our
customers. This programme has included a
Victorian hot gin bar with Sipsmiths at The
Conductor in Farringdon, an après ski bar at
the same venue with Alpine fruit beer Jubel,
and a series of garden takeovers with Fever-
Tree at 25 sites across the estate.
23
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. 211
bedrooms added
4.8%
increase in sales of Sunday roasts
Chief Executive’s Review
Continued
As we adjust to life as a focused premium
pubs and hotels business, our relentless focus
on fantastic food continues. In a move that
further inspires our chefs to new heights, we
were delighted to appoint Simon Rogan, the
holder of five Michelin stars, as the Honorary
President of the Fuller’s Chefs’ Guild. The move
was aligned with Fuller’s sponsorship of the
Bocuse d’Or – the legendary international chefs’
competition – and aims to elevate the way food
is regarded by our kitchen teams, the wider
business and our customers.
The year has also seen further focus on
vegetarian and vegan dishes, which continue
to grow in popularity, as well as the much-loved
Sunday roast – now the most important dining
occasion in the pub week. Sales of Sunday
roasts have risen by 4.8% and an outstanding
Sunday roast offer is, more than ever, the
benchmark of a fantastic pub.
Underpinning our food agenda are two key
constituents – well-trained and passionate
chefs and wonderful ingredients. While the
former continue to be inspired by their journey
through the Chefs’ Guild, the latter are equally
key. We always look to develop long-term
partnerships with our suppliers, which has led
to actions that range from delivering financial
gains from forward buying meat, to acquiring
a whole field of asparagus to ensure supply,
to accessing the apprenticeship levy of
our suppliers to further develop our own
apprenticeship programme. As we rebuild our
business in the coming months, these supplier
relationships will be more important than ever.
Targeted marketing for discerning customers
Much of the work undertaken by our
marketing team during the year will reap
rewards as we continue to open our pubs
for business again. The focus for the year has
been around improving our digital customer
journey and building on the single customer
view database that allows us to deliver the
right message to the right customer at
the right time.
Today, that database has in excess of 1.1 million
contactable customers with year on year
growth of 94%. Through targeted, relevant and
eye-catching digital marketing, this database
delivers an exceptionally high click rate of 24%
and these targeted mailings contributed
£1.9 million in sales revenue, after discount,
during the year. This is a growth of 12% against
the prior year.
This ability to communicate with our customer
base is paramount as we continue to come
out of lockdown. We need to understand who
our existing customers are and who could be
potential customers as we progress. Our recent
move to Wireless Social as our main wifi
provider will help with this process.
In the second half of the last financial year we
concluded a project with CBRE Research that
identified four statistically significant customer
groups. While all have a degree of affluence,
they occupy different age categories and have
different booking, eating, drinking and lifestyle
behaviours. By identifying these groups and
their propensity to frequent Fuller’s pubs, we
can further refine our messaging and targeting.
We can then apply this beyond the digital space
to broader marketing and wider business
planning as we rebuild trade.
This digital activity is supported by multi-channel
campaigns that encompass social media and
improved websites. This is combined with
improved search engine optimisation (“SEO”)
– particularly around our hotels and pubs with
rooms. Having researched and identified the way
customers chose locations for weekend breaks
and staycations, we invested in improving our
hotel websites and SEO to ensure they appeal to
customers seeking particular experiences or
types of holiday – for example dog friendly or
coastal breaks. This new approach has generated
great results, improved our search ranking,
increased the number of visitors to our web
pages by 76% and driven direct bookings –
all of which will help us to further capitalise
on the staycation opportunity.
As the doors open again to our customers,
we will also be ready to build on the experiential
activity that has worked so well for us during the
year. From Shakespeare in the Garden to Your
Home of Rugby, we have delivered excitement
and memories to thousands. A record 6,258
tickets were sold for 50 performances of Romeo
& Juliet and The Merry Wives of Windsor and the
large gardens at some of the new Cotswold Inns
& Hotels sites will allow us to extend this popular
activity to a whole new audience in the future.
The pub experience has had to change, but we
have a talent for innovating to deliver a premium
experience, and we will be using that talent to
ensure our pubs remain at the heart of their
communities and enjoyed by our customers
from the moment they step back through the
door. From order and pay at table options and
24
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. In these uncertain times, it is challenging
to accurately predict the future. But having
begun reopening our pubs nearly four weeks
ago, it is encouraging to see customers
returning to our pubs and this steady growth
in consumer confidence will be the key to
success – not just of our Company or our
industry but the economy as a whole. We have
a well-balanced estate geographically and that,
combined with a freehold asset base and the
calibre of our people, puts us in a stronger
position than many to build towards sustained
profitability in this full year and a strong start
to the FY2022 financial year.
A freehold approach is a fundamental
foundation of our long-term business. It is not
always fashionable, but yet again it underpins
our ability to survive the toughest of times.
We are proud to be 175 years old this year and
with our balanced and well-invested estate,
prudent approach to finance and amazing team
of dedicated people, we will still be here for
generations to come.
Simon Emeny
Chief Executive
30 July 2020
Finally, we are improving the speed and
effectiveness of our online ordering which has
resulted in over 90% of Tenants’ orders now
being taken online – making the process more
efficient and giving our Tenants more time
with their customers.
Current Trading and Prospects
While it is still early days, it is pleasing to
see our teams welcoming guests back and we
have taken a range of actions and measures to
ensure our pubs are safe and inviting. The first
stage of our three stage plan saw 27 pubs open
on 4 July 2020 and another 136 since –
meaning over 75% of our Managed Pubs and
Hotels are now open. Almost all our Tenanted
Inns have also reopened. While it is too early
to draw any meaningful conclusions, we are
comfortable with the level of trade and we
continue to monitor footfall in those areas
where our pubs are not yet open.
While we are prepared for business, particularly
in London, to take some time to return to normal,
we are well placed to satisfy the uptick in demand
for staycations as many customers holiday closer
to home – an opportunity we are supporting with
marketing activity for our Beautiful Bedrooms.
We continue to focus on minimising cash burn
and returning to profitability. During August, we
will gradually reintroduce rent for Tenants – but
on a tapered basis to help with their own return
to sustainable trading levels.
In line with our focus on pubs and hotels,
we decided to sell our pizza and cider business,
The Stable, to Three Joes – a sourdough
pizza company. We have retained the freehold
interest in five of the sites and we wish the
team at Three Joes, and our former colleagues,
every success in the future.
The decisions we have taken during these
difficult months have, as always, an emphasis
on the long term. We will complete our current
investment programme prior to stopping
refurbishments until Christmas to focus on
cash generation. We will recommence the
investment programme in Q4 and, in the
second half of the financial year, we will begin
refinancing discussions with our lenders.
QR codes for easy menu access to Test &
Trace data collection, the combination of great
interpersonal skills supported by digital initiatives
will be crucial as we rebuild our business.
Tenanted Inns
It was always going to be a tough year for our
Tenanted Inns with trading in the first half
measured against the hot weather and World
Cup of 2018. As a result, like for like profit was
down by 3% and total revenue was down by 4%.
This includes the two weeks at the end of the
year when our pubs were closed, hence revenue
for the 11 months to the end of February was
only down 2%. During the year we transferred
two sites from Tenanted to Managed – The
Coach & Horses in Soho and The Swan at Ship
Tavern Passage, London EC3.
In September, we appointed a new leader for
the Tenanted Division with Iain Rippon taking
charge. Iain has a wealth of tenanted and leased
experience and he was heavily involved in our
decision to cancel rents at the start of the
coronavirus pandemic – a move that was widely
applauded and gave our Tenants some breathing
space. He and his team have been working
with our Tenants to encourage them to use
government support to ensure they are in the
best position to trade successfully as they open
again, while having manageable levels of
historical debt.
The ingenuity and generosity of our Tenants
was outstanding during lockdown with many
offering take-away meals, opening as
community stores, and even providing hot
meals daily for local rough sleepers. It was
fantastic to see the way they rose to the
challenges lockdown created, at the very heart
of the communities that they serve, and we
look forward to building on that creativity in
the future.
Among the changes Iain has made are a
reduction of ingoing cost for new Tenants and
regular meet and greet events advertised on
social media. This has led to an increase in the
number of applicants for Tenanted vacancies
and we have created a new position in the team
to focus on providing induction support and
in-pub training for new Tenants.
We are also conducting a full review of
the agreements we offer Tenants. While the
turnover agreement is working well in some
pubs, we feel it underperforms in others and
our ambition is to better understand this so we
can make any changes necessary to optimise
the agreement before we roll it out further.
25
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Our Strategy
The Windjammer, Royal Docks
1. To deliver a distinctive
customer experience
across the whole
Fuller’s estate
Investing in:
– Broadening the appeal of our pubs and
hotels to new and existing customers
– Sourcing the right range of authentic
products to make our pubs distinctive
– Digital communications to provide a single
view of each customer to share relevant,
targeted marketing
– Monitoring and staying ahead of consumer
food trends
– Exceptional levels of customer service
– Creating memorable experiences
– Exceeding expectations and ensuring
people leave happier than they arrived.
Progress:
We have delivered strong like for like growth
during the year with like for like sales rising 2.3%.
Our like for like accommodation sales have risen
by 5.9%, which will stand us in good stead to
capitalise on the staycation opportunities
presented by the coronavirus pandemic.
During the year, and in light of the sale of the
Fuller’s Beer Business, we have successfully
implemented further premiumisation of, in
particular, our beer range.
To further elevate the food experience in
our pubs and hotels, we have teamed up with
Simon Rogan, the holder of five Michelin
26
Stars, who was named as Honorary President
of the Fuller’s Chefs’ Guild. This will raise the
ambitions of our chefs and inspire them to
new heights. This is combined with improved
use of the FnB food stock and reporting
package, which reduces waste and protects
our commitment to the highest possible
standards of allergen labelling.
Priorities:
– Build on our single customer view database
to further improve the success of our
targeted e-mail campaigns
– Map the role of technology in the customer
journey and maximise the use of digital tools
in building sales and improving the
customer’s digital journey
– Continue to deliver innovative and exciting
customer experiences – in a safe and secure
environment
– Build on changes to consumer behaviour,
such as staycations, due to the coronavirus
pandemic.
Influences:
– Customers need an experience that cannot
be replicated at home
– Need to adapt our operation to meet
changes in behaviour and expectations
following on from the coronavirus pandemic
and changes to work/home life balance
– Monitor and respond to changes in
consumer trends, particularly around
healthier lifestyles
– Ensure that our experiences are first class
to meet a flight to fewer higher quality
experiences that could be the result of
decreased incomes as the country comes
out of lockdown.
2. To grow by carefully
targeted acquisitions and
developments that enhance
our premium business
Investing in:
– Building our presence in the South
of England
– High footfall transport hubs and sites close
to good transport links
– Acquisitions in areas where our estate is
under represented
– Sites with potential to develop bedrooms
– Acquisitions that enhance our
existing business
– Transformational investments that attract
new customers.
Progress:
During the year we made a major acquisition
with the purchase of Cotswold Inns & Hotels.
This stunning collection of seven wonderful
country hotels, as well as two vibrant bars
in Birmingham, added 201 bedrooms to
our estate and is a perfect complement to
our existing business. It fills a geographical
gap in our portfolio and the expertise of the
Cotswold team in dealing with large weddings
and corporate functions will be transferable
throughout our Managed estate.
We also acquired The Trinity, a well-known
pub in the Borough area of London, and
opened The Windjammer – a new build
site overlooking the Thames Barrier in
Royal Docks.
We have completed a number of
transformational refurbishments including
opening The Bear of Burton – a wonderful pub
with 10 bedrooms just outside Christchurch
in Dorset.
Priorities:
– To seek further acquisitions that enhance
our estate and increase our customer base
– To continue with our programme of
investment in our estate to ensure we
always have the best pub in the area.
Influences:
– Availability of high quality sites
and opportunities.
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Our commitment to training and developing
our team members is reflected in the
completion of over 3,300 formal training days
during the year and that 64 of the 71 General
Managers appointed during the year were
internal promotions.
Priorities:
– Continue to find the best people through
a strong employer brand – work is well
underway in this area
– Ensure we are fit for the future with the
right organisational structure, capability
and roles
– Ensure our people experience engages
our team members, fulfils their needs and
ambitions and encourages the best people
to stay at Fuller’s.
Influences:
– Impact of potential changes to the size
and composition of our workforce in
the light of coronavirus and changing
consumer behaviour
– Impact of Brexit on the labour market pool
within the hospitality industry
– Availability of labour with appropriate skills.
– Implement new processes and procedures
to ensure the safety of our customers
and team members in light of the
coronavirus outbreak.
Influences:
– Changes in consumer behaviour due to
the impact of the coronavirus pandemic
– Increased customer use of digital technology
– Importance of safeguarding personal data.
4. Supporting these
objectives by recruiting,
developing and investing
in the best people
Investing in:
– Training and development programmes
for all areas of the business
– Genuine career paths from top to bottom
– A robust succession plan
– Recruiting, recognising and rewarding
the best people.
Progress:
We were delighted during the year to pick
up two major awards for our apprenticeship
programme – a silver in the Training Journal
Awards and the top prize in the British Institute
of Innkeeping National Innovation in Training
Awards. This programme goes from strength
to strength and we hope to utilise our full
Apprenticeship Levy funding by 2021.
27
3. To build a leaner cost
base by investing and
improving processes
Investing in:
– Core IT systems
– New processes
– New technologies
– Digital communications to improve
the customer journey
– New operational standards – particularly
in the light of the coronavirus pandemic.
Progress:
During the early part of the year we completed
the integration of the ERP system which has
allowed us to move on to the search for a more
suitable finance system for a focused pubs and
hotels business.
We have further rolled out the FnB food stock
and reporting package and its links with Ten
Kites, our online menu system, which allows
diners with a food allergy or intolerance to
filter the menu, only showing the dishes that
do not contain the relevant ingredient.
We have also replaced some old legacy IT
systems with a cloud-based solution and moved
all support centre and General Managers to
Office 365.
Finally, we have worked with CBRE to
further develop our single view customer
database – improving our ability to create
bespoke communications by pub type and by
audience, generating a positive response and
contributing £1.9 million of revenue.
Priorities:
– Implement and roll out a new finance
system that is suitable for a focused pubs
and hotels business
– Build on our single view customer database
by identifying key interaction points in the
customer journey and digital solutions to
improve the customer journey
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Financial Review
FINANCIAL HIGHLIGHTS
Increase in revenue
and other income1
+3%
Adjusted profit before tax2
£19.7m
Returns to shareholders
during the year3
£1.33
1 From continuing operations.
2 Operating profit from continuing operations
before separately disclosed items and pre
IFRS 16.
3 Per ‘A’ ordinary 40p share, incorporating
interim dividend and ‘D’ share scheme.
28
Adam Councell, Finance Director
“Pre IFRS 16 profit
before tax has increased
by £148.4 million to
£174.5 million (2019:
£26.1 million)
predominantly as a result
of the sale of the Fuller’s
Beer Business. The
sale enabled Fuller’s to
return £69 million
to shareholders.”
Financial Position and Performance
The adoption of IFRS 16 Leases has been
reflected in the 52 weeks ended 28 March
2020 and, as permitted by the standard,
transitional provisions have been adopted which
allow for no restatement of prior period figures.
Therefore, for better comparison, the figures
discussed below are on a pre IFRS 16 basis and
are for the continuing operations of the Group.
Due to the one-off nature of separately
disclosed items the Directors believe that
an adjusted measure of profit before tax and
earnings per share provides shareholders with
a more appropriate representation of the
underlying earnings derived from the Group.
We have grown revenue and other income by
3% on the prior year despite the significant
impact of coronavirus on the final month of
trading. Growth was helped by the contribution
from our acquisition of Cotswold Inns & Hotels
on 31 October 2019. On a like for like basis,
our Managed Pubs and Hotels Division
outperformed the industry with sales rising
by 2.3% to 7 March 2020 (2019: +4.9%).
Our adjusted profits decreased by 40% to
£19.7 million (2019: £33.1 million), reflecting the
severe impact of the full closure of the business
in the final month of the year. We estimate that
the negative impact in the final month of the
year was in excess of £10 million. In our Managed
Pubs and Hotels this consisted of the direct
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Revenue and other income
Managed Pubs and Hotels
Tenanted Inns
Unallocated
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
299.6
299.6
29.7
3.7
29.7
3.7
52 weeks
ended
30 March
2019
£m
293.8
30.9
52 weeks
YoY Var
2%
(4)%
–
100%
Group revenue and other income from
continuing operations
333.0
333.0
324.7
3%
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
29.5
11.8
28.7
11.7
(15.4)
(15.4)
25.9
(7.9)
18.0
25.0
(5.3)
19.7
42.7
13.8
(16.5)
40.0
(6.9)
33.1
52 weeks
YoY Var
(33)%
(15)%
(7)%
(38)%
(23)%
(40)%
Adjusted profit by segment
Managed Pubs and Hotels
Tenanted Inns
Unallocated
Operating profit from continuing operations
Finance costs
Adjusted profit from continuing operations
TOTAL TAX COLLECTED
(£m)
150
120
90
60
30
0
2.1
9.1
12.0
9.0
22.1
53.3
40.6
F Y1 9
3.1
7.7
14.0
10.1
18.5
31.9
2.6
F Y 20
Excise duty
VAT
Corporation tax
Other taxes & Apprenticeship Levy
Business rates
PAYE and employees’ NI
Employers’ NI
impact of the closure of the business and the
severely impaired trading in the period leading
up to the point of closure. In addition, our
Managed Pubs and Hotels business suffered
from the negative impact of the write down of
stock values and certain capitalised development
projects. Our Tenanted pubs suffered from
reduced rent revenue and reduced orders from
tenants in the final month, combined with an
increase in the levels of provisions required
against outstanding debts. As reported
previously, the sale of the Fuller’s Beer Business
and the subsequent complex separation has
resulted in significant restructuring costs.
With the TSA completing in April 2020, we are
now in a position to transition to a simplified
structure and reduce central overheads.
Pre IFRS 16 profit before tax has increased
by £148.4 million to £174.5 million (2019:
£26.1 million) predominately as a result of
the sale of the Fuller’s Beer Business.
The sale enabled Fuller’s to return £69 million
to shareholders via ‘D’ shares issuance and
repurchase, make a voluntary contribution
to the defined benefit pension scheme of
£24 million – helping to reduce the defined
benefit pension scheme deficit to £4.7 million
at year end – and acquire Cotswold Inns &
Hotels for an enterprise value of £40 million.
During the year we also sold two of our
freehold pubs for £11.4 million, resulting
in a profit of £9.6 million as disclosed in
separately disclosed items. These events
meant we were in a strong financial position
with substantial liquidity headroom when the
coronavirus pandemic started to have a direct
impact on the business. As the pandemic
continues, we are continually monitoring the
situation and post year end we have issued
£100 million of commercial paper through the
Bank of England Covid Corporate Financing
Facility and taken advantage of the government
support offered through the Coronavirus Job
Retention Scheme and the business rates
holiday for the hospitality sector.
Sale of the Fuller’s Beer Business
As previously reported, the sale of our Beer
Business to Asahi Europe Ltd completed one
month into this financial year on 27 April 2019
for an enterprise value of £250 million.
The business sold comprised the entirety
of Fuller’s beer, cider and soft drinks brewing
and production, wine wholesaling, and the
distribution thereof, and also included the
Griffin Brewery, Cornish Orchards, Dark Star
Brewing and Nectar Imports. Accordingly,
those divisions are reported as discontinued
operations in the financial statements with
the remaining Managed Pubs and Hotels
and Tenanted Inns businesses being shown
as continuing operations.
The amounts shown as discontinued
operations in the financial statements for
the 52 weeks ended 28 March 2020 are an
operating profit before tax of £0.6 million
29
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Financial Review
Continued
Cash flow
EBITDA
Interest
Tax
Working capital and pension
Cash available for discretionary spend
Capital expenditure
Acquisitions including debt repaid
Acquisition costs and other separately disclosed items
Property disposals
Dividends and share transactions
Sale of the Fuller’s Beer Business and discontinued operations cash flow
Voluntary pension contribution
Cash flow
Non-cash movement
Net debt movement
Sources of finance
Bank debt
Other debt
Cash
Total net debt
Pre IFRS 16
2020
£m
44.0
(4.7)
(10.1)
(3.7)
25.5
(47.6)
(41.2)
(5.0)
11.4
(78.8)
226.0
(24.0)
66.3
–
66.3
2019
£m
228.5
27.7
(11.0)
245.2
Pre IFRS 16
2020
£m
171.7
27.5
(20.3)
178.9
During the 52 weeks ended 28 March
2020, the total tax contribution of the
Group to the UK Exchequer was £87.9 million
(2019: £148.2 million) in taxes borne and taxes
collected on behalf of colleagues, customers
and suppliers.
Pension
The defined benefit pension scheme deficit
has decreased by £31.7 million to £4.7 million
(2019: £36.4 million) primarily due to the
voluntary £24 million contribution made
in the financial year. The present value of
pension obligations decreased by £19.8 million
to £128.5 million and the fair value of scheme
assets increased by £11.9 million from
£111.9 million to £123.8 million primarily
as a result of the voluntary contribution.
Standard deficit recovery payments of
£2.4 million were also made during the
financial year.
Shareholders’ Return
Adjusted earnings per share for continuing
operations were 51% lower than last year
at 23.95p (2019: 48.40p). In light of the
temporary closure of the estate the Board is
not proposing the payment of a final dividend.
However, during the year the Company
returned £69 million to shareholders, which
is the equivalent of £1.25 per 40p ‘A’ ordinary
share, and paid an interim dividend of 7.80p
per 40p ‘A’ and ‘C’ ordinary share and 0.780p
per 4p ‘B’ ordinary share. The total returns
to shareholders in the year equates to £1.33
per ‘A’ ordinary share.
During the period 48,700 ‘A’ ordinary 40p
shares were purchased into treasury for a total
of £0.4 million (2019: 313,983 ‘A’ ordinary
40p shares for £3.1 million). In addition,
90,641 ‘B’ ordinary 4p shares were purchased
for £0.1 million by or on behalf of the Trustees
of the Long-Term Incentive Plan to cover
future issuance (2019: 121,031 ‘B’ ordinary
4p shares for £0.1 million). The average price
paid was 962.6p per ‘A’ ordinary 40p share.
The middle-market quotation of the
Company’s ordinary shares at the end of
the financial year was 650p. The highest
price during the year was 1,102p, while the
lowest was 610p. The Company’s market
capitalisation at 28 March 2020 was
£358.8 million (2019: £645.8 million).
(2019: £8.5 million). During the period,
a gain on disposal of £162.4 million (net of
transaction costs of £9.4 million) has also
been recognised in discontinued operations.
In addition, £7.0 million of disposal costs were
recognised in the year ended 30 March 2019
within separately disclosed items.
Finance Costs
Total net finance costs (before separately
disclosed items) have decreased by £1.6 million
to £5.3 million as a direct result of sale of the
Fuller’s Beer Business. Sale proceeds were
partially offset by the subsequent return to
shareholders, voluntary contribution to the
pension scheme and purchase of Cotswold Inns
& Hotels, but resulted in average cash balances
£4.3 million higher and average cash borrowings
£7.2 million lower. The average cost of gross
borrowing decreased to 2.3% (2019: 2.9%).
The net interest expense on our defined
benefit pension scheme is shown within
separately disclosed items as the charge is
driven by market conditions at an arbitrary
point in time and is not associated with our
underlying trading.
Separately Disclosed Items
Separately disclosed items of £8.2 million
comprises, principally, £12.3 million of
impairments, £2.1 million of reorganisation
costs as a direct result of the sale of the Fuller’s
Beer Business, £1.4 million of acquisition costs,
£1.5 million of costs incurred finishing the
implementation of our ERP system and a
net finance charge on our pension deficit of
£0.6 million. The impairment charge includes
£8.6 million reduction of carrying values
against a number of properties and the write
down of previously acquired goodwill on the
acquisition of The Stable Pizza & Cider Limited
of £3.7 million. Acquisition costs primarily
related to the purchase of Cotswold Inns
& Hotels, The Trinity at Borough and the
acquisition of our new head offices at Pier
House. The total separately disclosed costs
were offset by £9.6 million of profits on the
disposal of two pubs including The Castle in
North Acton which was sold for £10.3 million.
Tax
A full analysis of the tax charge for the year
is set out in note 7 to the financial statements.
The effective tax rate is 33.0% (2019: 19.6%)
on adjusted profits from continuing operations,
following a £1.6 million deferred tax charge
relating to the change to the future corporation
tax rate. The overall effective tax rate of 50.4%
is due to the separately disclosed items being
taxed at an effective tax rate of 8.5%.
30
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Cash Flow and Net Debt
The Group generated cash available
for discretionary spend of £25.5 million
(2019: £35.1 million) with the reduction
compared to prior year due to lower
EBITDA mainly resulting from the disruption
to trading in March. In line with our long-term
investment strategy, we invested £47.6 million
in capital expenditure (2019: £32.7 million).
The investment of £47.6 million in our existing
estate included 14 major refurbishments such
as The Bear of Burton and the creation of a
new build site, The Windjammer, as well as
acquiring new offices for our support team at
Pier House. We also invested £37.5 million on
the acquisition of Cotswold Inns & Hotels and
£3.7 million on the acquisition of The Trinity at
Borough. Asset disposals from the sale of two
pubs raised £11.4 million and generated a
separately disclosed profit of £9.6 million.
Overall net debt at 28 March 2020 has
decreased by £66.3 million to £178.9 million
pre IFRS 16, largely due to the sale of the
Fuller’s Beer Business. Post IFRS 16, net debt
has increased to £291.8 million due to the
inclusion of £112.9 million of lease liabilities.
Sources of Finance
The Group has £225 million of bank facilities
and £26 million of long-term debentures,
£191.7 million of bank facilities are available
until August 2021 and £33.3 million of which
is available until August 2020. As a result of
coronavirus, the Directors have assessed that
there was a technical breach of the covenants at
the Balance Sheet date and hence classified all
debt as current. Subsequent to year end the
covenants were formally revised to a liquidity test
and £145.6 million was reclassified to non-current
liabilities. Our undrawn facilities at 28 March
2020 were £53.0 million, with a further
£20.3 million of cash held on the Balance Sheet.
£40 million of our borrowings at 28 March 2020
were hedged using swaps at a blended interest
rate of 2.42% (excluding bank margin).
The interest rate swap agreements in place will
allow us to continue to borrow a portion of our
bank debt at a fixed interest rate until 2022.
The Group’s financing is a mix of bank
debt, debentures, cumulative preference
shares, overdraft, cash and short-term
deposits as disclosed in notes 24, 26 and 28.
Other financial assets and liabilities such as
trade receivables and payables arise through
the Group’s operating activities. The Group
does not trade in financial instruments.
Financial Risks and Treasury Policies
The Group operates a centralised treasury
function, which controls cash management
and borrowings and the Group’s financial risks.
The objectives of the function are to manage
the Group’s financial risk, to secure cost
effective funding for the Group’s operations,
and to minimise the adverse effects of
fluctuations in the financial markets on the
value of the Group’s financial assets and
liabilities, on reported profitability and on the
cash flows of the Group. The Group Treasury
team monitors the overall level of financial
gearing weekly, with our short and medium-
term forecasts showing underlying levels of
gearing which remain within our targets.
Transactions of a speculative nature are
prohibited. The Group’s treasury activities
are governed by policies approved and
monitored by the Board.
Going Concern
The Group’s business activities, together
with the factors likely to affect its future
development, performance and position are
set out in the Strategic Report on pages 6 to
41. The financial position of the Company, its
cash flows, net debt and borrowing facilities
and the maturity of those facilities are set out
above and on pages 142 to 149.
In addition, there are further details in the
financial statements on the Group’s financial
risk management, objectives and policies in
note 28. The Directors have outlined the
assessment approach for going concern in the
accounting policy disclosure in note 1 of the
consolidated financial statements.
There is a material uncertainty that may cast
significant doubt about the Group’s ability to
continue as a going concern as discussed in
note 1, however the Board has a reasonable
expectation that the Company has adequate
resources to continue in operational existence
for the foreseeable future. For these reasons,
they continue to adopt the going concern basis
in preparing the Annual Report and Accounts.
Viability Statement
The Corporate Governance Code requires
that the Directors have considered the viability
of the Group over an appropriate period of
time selected by them. In considering the
appropriate period, the Directors have chosen
to assess for three years through to March
2023, taking into consideration the Group’s
current position, the potential impact of
the principal risks documented on pages 32
to 34 in the Strategic Report as well as the
uncertainty regarding the duration, extent and
ultimate impact of the coronavirus pandemic.
The Directors recognise that the impact on
customer behaviour in the short-term as well as
in the long-term, in a post coronavirus world is far
from certain. The extend and duration of social
distancing will also have a significant bearing on
the capacity at which the business can operate at.
Multiple scenarios were modelled through the
process and were reviewed by the Board.
In making the viability statement, the Board
carried out a robust assessment of the principal
risks and uncertainties facing the Group, which
could impact the business model focusing
specifically on the impact of coronavirus and the
future performance, solvency and liquidity of the
Group. The scenario modelling and sensitivity
analysis were applied to forecasted cash flows.
Should the impacts of the pandemic on
trading conditions be more prolonged or
severe than currently forecast by the Directors,
this viability statement would be dependent
on the Group’s ability to access additional
liquidity. Subsequent to year end, the Group
has increased its available facilities further
by accessing the Covid Corporate Financing
Facility (“CCFF”) programme which has issued
£100 million of commercial paper with access
to a further £50 million. The CCFF provides
short-term unsecured debt and is repayable in
May 2021. As well as the CCFF, the Group has
facilities of £225 million; £33 million is due to
expire in August 2020 with the remainder in
August 2021.
Under a downside scenario that the pubs all
remain closed until August 2020, the furlough
scheme closes at the end of October 2020, and
the Group operates at reduced capacity of 40%
of the original budget for the remainder of
2020/21 then the long-term viability would
be dependent on whether the Group could
refinance when the CCFF loan was repayable
in May 2021.
Management are in continuous dialogue with
the lenders and are comfortable that they will be
able to refinance due to the Group’s high-quality
asset backed Balance Sheet; however, as this
process has not been formalised it gives rise
to a material uncertainty over the going
concern assumption.
As part of the ongoing discussions with the
lenders, post year end the covenants have been
revised for March, June and September 2020.
Management are in discussion with the lenders
to revise the covenants for December 2020
and March 2021 and have informally got their
confirmation that this will be agreed. As this has
not been formalised and under most scenarios
the Group would fail the covenant tests if
not revised, this also gives rise to a material
uncertainty over the going concern assumption.
Based upon this assessment, the Directors
confirm that they have reasonable expectation
that the Group will be able to continue in
operation and meet its liabilities as they fall due
over the assessment period. However, because
of the reliance on refinancing which has not
been formalised and the fact that under most
scenarios the Group would be unable to comply
with the covenants during the assessment period
unless revised beyond September 2020, these
materiality uncertainties may cast significant
doubt about the Group’s ability to continue as
a going concern.
Adam Councell
Finance Director
30 July 2020
31
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Principal Risks and Uncertainties
Principal Risks and Uncertainties
The following sets out the principal risks
the business faces at present that may
impact future performance. This analysis is
not intended to be a comprehensive list of
all risks actively managed by the business.
The key financial risks are detailed in note 28
to the financial statements. The principal risks
have been categorised as emerging or strategic
risks in order to highlight areas where there
is a greater degree of fluidity due to
changing circumstances.
Risk Management
Risk Management
Managing risks effectively is key to
ensuring that we achieve our strategic
objectives in the long term and continue
to deliver the high standard our customers,
people and shareholders expect. Whilst we
have a well-established risk management
framework, we continually strive to improve
our approach, for example by:
– conducting in-depth reviews of specific
risks to ensure that our controls operate
effectively and mitigate our risks to an
acceptable level
– enhancing our regular risk reporting to
the Audit Committee to assist its
oversight role
– reviewing the potential impact of emerging
risks on the business and taking
appropriate actions to mitigate those risks
– reviewing ownership and accountability of
risks and controls across the new
Executive and management teams.
Risk Management Process
Risks are identified, considered and
observed at all levels of the business
including operational, administrative
and strategic risks. These risks are then
assessed and appropriate mitigation and
management plans are implemented to
reduce the potential likelihood and impact.
The suitability of these actions is reviewed
through robust reporting and monitoring
which creates a feedback loop enabling a
continuous improvement process to be in
place regarding risk management.
The risk management process is managed by
the Executive Team and is overseen by the
Audit Committee which is further supported
by the external audit process. Both the
Executive Team and the Audit Committee
report to the Main Board.
Emerging Risks
Description
Risk mitigation
Coronavirus
The coronavirus outbreak has had a seismic short-term
impact on our industry. This has most obviously been
through the closure of all our pubs and hotels to help
limit the spread of the virus. The impact of any
government enforced social distancing restrictions on
our ability to trade when we reopen, and any changes in
the behaviour in our customers following the outbreak,
are both considered risks in the medium and longer
term. The health and safety of our team members is
critical so implementing appropriate measures for
them to carry out their roles safely is of paramount
importance to Fuller’s.
National Living Wage and Labour Pool
Future labour cost increases may impact the profitability
of the business. The principal drivers of such increases
are projections for future increases in the National Living
Wage coupled with any potential for a tightening
of labour supply.
During the period of business closure, we have taken all possible action to reduce our
monthly cost base, such as making alternative arrangements with our suppliers and
landlords. In addition, we have taken advantage of the government support for business
through the job retention scheme, business rates holiday for the hospitality sector and
increasing our liquidity levels through the Bank of England Covid Corporate Financing
Facility. Furthermore, we have focused on reopening our business with an appropriate
offer to maximise our ability to trade despite continued restrictions. Fuller’s ability to
withstand such periods of uncertainty has been built on a sustained strategy of aiming to
develop a largely freehold estate so that the strength of the Company’s Balance Sheet
underpins the business.
This risk is kept under review and we aim to mitigate the risk of such increases through
a combination of improved operational efficiency and passing the cost on through the
prices we charge. Without these opportunities, the business would suffer a reduction
in profitability across both pubs and hotels.
32
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Emerging Risks continued
Description
Risk mitigation
Brexit
There continues to be a potential negative impact on the
business through Brexit following the transitional period.
The primary risk is a reduction of labour supply and the
impact on our ability to find and recruit appropriate levels
of staff. Secondary risks, though less likely, relate to
supply chain challenges and the potential for increase
in raw material costs.
Strategic Risks
Description
Strategy Development
There is a risk that we are unable to design or
implement appropriate business plans and strategies,
to make decisions, to allocate resources or to adapt
to changes in the business environment. This includes
the risks associated with coronavirus, acquisition and
disposal decisions and their implementation.
Consumer Demand Shifts
The business’s success is attributable to its ability
to anticipate and react to consumer demand.
The Board continues to consider the risk posed by Brexit. Due to the coronavirus
outbreak this risk has materially reduced in the short term as we are unlikely to need
to recruit as many new team members whilst our business is subject to social distancing
restrictions. Our philosophy of providing locally sourced produce on our menus
reduces the potential of raw material cost increases.
Risk mitigation
Our vision for the future is very clear: “to create exceptional experiences full of style
and spirit – characterful pubs and hotels where everyone feels they belong and where
people leave happier than when they arrived”.
We have already restructured our Executive Team to ensure we have the right skills and
experience to deliver this vision and retain a strong value set which guides our actions.
As a primarily family owned business, we have the advantage of pursuing long-term
growth as opposed to short-term gains.
Management monitor and research consumer trends and run trials of new technologies.
We gather consumer feedback through Net Promoter Score surveys, customer
complaints and online and social media reviews.
We analyse retail pricing and market share data to ensure we are competitive but
still premium.
Health and Safety
The health and safety of our employees and customers
is a key priority for us.
Operating a large number of sites increases the
challenge of ensuring the highest health and safety
standards are adhered to. In the short term the
increased risk of coronavirus demands that we take
all appropriate steps in reopening to protect our
customers and provide all employees with the right
personal protective equipment to ensure their safety.
We have a comprehensive training programme in place for our employees covering all
aspects of health and safety.
All sites complete a risk assessment and are required to undertake detailed weekly and
monthly compliance checks which are then subject to review by our in-house health
and safety team. New risk assessments and appropriate adjustments to sites to comply
with government guidelines and restrictions in response to coronavirus have been
carried out for every location that has or will be reopened.
Finally, we will continue to utilise the services of expert third party health and safety
auditors to undertake annual audits on all our sites and perform detailed investigations
in instances where an incident does occur.
Recruitment and Retention of Employees
The recruitment and retention of high calibre
employees is fundamental to our ability to deliver
a distinctive experience for our customers, and to
support our growth agenda. In particular, the role
of the Executive Team in the management of the
business is key and any unplanned vacancies would
carry an increased level of risk.
We have succession plans in place for key senior management roles and have drawn
upon these when selecting an Executive Team to deliver the Board’s strategy for the
new pubs and hotels focused business.
Given the competition for high quality candidates across our sites and especially in
London, we have a progressive recruitment strategy to ensure that our offer to employees
is attractive. We provide support for staff from the EU and have increased the number of
chef apprentice positions for UK candidates. By investing in our employees and offering
them real career paths, we are able to differentiate ourselves from the competition and
ensure that we remain the employer of choice in a challenging market.
33
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Strategic Report
Principal Risks and Uncertainties
Continued
Strategic Risks continued
Description
Risk mitigation
Information Technology
The Group is increasingly reliant on its information
systems to operate, and trading would be affected
by any significant or prolonged failures.
Our IT function has a range of facilities and controls in place to ensure that in the
event of an issue normal operation would be restored quickly. These include a formal IT
Recovery Plan, online replication of systems and data to a third party recovery facility,
and external support for hardware and software.
Cost Inflation
Market uncertainty and increasing demand leads to
cost pressures in several areas, such as food and drink
production, utilities and staff costs. This risk has increased
following the sale of the The Fuller’s Beer Company and
the inception of a new supply agreement to stock our
bars, and with the ongoing uncertainty around Brexit.
Supply Chain
There is a risk that poor performance by our suppliers
may damage customer satisfaction and could impact
the profitability of the Company. This risk has increased
following the sale of The Fuller’s Beer Company and the
inception of a new supply agreement.
Over the last year we have worked hard to separate our IT systems from The Fuller’s
Beer Company following the sale process and in readiness for relocation to our new
support centre.
Our preference is to have long-term agreements in place with our suppliers linking any
price rises to CPI. We have a Long-Term Supply Agreement (“LTSA”) in place with
Asahi Europe Ltd for the supply of beer, cider and other beverages which limits
increases to CPI.
We regularly monitor prices using relevant commodity databases and the ONS
inflation indexes and all contracts are competitively tendered.
We have an LTSA in place with Asahi Europe Ltd for the supply of beer, cider and other
beverages. This ensures that products will meet certain brand performance metrics, and
the supply service is subject to Key Performance Indicators (“KPIs”).
All other key suppliers are subject to service and quality KPIs which are monitored
on a monthly basis.
Our preference is for long-term agreements and strong relationships and we work with
smaller suppliers to ensure that they grow healthy sustainable businesses outside of
their agreement with Fuller’s.
Long-Term Supply Agreement
The LTSA entered into with Asahi Europe Ltd from
30 April 2019 exposes the Company to reputational
risk, as a third party is operating under the Fuller’s
name and branding. It also increases the risk of a break
in continuity of distribution now that this is no longer
directly under the control of the Company.
The operation of the LTSA includes regular dialogue between the Company and Asahi
to discuss key initiatives and maintain mutual brand guidelines. Asahi and Fuller’s have
similar strong core values, which reduces reputational risk.
The terms of the LTSA ensure that distribution services are subject to strict KPIs and
Fuller’s retains direct relationships with all key end suppliers.
34
Annual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Section 172 Statement
The Companies (Miscellaneous
Reporting) Regulations 2018
require Directors to explain how
they considered the interests of key
stakeholders and the broader matters
set out in Section 172(1)(A) to (F) of
the Companies Act 2006 (“Section
172”) when performing their duty to
promote the success of the Company
under Section 172. This includes
considering the interest of other
stakeholders, which will have an
impact on the long-term success
of the Company.
This Section 172 statement, which is reported
for the first time, explains how Directors have
engaged with employees, suppliers, customers
and others; and have had regard to employee
interests, the need to foster the Company’s
business relationships with suppliers, customers
and others, and the effect of that regard on the
principal decisions taken by the Company
during the financial year.
The Section 172 statement focuses on matters
of strategic importance to Fuller’s, and the
level of information disclosed is consistent with
the size and the complexity of the business.
As detailed in the Corporate Governance
Report on page 48, the Board of Directors
has a clear set of matters reserved for its
consideration as well as matters delegated to
Committees with detailed terms of reference.
When making decisions, each Director ensures
that they act in the way they consider, in good
faith, would most likely promote the Company’s
success for the benefit of its members as a whole
and in doing so have regard to:
(a) the likely consequences of any decision
in the long term. For Fuller’s and its
Board of Directors, this has always been
an integral part of the culture of a very
long-established business. The long term
for Fuller’s means much more than normal
business modelling entails. It is at the heart
of all decisions taken by the Board
(b) the interest of the Company’s employees.
Details of the normal engagement process
with employees can be found in the
Directors’ Report on pages 44 and 45;
in addition, more information relating to
specific engagement in relation to the
coronavirus can be found on page 6
(c) the need to foster the Company’s business
relationship with suppliers, customers and
others. The Board believes that delivering
the strategy successfully requires strong
mutually beneficial relationships with
suppliers and customers and indeed with
industry bodies that further the interests
of the sector as a whole. More details of
engagement can be found in the Corporate
Social Responsibility report on page 36
(d) the impact of the Company’s operations
on the community and the environment.
The Board has considered and approved
a revised Corporate Social Responsibility
policy and framework which recognises this
impact. Details can be found on page 36
(e) the desirability of the Company
maintaining a reputation for high standards
of business conduct. Fuller’s is well regarded
as a business because it has a consistent
record of doing the right thing – one of the
most enduring key values of the business.
This forms part of the Fuller’s culture
(f) the need to act fairly as between
members of the Company. The unique
capital structure of Fuller’s as a partly
listed company has always required the
Directors to balance the interests of a
diverse shareholder base. The focus on
the long term is well understood by the
Company’s shareholders themselves.
Principal Decisions
As detailed in the Chairman’s and Chief
Executive’s Statements on pages 2 to 25,
the financial year ended 28 March 2020
has been a transformational year for the
business starting with the sale of the Fuller’s
Beer Business, a critical decision taken in the
previous financial year. The year ended having
to face the greatest challenge for the business:
the temporary closure of the entire business
due to the coronavirus pandemic.
In the period, the Board of Directors
considered the use of the proceeds of the
disposal of the Beer Business. The Board had
already indicated in the Circular relating to the
disposal that it intended to use the proceeds to
return some value to shareholders (including
staff participating in the Share Incentive Plan),
making an ad hoc contribution to the Defined
Benefit Pension Scheme for the benefit of its
members, and reinvesting the larger part of
the proceeds into the business for the benefit
of all its stakeholders.
The Board also elected to compensate staff
who held options to purchase shares as at the
date of the return of capital by offering a cash
amount equivalent to the value of the return of
capital on exercise of options (including in the
Savings Related Share Option Scheme).
These decisions have required regard to the
interest of investors, whether institutional or
from the family, employees, pensioners and
the Pension Regulator.
The process of completing the disposal of
the Beer Business involved separating out
that business into The Fuller’s Beer Company
which was subsequently acquired by Asahi
Europe Ltd. The Board had specific regard
to the interests of employees, customers and
suppliers of the Beer Business in that process
and this was implemented ensuring good
communications throughout.
The disposal of the Griffin Brewery brought
about the need to consider where to establish
the support office for the focused pubs and
hotels business. The Brewery had been the
birthplace of Fuller’s and it was important to
choose wisely in determining where its new
home would be. The decision was taken to
remain in Chiswick. The acquisition of the
freehold of Pier House provides the business
with its own place to establish symbolic new
roots for the long term. This, in the view of
the Board, is in the best interest of all of
Fuller’s stakeholders.
The response to the coronavirus crisis is set
out fully on page 6. The Board instituted a
series of weekly Board video calls to receive
regular reports from the Executive Committee
and consider critical decisions required in that
period. The decisions taken throughout the
crisis have shown the regard the Board has for
all stakeholders: from starting to close sites
ahead of the Government’s instructions to do
so based on health and safety concerns and
reduced sales level, to committing to pay
wages for two weeks pending decisions from
Government, to topping up the Coronavirus
Job Retention Scheme (“CJRS”) so that
staff received 80% of their actual salary, to
suspending commercial rent for our Tenants,
to liaising closely with suppliers throughout the
closure and getting involved through industry
bodies to ensure the best possible outcome
for the business and the sector.
35
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Corporate Social Responsibility
F U L L E R ’ S H A S H A D C O R P O R AT E
S O C I A L R E S P O N S I B I L I T Y AT I T S
H E A R T F O R 1 7 5 Y E A R S , B U T
T H I S Y E A R W E I M P L E M E N T E D
A N E W C S R S T R AT E G Y –
L I F E ’ S T O O G O O D T O W A S T E .
At its core are three distinct areas that we are committed to focusing on:
Our environment
Our communities
Our people
At the other end of the process, we have trialled
a food waste collection service. The food waste
is sent for anaerobic digestion to produce green
energy and compost. We are already sending
zero waste to landfill with 64% being recycled
and the remainder being sent for conversion
to fuel. We are aiming to raise the recycling
figure to 80% by 2022. We will look to
regularly update our stakeholders on progress
in this area.
Our suppliers play a key role in reducing our
environmental footprint. The majority of our
suppliers are UK based. Many of these supplier
relationships are long established – for instance,
we have worked with Owton’s, our Hampshire-
based butcher, since 2006.
By embarking on this initiative, we are
prioritising the protection of those three areas.
We will look after the environment, doing our
part in the fight against climate change; we will
protect our people – which will help to attract
and retain the right people for our business
– and we will support our communities, working
in partnership with those who provide vital care
to, or are active in, our neighbourhoods.
The strategy is based on a simple cycle of
understanding the issues that impact on the
three areas, planning solutions for tackling
those issues, implementing the plans – and
then understanding how our actions have
impacted in a positive manner, thereby creating
a virtuous circle to ensure we continuously
improve. Good Corporate Social Responsibility
(“CSR”) is not a tick box exercise – actions
have to be evaluated as the agenda moves on
and we must move with it.
The Life’s too good to waste campaign will
also be at the heart of all our strategic business
decisions, as our stakeholders demand that
we don’t just act in a responsible manner, but
ensure it is at the centre of our thinking,
planning, vision and strategy.
The campaign was launched to the business in
January 2020 and started with a number of
easy to undertake initiatives to get us started.
We will look at the three areas in more detail,
the early actions we have taken and the plans
we have to develop further.
Our Environment is Too Good to Waste
Environmental issues have really come to
the fore over the last year with the protests by
Extinction Rebellion gaining extensive media
coverage and the rise of Greta Thunberg, who
is inspiring the next generation to prioritise the
natural world in everything they do.
At Fuller’s, we are very keen to ensure that we
play our role within this movement and one of
the best places to start is with food waste, as
this can be tackled on more than one front.
The investment we put into training our chefs
and kitchen teams focuses their thinking on
avoiding waste when creating dishes and
planning menus, benefiting the environment
and the bottom line.
36
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. These local food stories are both good for
the environment and appealing to customers.
Another great example is the chalk stream
trout that we serve on our menu. Caught in the
River Test, right next to our pub, The Mayfly,
the fish is smoked at Severn & Wye Smokery
before returning on the pub’s menu as one of
our most popular dishes. Like all our fish, this
is from a sustainable source.
Modern Slavery
All of our suppliers must adhere to the
highest practices, particularly around
modern slavery. This year, for the first
time, we held a modern slavery training
session for our hotel teams to help them
identify possible abuse. The session, which
was a real eye-opener, covered forced
labour – particularly around cleaning
contractors – and possible abuse of a sexual
nature. While incredibly disturbing and
emotional, our team members left with
some clear ideas on what to look for and
what to do if they suspected someone was
a victim of modern slavery.
One of the biggest areas where we can improve
on our environmental footprint is through the
materials, technology and energy systems we
use in our refurbishments. We have already
installed smart metering across our estate,
allowing us to monitor energy consumption
every half hour – and to take action accordingly
– but where we undertake refurbishments, we
have an opportunity to add in exciting new
features to further reduce energy usage.
The same is true at Pier House, our new support
centre, where building work was completed in
the last quarter of the financial year.
ROYAL SOCIETY FOR
BLIND CHILDREN
Fuller’s sponsors a large number of
smaller charities every year and one
of these is the Royal Society for Blind
Children (“RSBC”). The money we
donate helps provide support for visually
impaired children and their families in the
Hounslow area. The RSBC ensures that
the children and their families can lead
full and active lives and that the children
can become socially independent and
confident individuals.
>> For more information, visit
www.rsbc.org.uk
At Pier House, an intelligent heating system
matches output with demand – taking account
of the number of people in the building to
ensure it can maintain a standard temperature
of 21/22°C throughout. There are solar panels
for water heating and all lighting – both internal
and external – is either on light sensors or
movement sensors to avoid unnecessary
energy use. The toilets are fitted with low
flushing loos, waterless urinals, low energy hand
dryers and instant hot water to avoid heating
unnecessary tanks. In the kitchens, energy
efficient hot water boilers replace kettles while
there are taps for cool and carbonated water,
avoiding the need for plastic bottled water
coolers. The building also has four electrical
vehicle charge points in the car park.
£290k
donated to Special Olympics GB
144
trained Mental Health First Aiders
Greenhouse Gas (“GHG”) Emissions and Energy Consumption
The annual quantity of energy consumed in kWh from (i)
the combustion gas and (ii) the consumption of fuel for
the purposes of transport, together with the annual quantity
of energy consumed in kWh resulting from the purchase
of electricity
tCO2e1 emissions from the combustion of gas and fuel at our
facilities as well as fleet vehicle use (Scope 1 emissions)
tCO2e emissions from purchased electricity
(Scope 2 emissions)
Total GHG emissions (Scope 1 and Scope 2)
Group’s chosen intensity measurement:
52 weeks
ended
28 March
2020
52 weeks
ended
30 March
2019
83,555,406 101,587,325
8,436
11,122
8,902
17,338
13,207
24,329
tCO2e emissions per £100,000 of turnover
5.2
5.6
1
tCO2e are tonnes of carbon dioxide equivalent.
The following methodologies were used to calculate the above quantities:
– The kWh consumption figures relevant to gas and electricity were taken from invoices
received by the Group – the kWh figures were then converted to tCO2e figures using
the UK Government’s GHG Conversion Factors for Company Reporting 2020
– The consumption figures relevant to transport were calculated using invoices received
from the Group’s fuel supplier – the resulting tCO2e figures were then converted to
kWh using the UK Government’s GHG Conversion Factors for Company
Reporting 2020.
The Group does not have responsibility for any emission sources that are not included in
the consolidated financial statements and are outside the boundary of operational control.
Emissions associated with air conditioning and refrigerated leaks have been excluded as not
being material.
During the year, measures were in place to collect emissions data from our pub and hotel
sites. Where this data was incomplete at the year end, we have extrapolated total emissions
by using an average to extend data to a full year. The calculations allow for sites which
opened and closed during the year.
37
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Corporate Social Responsibility
Continued
Similar equipment is also in place in our newly
refurbished pubs where we are also installing
improved cellar cooling systems that use
heat recovery to heat hot water systems in our
kitchens. We have also undertaken further work
on our kitchen design and the use of Rational
ovens reduces energy consumption by 28% and
reduces grease by 95%. We continue to develop
this area and are in the process of writing new
technical specifications for our refurbishments
that will improve energy efficiency still further.
Our Communities are Too Good to Waste
Fuller’s has been supporting its local
communities for 175 years and, thanks to the
generosity of our customers, we are providing
more financial support than ever due to the
Pennies initiative.
Pennies, which was founded in 2010, is a charity
leading a micro-donation movement and runs
the “digital charity box” which offers customers
paying by chip and pin the chance of rounding up
their bill to the nearest pound. The money is
shared between two of our corporate charities
– Special Olympics GB and Shooting Star
Children’s Hospices.
£194k
raised for charity during the year through
‘Pennies’ in our pubs
Of the money raised, 100% goes to charity.
10% goes to Pennies, to help grow the micro-
donation movement and meet its charitable
aims, while Fuller’s chooses which charities
to support with the remaining 90%. Up until
1 July 2019, Shooting Star Children’s Hospices
received all of the Fuller’s discretionary
donation, decreasing to 50% since that date,
with the other 50% going to Special Olympics
GB. This has resulted in donations during the
financial year in excess of £100,000 for
Shooting Star Children’s Hospices and over
£74,000 for Special Olympics GB.
In addition, our main Corporate Charity,
which is Special Olympics GB, has received
over £100,000 through donations made on
the sale of children’s meals and our popular Ale
& Pie Tasting Board. Our teams have also got
behind Special Olympics GB with money
raised through walks, bike rides and football
tournaments and we are now the biggest
contributor to this amazing charity.
We have also supported two other charities
in a major way during the year. The first is
OnSide – where we are supporting a new
youth zone in Hammersmith. OnSide’s Youth
Zones are designed to give young people aged
8-19 (25 for those with a disability) somewhere
to go, something to do and someone to talk to
in their leisure time – occupying their bodies
and minds with fun activities, learning new
skills and socialising in a safe, positive way.
OnSide Youth Zones are there for young
38
SPECIAL OLYMPICS GB
Special Olympics GB (“SOGB”) is
the largest provider of year-round
sports coaching and athletic
competitions for children and adults
with intellectual disabilities (“IDs”).
There are an estimated 1.5 million
people with an ID in Great Britain,
many of whom experience the worst
forms of discrimination and bullying.
SOGB currently has more than 120
accredited clubs and hosts over 160
annual competitions across 28 sports.
These programmes are run by over
3,700 volunteers who support
thousands of athletes.
Fuller’s partnership supports the
delivery of these sports programmes,
the club accreditation infrastructure,
volunteer recruitment and athlete
registration. It also supports the
development of specialist programmes
such as Unified Sport, where children
both with and without IDs compete
together, and the Athlete Leadership
Programme, training athletes to grow
through sporting achievements and
become leaders in their communities.
SOGB transforms the lives of
people living with an ID. It provides
opportunities to increase confidence,
realise potential, develop physical
fitness, demonstrate courage and
experience new friendships – and,
above all, for both athletes and their
families to have some fun.
>> For more information, visit
www.specialolympicsgb.org.uk
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. MENTAL HEALTH FIRST AID
The mental and emotional well-being of
our team members is as important as their
physical safety and we have worked hard
over the year to improve the way we
respond to this issue. At the year end
we had 144 trained Mental Health First
Aiders and we have worked with the
Licensed Trade Charity to make sure that
any of our 5,000 team members, at any
level, can access the help and support
they need.
people in deprived areas, where the alternative
for many is spending their evenings on the
streets or isolated in their bedrooms, surfing
the internet. We have made a £25,000
donation to this project in the year and have
pledged to provide an additional £125,000
over the next three years to help with the
building, set-up and initial running costs.
Prostate Cancer UK is another charity that we
have supported during the year with a tie-up in
June 2019 that saw this worthy cause receive
£2 for every confirmed table booking made
online for Father’s Day. The activity generated
a donation to the charity of £10,000.
Outside of the specific activities mentioned
above, Fuller’s also donated over £130,000
to a number of charities including local
charities, alcohol related charities and by
matching employee fundraising activity
through our Give As You Earn scheme and
ad hoc payments.
In total, and including the Pennies payments,
Fuller’s and our customers have raised over
£350,000 for charities during the financial
year. But supporting our communities goes
beyond just raising money for charity.
We strive to serve our communities in other
ways too – in particular by ensuring that we
tailor our offer and our communication to make
life easier for those with disabilities or particular
dietary requirements. This includes ensuring an
excellent range of vegan and vegetarian dishes
and low and no-alcohol alternatives on the bar.
One of the biggest issues we face is food
intolerances and allergies – and we have
worked hard to ingrain allergen training in our
front-line employees from the minute they join
the team to protect our customers. As well as
onsite training, we have also invested in the Ten
Kites online menu system, which allows anyone
with a food intolerance to screen the menu
online before arriving at a venue. Rather than
showing people what they can’t eat, the system
shows them what they can eat, making it a
much more positive experience.
Along similar lines, we also signed up to
Good Food Talks during the year. This system
is aimed at those with a visual impairment and
avoids a fellow diner having to read out the
menu. Instead, the Good Food Talks app will read
the menu to them through their smartphone,
giving the diner back their independence. This is
the first step in improving our accessibility to
a wide range of customers and we look forward
to updating all our stakeholders further in the
coming years.
NAOMI HOUSE
A number of our Hampshire pubs have
raised money for local charity Naomi
House. Naomi House first opened in 1997
to offer care and support to children who
were not expected to live to adulthood and
to their families. Our pubs have played
football, volunteered at the house itself
and will be undertaking the Three Peaks
Challenge for this brilliant local charity.
>> For more information, visit
www.naomihouse.org.uk
39
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Corporate Social Responsibility
Continued
GENDER DIVERSITY
DIRECTORS
SENIOR
MANAGEMENT
OTHER EMPLOYEES
Female
Male
2
7
22%
78%
Female
Male
8
8
50%
50%
Female
Male
2,148
2,909
42%
58%
Our People are Too Good to Waste
Our people are our most precious resource
and we invest heavily in their well-being – both
through training and development for their
role and career within Fuller’s, but also with
regard to their mental and physical well-being
Issues around mental health have definitely
become more widespread and more talked
about in recent years – and it is an issue that
has been a major focus for Fuller’s in the
past year.
The investments we have made in training
for our people in recent years is showing
rewards with 90% of our new pub managers
appointed during the year having progressed
through the Fuller’s career path. We are also
widening our search for new recruits and have
been working with Only a Pavement Away,
a charity that matches jobs in hospitality
with ex-offenders, those in the homeless
community and forces veterans. We have
already recruited a small number of team
members through this network.
Over the last year, we have also continued
to develop our award-winning apprenticeship
programme and have started to work with our
supply chain to access their apprenticeship
levy too, allowing us to recruit even more
apprentices into our business.
Life’s Too Good to Waste
It is early days for our new CSR Strategy
– but we are excited by the start we have made
and the opportunity to develop it further in
the future.
During the year, our team members undertook
over 3,300 training days and we relaunched
our training offer under the banner Designed for
Life. Rather than just focusing on delivering the
skills to do the job, the new programme looks to
cover a much broader personal journey.
CSR is no longer something that sits to the side
of a business – it has to be at its heart. With the
launch of the Life’s too good to waste campaign,
we have created a path to ensure that happens
and we look forward to reporting on our progress
in future shareholder communications.
Starting with a revised and improved induction,
the initiative has three core headings – begin,
become, beyond. It has a stronger focus on
in-role leadership and the soft skills that our
team members will need both for work and
in life. It includes a huge range of bite-sized
learning on subjects including social media
marketing, presentation skills, business English
and mindfulness. We want to ensure that even
if our team members decide not to follow a
career in pubs or hotels, we still help them
be the best they can be.
By order of the Board
Simon Emeny
Chief Executive
30 July 2020
We have used Fuse – our online training and
communications platform – to share a variety
of contacts, training and articles signposting
sources of help and support for our 5,000
employees. In addition, we have held 12 Mental
Health First Aid courses during the year,
training 144 team members to be Mental
Health First Aiders.
We have also conducted our second Stop
the Clock exercise on the topic – whereby
discussion and training take place in the pub.
We also work very closely with the Licensed
Trade Charity to offer support and counselling
for any team member and we actively
encourage people to reach out and ask for
help, creating an environment that enables our
team members to be comfortable in doing so.
40
Strategic ReportAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Non-Financial Information Statement
We set out below the information required by Section 414CA and 414CB of the Companies Act 2006 to help stakeholders understand the
development, performance and position of the Group as well as the impact of its activity in relation to this non-financial information.
Reporting requirement
Policies followed
Environmental
matters
Employees
CSR Strategy – Our environment
CSR Strategy – Our people, Alcohol and Drugs Policy, Attendance and
Absence Policy, Bullying and Harassment Policy, Communications Policy,
Compassionate and Bereavement Policy, Data Protection Policy,
Disciplinary Policy, Equal Opportunity Policy, Family Friendly Policy,
Anti-Bribery Policy (covering gifts and hospitality), Grievance Policy, IT
Policy, Mobile Phone Policy, Other Employment Policy, Parenting Policy,
Recruitment Policy, Redundancy Policy, Residential Accommodation
Policy, Right to Work Policy, Smoking Policy, Social Media Policy, Staff
Accommodation Policy, Stop and Search Policy, Stress Policy, Tuition
Policy, Modern Slavery Statement, Whistleblowing Policy
Outcome of the policies
CSR Report from page 36
CSR report from page 36
Strategic Report on page 26 and 27
Social matters
CSR Strategy – Our communities, Gender Pay Gap reporting
CSR Report from page 36
Human rights
Modern Slavery Statement
Anti-Bribery Policy (covering gifts and hospitality),
Whistleblowing Policy
Anti-corruption
and anti-bribery
matters
Principal risks
and impact
on business
Description of
business model
Non-financial
Key Performance
Indicators
CSR Report – page 37 in particular
Corporate Governance Report from
page 48
Audit Committee Report from page 53
These are set out on pages 32 and 34
See also page 6 regarding our response
to the coronavirus pandemic
At a glance page 4
See our vision and purpose on page 4
Strategic Report on pages 26 and 27
Strategic Report on pages 26 and 27
41
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Board of Directors
D R I V I N G O U R
S T R AT E G Y
The Main Board thrives by
being strong and talented
individuals who combine
to form the team that
drives our strategy. Each
member brings their skills
and talents to set the
strategic direction and
deliver further success
for the Company.
MICHAEL TURNER
NON-EXECUTIVE CHAIRM AN
CHAIR OF THE
NOMINATIONS COMMIT TEE
Aged 69.
Joined in 1978. A Chartered Accountant with
international experience. Initially ran the Wine
Division as Wine Director. Appointed Marketing
Director in 1988, Managing Director in 1992,
Chief Executive in 2002 and Chairman in
2007. Chairman of the British Beer and
Pub Association 2008-2010. Master of the
Worshipful Company of Vintners 2011-2012.
SIMON EMENY
CHIEF EXECUTIVE
Aged 54.
Joined in 1996 from Bass plc where he held
a variety of senior operational and strategic
planning roles. Appointed to the Board as
Retail Director in May 1998, Managing
Director, Fuller’s Inns in July 2006, Group
Managing Director in November 2010 and
Chief Executive in July 2013. Non-Executive
Director of The National Gallery Company
Limited and Senior Independent Director
of WH Smith PLC. Previously Senior
Independent Director and Chair of the
Remuneration Committee of Dunelm
Group plc. An economics graduate and
alumnus of Harvard Business School.
JULIET TE STACE Y
SENIOR INDEPENDENT
NON-EXECUTIVE DIREC TOR
CHAIR OF THE AUDIT COMMIT TEE
MEMBER OF THE
REMUNERATION COMMIT TEE
MEMBER OF THE
NOMINATIONS COMMIT TEE
Aged 50.
Appointed in 2018. Former Chief Executive
of Mabey Holdings Limited. Former Chief
Operating Officer (UK and Europe) and
previously Finance Director (Commercial UK)
of Savills plc. Qualified as a Chartered
Accountant with Ernst & Young. Fellow of
Royal Institute of Chartered Surveyors.
RICHARD FULLER
NON-EXECUTIVE DIREC TOR
Aged 60.
Joined the Company in 1984.
Appointed a Divisional Director in 1992
and to the Board in December 2009
with responsibility initially for sales then,
additionally, personnel. Responsible for
Corporate Affairs and government relations.
Became Non-Executive Director in
February 2020. A GMP graduate
of Harvard Business School.
42
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. ADA M COUNCELL
FINANCE DIREC TOR
FRED TURNER
RETAIL DIREC TOR
Aged 34.
Appointed to the Board in 2019. Joined
the Company in 2013 as an Operations
Manager for Fuller’s Inns. Appointed Head
of Tenanted Operations in 2015 and Tenanted
Director in 2018. Qualified as a Chartered
Accountant with Grant Thornton UK LLP.
Civil engineering graduate.
Aged 42.
Appointed in 2019 from AIM-listed
Restore plc, where he was Group Finance
Director. Started his career at Whitbread plc
in the accounts department of The Pelican
Group restaurant division before moving to
the Milward Brown Precis subsidiary of WPP
plc. Joined Rentokil Initial plc in 2003,
where he held a variety of finance posts
including Commercial Director of the Business
and Industry division and Finance Director
of Catering and the combined Catering
and Hospitals division and finally Finance
Director of the UK Business Services division.
Qualified as a Chartered Accountant.
Holds a degree in Mathematics.
SÉ VERINE BÉQUIN
COMPANY SECRETARY
Aged 50.
Appointed in 2014 after nearly 10 years as
Group Company Secretary of Eurotunnel.
Previously worked as a solicitor in private
practice and then as Company Secretary
to various UK and international companies.
SIR JA MES FULLER, BT
NON-EXECUTIVE DIREC TOR
Aged 49.
Appointed in 2010. Served in The Life Guards
1991-1998. Employed by the Company from
1998-2003, working in the Tied and Managed
Pub estate and has since been running his
own business.
HELEN JONES
INDEPENDENT NON-
EXECUTIVE DIREC TOR
CHAIR OF THE
REMUNERATION COMMIT TEE
MEMBER OF THE AUDIT COMMIT TEE
Aged 61.
Appointed in 2019. Non-Executive Director
of motor accessories and cycling giant Halfords
Group plc, where she chairs the CSR Committee
and Non-Executive Director of Premier Foods
plc. Formerly Group Executive Director at Caffè
Nero and Managing Director of Zizzi, the Italian
casual dining chain, and Non-Executive Director
of international fast-dining restaurant group
Vapiano SE. Vice-Chairman of the Ben & Jerry’s
Board and Non-Executive Director of Whittard.
ROBIN ROWL AND, OBE
INDEPENDENT NON-
EXECUTIVE DIREC TOR
MEMBER OF THE AUDIT COMMIT TEE
MEMBER OF THE
REMUNERATION COMMIT TEE
Aged 59.
Appointed in 2020. Previously Chairman and
Chief Executive of YO! Sushi, Non-Executive
Director of Marstons PLC and Tortilla.
Currently European Operating Partner of
TriSpan Private Equity with Chairman and
Non-Executive Director roles with three
portfolio companies: Rosa Thai, Thunderbird
and Rosa Mexicano (USA). Independent
Non-Executive Director roles with Eathos
(Gulf) and Caffè Nero. Awarded an OBE in
2015 for outstanding services to hospitality.
43
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Report
The Directors present their report to
shareholders together with the audited
financial statements for the 52 weeks
ended 28 March 2020.
Details of all Directors’ interests as at the
end of the financial year are set out in the
Directors’ Remuneration Report on pages
58 to 80.
Strategic Report
The statements and reviews on pages 6 to 41
comprise the Strategic Report which includes
information about the Group’s strategy and
business model as well as providing an update
on the business and financial performance
during the year and indications of likely future
developments, Key Performance Indicators
(“KPIs”), principal risks and uncertainties
and the Group’s financial management
and treasury policies. Post Balance Sheet
events are disclosed in note 34 to the
financial statements.
Directors
A list of Directors who served during the
financial year and comprise the Board of
Directors as at the date of this report, together
with biographical details, is given on pages 42
and 43.
On the disposal of the Fuller’s Beer Business,
Simon Dodd resigned as a Director with effect
from 30 April 2019. John Dunsmore, who had
served an additional year beyond his nine-year
term, resigned as a Director with effect from
25 July 2019. Jonathon Swaine resigned as a
Director with effect from 4 September 2019
and Richard Fuller became a Non-Executive
Director with effect from 1 February 2020.
On the recommendation of the Nominations
Committee, Fred Turner was appointed
by the Board of Directors with effect from
1 June 2019. His appointment was approved
by shareholders at the Annual General
Meeting held on 4 September 2019.
On the recommendation of the Nominations
Committee, Adam Councell was appointed by
the Board of Directors with shareholders effect
from 27 August 2019, this appointment was
approved by the shareholders at the Annual
General Meeting held on 4 September 2019.
On the recommendation of the Nominations
Committee, Robin Rowland was also appointed
as a Director by the Board with effect from
23 March 2020. In accordance with the
Articles of Association, his appointment will
be subject to the approval of shareholders
at the Annual General Meeting.
Richard Fuller and Adam Councell retire
by rotation at the Annual General Meeting and
offer themselves for re-election. Adam Councell
is an Executive Director and has a rolling service
contract of 12 months’ duration.
44
Dividends
The Company paid an interim dividend of
7.80p per ‘A’ and ‘C’ ordinary share of 40p
each and 0.780p per ‘B’ ordinary share of
4p each on 10 January 2020. In view of the
coronavirus pandemic, the Directors decided
not to recommend a final dividend for the
financial year ended 28 March 2020.
The 2020 interim dividend paid of
£4,309,331, which together with the ‘D’
share single dividend of £69,355,922 and the
£120,000 of cumulative preference dividends
paid will make total dividends of £73,785,253.
Auditors and Disclosure of Information
to Auditors
The Directors who held office as at the date
of approval of this Directors’ Report confirm
that, so far as they are each aware, there is
no relevant audit information (as defined in
Section 418(2) of the Companies Act 2006)
of which the Company’s auditors are unaware
and each Director has taken all the steps
that they ought to have taken as a Director to
make themselves aware of any relevant audit
information to establish that the Company’s
auditors are aware of that information.
The auditors, Grant Thornton UK LLP, have
indicated their willingness to continue in office,
and a resolution that they be re-appointed will
be proposed at the Annual General Meeting.
Indemnity Provisions
The Articles of Association provide the
Directors with indemnities in relation to
their duties as Directors, including qualifying
third party indemnity provisions (within the
meaning of the Companies Acts). All of the
Executive Directors’ contracts contain a
clause which states: “the Executive shall be
indemnified out of the assets of the Company
against any liability incurred by him as a
Director or other officer of the Company
in defending any proceedings (whether civil
or criminal) in which judgement is given in
his favour or in which he is acquitted or in
connection with any application under the
Companies Acts in which relief from liability
is granted to him by the court from liability for
negligence, default, breach of duty or breach
of trust he may be guilty of in relation to the
affairs of the Company.” The Company
purchases Directors and Officers liability
insurance which gives appropriate cover for
any legal action brought against its Directors.
This insurance also covers the Trustees of the
Company’s defined benefit pension scheme.
Political Donations
The Group does not make political donations.
Purchase of Own Shares
At the Annual General Meeting held on
4 September 2019, the Company was given
authority to purchase up to 4,811,797 ‘A’
ordinary shares to be held as treasury shares
to be used in connection with, among other
purposes, the Long-Term Incentive Plan
(“LTIP”) and/or other share option schemes.
This authority will expire at the Annual
General Meeting and shareholders will be
asked to give a similar authority to purchase
shares up to 15% of the ‘A’ ordinary capital
at that date.
The Company’s maximum issued ordinary
share capital during the year was £22,793,726
comprising 33,619,834 ‘A’ ordinary shares,
89,052,625 ‘B’ ordinary shares and
14,459,218 ‘C’ ordinary shares.
During the year the Company purchased a
total of 48,700 ‘A’ ordinary shares at a total
cost of £395,487 (exclusive of stamp duty).
These share purchases represented 0.09%
of the maximum issued ordinary shares and
0.14% of the Company’s issued ‘A’ ordinary
share capital.
41,374 ‘A’ ordinary shares held in treasury,
with a value of £477,870, were transferred
to the Trustee of the Share Incentive Plan.
293,955 ‘A’ ordinary shares held in treasury
were allocated to participants of the Savings
Related Share Option Scheme, the Senior
Executive Share Option Scheme and the
Executive Share Option Scheme on exercise
of options, generating net cash proceeds of
£2,267,602. As at 28 March 2020, a total
of 1,280,061 ‘A’ ordinary shares and a total
of 4,558,009 ‘B’ ordinary shares are held
as treasury shares.
Employees
Communication and engagement is
important to the business and is part of the
rhythm of life at Fuller’s. Formal and informal
messages are cascaded via a communications
app, noticeboards and face to face via the
regular team meetings and shift briefings
held in every area and every pub or hotel.
Every team member has access to Fuse, the
communications app, which provides access
information at a time to suit the individual and
an opportunity to ask questions and provide
feedback to the author of the communication.
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Large, face to face, events are carefully
designed to engage team members and share
messages in an experiential way. The annual
Managers’ Conference (for all General
Managers and Head Chefs) and Connection
Week, for one non-management representative
from each pub or hotel, are popular events
on the communications calendar. Both events
facilitate the communication of key messages
directly from the Executive Team and senior
leaders to a largely remote workforce.
Materials are also provided for attendees to
cascade the messages to their local teams.
Share Capital
Information on the Company’s financial
instruments, capital structure and related
restrictions is given in notes 28 and 29 to the
financial statements. Details of significant
shareholdings are set out below.
Computershare Trustees Limited holds
a total of 226,793 ‘A’ ordinary shares on
behalf of employees of the Company who are
participants in its SIP. This represents 1.17% of
the issued ‘A’ ordinary share capital (excluding
Percentage ‘A’ ordinary shares of 40p each
shares held in treasury). In respect of the shares
that have been allocated, Computershare
Trustees Limited exercises voting rights in
relation to those shares, having consulted with
the participants about their voting intentions.
Substantial Shareholdings
The Company had been advised under the
Disclosure and Transparency Rules that the
following held an interest in 3% or more of the
voting rights of its listed issued share capital:
As at
28 March
2020
15.29
6.42
3.03
As at
1 July
2020
14.86
6.42
3.03
A consultation committee further
facilitates a dialogue between the business
and representatives of all team members
including union members. Taken together,
these communications have allowed the
business to engage successfully with all
teams, wherever they are employed.
A recruitment policy is designed to ensure
that all applications for employment, including
those made by disabled persons, are given full
and fair consideration, in light of the applicants’
particular aptitudes and abilities. The Company
also has an Equal Opportunities Policy which
is designed to ensure that all colleagues are
treated equally in terms of training, career
development and promotion. Where team
members develop a disability during their
employment, every effort is made to
continue their employment and arrange for
appropriate training, career development and
promotion as far as is reasonably practicable.
Development and training of our teams at all
levels has always been a priority at Fuller’s and we
run multiple development and apprenticeship
programmes each year culminating in an annual
graduation ceremony for our all graduates
and apprentices.
The Company continues to offer qualifying
staff a Savings Related Share Option Scheme
– although no invitation was made in 2019, a
Share Incentive Plan (“SIP”) and a variety of
performance related bonus arrangements, which
serve to encourage team interest in the Group’s
performance. All team members are given an
“Inndulgence” card allowing them to benefit
from a colleague discount in the Company’s
managed pubs as well as in Cotswold Inns &
Hotels and Bel & The Dragon outlets.
Stakeholder Engagement
Information on how the Directors engage with
the Group’s different stakeholders, including
shareholders, employees and customers, can
be found on page 35.
BlackRock, Inc
Ameriprise Financial, Inc
Dunarden Limited
The Company is also aware of the following interests in 3% or more of the voting rights in the two
classes of its unlisted share capital:
Percentage ‘B’ ordinary shares of 4p each
Mr A W M Mitchell & Burges Salmon Trustees Ltd
Mr R H F Fuller & Mr R I Turner & Mr P A Sheils
Mr A G F Fuller
Mr R H F Fuller & Mr P A Sheils & Mr P J Turner
Dunarden Limited
Mr R D Inverarity
Mr G F Inverarity
Miss S M Turner
Mr M J Turner
Mr R H F Fuller
Mr T J M Turner
Percentage ‘C’ ordinary shares of 40p each
Mr A W M Mitchell & Burges Salmon Trustees Ltd
Mr T J M Turner
Miss S M Turner
Mr P A R Carter & Mr J M Gordon
Mr A G F Fuller & Mr P A R Carter
Mr P A R Carter & Mr A G F Fuller
Mrs D M St. C Turner
Mr C D W Williams
Mrs E A Crisp
As at
28 March
2020
and at
1 July
2020
15.65
8.07
6.03
4.87
3.79
3.71
3.67
3.51
3.50
3.25
3.25
As at
28 March
2020
and at
1 July
2020
31.02
6.20
5.25
4.30
4.12
4.02
3.09
3.02
3.02
45
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Report
Continued
The Group has entered into a number
of agreements with the major brewers
operating in the UK under which it both buys
and sells beers and these agreements may be
terminated by the other party should the
Group undergo a change of control.
In the event of a change of control the
Company is obliged to notify its main bank
lenders of such. The lenders shall not be
obliged to fund any new borrowing requests
and the facilities will lapse after 30 days
from the change of control if terms on which
they can continue have not been agreed.
All borrowings including accrued interest
will become repayable within ten days of
such a lapse.
Information Required under the Listing Rules
There is no information to disclose in this
Annual Report and Accounts pursuant to
Listing Rule 9.8.4.
Corporate Governance
The Group’s report on Corporate Governance
is set out on pages 48 to 52. The Corporate
Governance Report forms part of this
Directors’ Report and is incorporated
into it by reference.
Corporate Social Responsibility
The Group’s report on Corporate Social
Responsibility is set out on pages 36 to 40.
It contains information on greenhouse gas
emissions, energy efficiency action and
gender diversity.
By order of the Board
Séverine Béquin
Company Secretary
30 July 2020
Fuller, Smith & Turner P.L.C.
Pier House
86-93 Strand-on-the-Green
London W4 3NN
Registered in England under number: 241882
Articles of Association
The Articles of Association state that the
Board may appoint Directors and that at
the subsequent Annual General Meeting,
shareholders may elect any such Director.
Alternatively, the Company may directly
appoint a Director. The Articles also contain
the power for the Company to remove any
Director by special resolution and appoint
someone in his place by ordinary resolution.
There are various other circumstances under
the Articles which would mean that the office
of a Director would be vacated, including if he
resigns, becomes of unsound mind or bankrupt.
At every Annual General Meeting one-third
of the Directors who are subject to retirement
by rotation or, if their number is not three or
any multiple of three, then the number nearest
to but not exceeding one-third shall retire
from office but, if there is only one Director
who is subject to retirement by rotation, he
or she shall retire. In addition, if any Director
has at the start of the Annual General
Meeting been in office for more than three
years since his or her last appointment or
re-appointment he or she shall retire at that
Annual General Meeting.
The Articles do not contain any specific provisions
about amendments to the Articles and are
therefore governed by the relevant Companies
Act requirements which state that the Articles
may only be amended by special resolution.
Subject to the Company’s Memorandum and
Articles of Association and UK legislation, the
business of the Company is managed by the
Board which may exercise all the powers of the
Company. The Articles of the Company have
a section entitled “Powers and Duties of the
Board” which sets out powers such as the rights
to establish local boards, to appoint agents,
to delegate and to appoint persons with the
designation “Director” without implying that
the person is a Director of the Company.
There are further sections of the Articles
entitled “Allotment of Shares” setting out the
Board’s power to issue shares and purchase the
Company’s own shares, and “Borrowing Powers”
setting out the provisions concerning the
Company’s power to borrow and give security.
The Directors have been authorised to allot and
issue ordinary shares. These powers are exercised
under authority of resolutions of the Company
passed at its Annual General Meeting.
46
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Statements
The Directors are responsible for preparing
the Annual Report in accordance with
applicable law and regulations. The Directors
consider the Annual Report and the financial
statements, taken as a whole, provides the
information necessary to assess the Company’s
performance, business model and strategy
and is fair, balanced and understandable.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Statement as to Preparation
of Financial Statements
The Directors confirm, to the best of
their knowledge:
– that these financial statements, prepared
in accordance with IFRS as adopted by the
European Union, give a true and fair view
of the assets, liabilities, financial position
and profit of the Group and Company taken
as a whole; and
– that the Annual Report and the Strategic
Report includes a fair review of the
development and performance of the
business and the position of the Group and
Company taken as a whole, together with
a description of the principal risks and
uncertainties that they face.
The Directors of Fuller, Smith & Turner P.L.C.
are listed on pages 42 and 43.
Directors’ Statement as to Disclosure
of Information to Auditors
The Directors who were members of the Board
at the time of approving the Directors’ Report
are listed on pages 42 and 43. Having made
enquiries of fellow Directors and of the
Company’s auditors, each of these Directors
confirms that:
– to the best of each Director’s knowledge
and belief, there is no information relevant
to the preparation of this report of which
the Company’s auditors are unaware; and
– each Director has taken all the steps a
Director might reasonably be expected
to have taken to be aware of any relevant
audit information and to establish that
the Company’s auditors are aware of
that information.
On behalf of the Board
Michael Turner
Chairman
30 July 2020
Adam Councell
Finance Director
30 July 2020
Statement of Directors’ Responsibilities
in Respect of the Financial Statements
The Directors are responsible for preparing
the Strategic Report, the Annual Report, the
Remuneration Report and the Group and
Company financial statements in accordance
with applicable United Kingdom law and those
International Financial Reporting Standards
(“IFRS”) as adopted by the European Union.
Company law requires the Directors to
prepare financial statements for each financial
year. Under that law, the Directors have
elected to prepare the financial statements
in accordance with IFRS as adopted by the
European Union. Under company law, the
Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
and profit or loss of the Group and Company
for the financial period. In preparing the Group
and Company financial statements, the
Directors are required to:
– select suitable accounting policies in
accordance with IAS 1 Presentation of
Financial Statements and then apply them
consistently
– make an assessment of the Company’s
ability to continue as a going concern
– state that the Group and Company have
complied with IFRS, subject to any material
departures disclosed and explained in the
financial statements; and
– make judgements and estimates that are
reasonable and prudent.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Group and Company and enable them
to ensure that the financial statements and
the Remuneration Report comply with
the Companies Act 2006 and applicable
regulations, including the requirements of
the Listing Rules and the Disclosure and
Transparency Rules (“DTR”) and in the
case of the Group financial statements, with
Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the
Group and hence for taking reasonable steps
for the prevention and detection of fraud and
other irregularities.
47
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Corporate Governance Report
“I am satisfied that the
Board comprises the right
individuals who have the
skills required to run
this business and to
respond well to the
challenges presented.”
It is the Board’s belief that good corporate
governance at all levels of the business will
further the long-term sustainable success of
our long-established business. As Chairman,
my responsibility is to lead the Board and
ensure it is working effectively towards delivery.
We have made some progress towards
compliance with the new UK Corporate
Governance Code (the “Code”) published in July
2018 which applies to the Company. However,
the challenges presented by the transformative
nature of the last 18 months for the business,
from the implementation of a complex ERP
system, the Disposal of the Fuller’s Beer
Business, the return of capital to shareholders
and many resulting changes to the composition
of the Board mean that there are still areas which
require attention going forward as we recover
from the impact of the current pandemic.
The Board continues to see succession
planning as a key issue for a business that
has very low turnover amongst its senior
management and is still very much a family-
controlled concern whilst also being a listed
48
public company. However, succession plans
continue to be discussed both at Executive
Committee and Board level. Throughout the
rest of the business, succession plans are in
place at departmental level and are reviewed
regularly by the relevant Directors in
conjunction with their Executive colleagues
and their personnel advisors. Furthermore,
all department plans are compiled into a
Company succession plan which provides
effective review of cross-departmental
promotion and opportunities.
In terms of Board balance, I chair the
Nominations Committee and am personally
involved in all Board level recruitment. Therefore,
I am able to ensure that we continue to have a
good balance of skills, experience, independence
and knowledge on our Board and our Board
Committees. This year has seen a number of
changes to your Board with the departure of
Simon Dodd and Jonathon Swaine, following
completion of the disposal of the Fuller’s Beer
Business. Fred Turner joined the Board as
Retail Director with effect from 1 June 2019.
Adam Councell joined the Board as Finance
Director with effect from 27 August 2019.
Having ensured a smooth transition with the
appointment of Peter Swinburn and later Helen
Jones, John Dunsmore stepped down as planned
in the summer of 2019. It was with sadness that
the Board had to say goodbye to Peter Swinburn
who resigned as a result of health issues.
Richard Fuller moved from an Executive to a
Non-Executive role with effect from 1 February
this year and Robin Rowland joined the Board at a
very critical time for the business at the outset of
the coronavirus pandemic.
I am satisfied that the Board comprises the
right individuals who have the skills required
to run this business and to respond well to the
challenges presented by the continually
changing environment in which we operate.
The Board recognises the importance of
diversity for Board effectiveness. We continue
to believe that appointments should be made
on the basis of merit against the selection
criteria for any particular role.
We believe that you can only have an effective
Board when all members understand what is
required of them and when they all have time to
conduct their duties. All of our Directors have
detailed appointment letters or contracts which
set out their duties. We confirm that appointment
letters for Non-Executive Directors set out the
expected time commitment required. We also
have a policy that Directors can only take on
additional roles with Board approval. In line with
the Code, the terms of appointment for all our
Non-Executives specifically state that the role of
the Non-Executive Directors is to challenge and
help develop strategy.
Finally, our annual Board evaluation, this year,
was carried out by our Senior Independent
Director. The Board has resolved to seek
external assistance to carry out this process next
year as do many listed PLCs as recommended by
provision 21 of the Code. However, the Board is
satisfied that the internal process is robust and
that the manner in which the evaluation is
carried out encourages a healthy debate on
things that could be improved.
Michael Turner
Chairman
30 July 2020
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Introduction and Compliance
The Board of Directors is committed to the
highest standards of corporate governance
and believes that such standards are critical
to overall business integrity and performance.
This report explains how the Company applies
the principles of the Code, which shareholders
can find on the Financial Reporting Council’s
website at www.frc.org.uk, in the particular
circumstances of the Company.
The Company is subject to the UK Corporate
Governance Code 2018. It has complied
throughout the period with the requirements
of the 2016 Code, as applicable to a smaller
quoted company, and has endeavoured to
satisfy the requirement of the 2018 Code
throughout the financial year.
reference for the Board’s standing Committees
will also be reviewed. Once this work has been
completed, these will be made available on
our website in compliance with provision 14
of the Code. The Board understands that the
Code recommends that the Remuneration
Committee should be responsible for
determining the remuneration of senior
management per provision 33. However, it is
felt that the Chairman and Chief Executive are
best placed to determine this. During the year,
the Remuneration Committee commissioned
a benchmarking survey as part of its review
of the Directors’ Remuneration Policy.
This survey did include senior management
and the Company Secretary and informed
decisions regarding appropriate pay levels
for senior management.
A supporting pillar of our strategy of delivering
a distinctive customer experience, building a
leaner cost base and growing by carefully
targeted acquisitions and developments, as
described on page 21, is recruiting, developing
and investing in the best people. To implement
this element, during the year, the Company
started a wide-ranging review of pay and
benefits throughout the Group as well as
putting plans in place to build engagement with
all our staff and develop a sense of belonging
for all, already a strong feature of the Fuller’s
culture. This involves setting up processes
and more formal forums to achieve these
objectives and better understand the views
of the workforce and ensuring Board
engagement by drawing on the experience
of our Independent Non-Executive Directors.
The process has been halted somewhat by the
coronavirus pandemic although, as illustrated
on page 6, Fuller’s has adopted a people first
approach in its response to the pandemic
by engaging effectively through strong
communications with its staff. The Board will
consider the designation of a Non-Executive
Director to provide a link to the Board as part
of this process in compliance with provision 5
of the Code.
The Executive Committee is working on
achieving the optimal structure for our
focused premium pub and hotel business
and this will involve a detailed review of
delegated authorities within the business
which will be overseen by the Audit
Committee. In conjunction with the work
being undertaken within the business, the
Board will seek to review the responsibilities
of the Chairman, Chief Executive, Senior
Independent Director, matters reserved for
the Board and terms of reference for the new
Executive Committee. Existing terms of
Michael Turner has been Chairman for
more than nine years and is not independent
according to the Code. Whilst the Board
understands the requirements of Code
provision 19 in that regard, the Board
considers that the Chairman’s knowledge and
understanding of this long-established family
business and its requirements is extremely
valuable. The Board will continue to keep
provision 19 of the Code under review.
Similarly, whilst at least half of the Board is
not made up of Independent Non-Executive
Directors as recommended by provision 11
of the Code, the Board considers it is well
balanced and that the presence of Non-
Executive Directors who are long-standing
family shareholders is important in this
professionally run family business.
As part of its review of the Directors’
Remuneration Policy detailed in its report
on page 58, the Remuneration Committee
has considered provision 38 of the Code
and concluded that for any new Executive
Directors appointed to the Board from 1 April
2020, the pension opportunity will be in line
with the maximum contribution available for
the majority of the workforce. It was not
considered appropriate to seek a change
to the contractual entitlement of current
Executive Directors.
Other areas of non-compliance are addressed
within this report.
The information that is required by Code
provisions 1 and 2 can be found in the Strategic
Report on pages 6 to 41. The information
relating to the share capital of the Company that
is required by DTR 7.2.6R can be found within
the Directors’ Report, on pages 44 to 46.
The Board
The Board’s Role
The Board of Directors is collectively
responsible to the shareholders for the
performance and long-term success of the
Group. Its role includes the establishment,
review and monitoring of strategic objectives,
approval of major acquisitions, disposals
and capital expenditure, ownership of the
corporate values, overseeing the Group’s
systems of internal controls, governance
and risk management, and ensuring that the
appropriate resources are in place to deliver
these and fulfil the Company’s obligations
to its stakeholders.
How the Board Works
The Board governs through its Executive
Committee, and formally via its other clearly
mandated Committees. Each standing Board
Committee has specific written terms of
reference which are regularly reviewed by
the Board and there is a formal list of Matters
Reserved for the Board. This distinguishes
between matters reserved for the Board and
Executive Committee decisions. The terms
of reference of the Audit, Remuneration and
Nominations Committees are available on the
Company’s website. All Committee Chairmen
report orally on the proceedings of their
Committees at the next meeting of the Board,
and the minutes of the meetings of all Board
Committees (with some exceptions on
remuneration matters) are provided to Board
members. The Chairman ensures that the
Executive Committee provides accurate and
timely information for Board meetings which
is then open to debate and challenge by all.
Meetings enjoy open dialogue and constructive
challenge on all issues is encouraged. With a
good information flow between and prior to
Board meetings, decisions are made in a timely
manner after appropriate questions are dealt
with. The Board has adopted a procedure,
in accordance with the Company’s Articles,
to consider and, if it sees fit, to authorise
situations were a Director to have an interest
that conflicts, or may possibly conflict, with
the interests of the Company.
Board Meetings
The Board meets formally at least six times a
year with papers circulated a week in advance
and the agenda and papers for these meetings
are subject to the scrutiny of the Chairman and
the Company Secretary. However, the Board
regularly considers matters on an ad hoc basis
between scheduled meetings. This year, the
Board specifically met more frequently in view
of the postponement of the publication of the
Group’s financial results for the prior financial
49
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Corporate Governance Report
Continued
year, and since the outset of the coronavirus
pandemic, the Board has met weekly by
video conference to inform the Board and
empower the Executive as required to address
the challenges posed by the enforced closure
of the business due to the pandemic.
At Board meetings, the agendas cover
projects, analysis of the market in which
the Group operates and performance.
Each of the Executive Directors and the
Company Secretary also update the Board at
each meeting on matters for which they are
responsible. The Board is responsible for
approving the annual budget and the annual
and half year results. At the beginning of some
of the Board meetings, one or more members
of the Executive Committee (who are not an
Executive Director) or Senior Managers are
invited to join the meeting and inform the
Board of developments in their area of the
business. In addition to scheduled meetings,
the Board also meets every year for an
in-depth review of corporate strategy, and
other agenda items might include an update
on the economy and a review of the Group’s
competitors. The Non-Executive Directors
from time to time meet with members of the
senior management team and also spend days
out in the trade with individual members of
that team. This helps to keep Non-Executive
Directors up to date with the operations of
the Group and also provides the Executive
Directors and senior management with
valuable feedback about the Company’s
people and its operations.
Following the disposal of the Fuller’s Beer
Business, Board and Committee meetings
were mainly held within our retail estate.
Going forward, meetings will be held at the
Group’s new registered office, Pier House,
and also within the estate.
As well as the dialogue within the
boardroom, the Non-Executive Directors
meet privately, under the leadership of the
Senior Independent Director, without the
Executive Directors present. They also meet
with the Chairman and the Chief Executive
on a regular basis. These meetings allow for
the review of issues faced by the business, the
continuation of dialogue on strategic issues,
the discussion of Board appointments when
appropriate, succession planning, and the
provision of support to the Chairman and
the Chief Executive in their roles.
Board Committees
The Executive Committee
The Executive Committee is chaired by
the Chief Executive and comprises of the
Executive Directors – Finance Director and
Retail Director – and the People & Talent
Director, the Property Director and the
Marketing Director. The Company Secretary
is secretary to the Executive Committee.
The Executive Committee normally meets
formally at least 11 times a year and also meets
informally most weeks. There is thus a regular
flow of information at Board and Executive
Committee level.
Meetings of the Executive Committee focus
on the detail of the Group’s performance.
The Finance Director leads a review of the
Group’s management accounts and presents
updates on cash management and credit control.
Each member of Committee and the Company
Secretary update their colleagues on the key
issues facing their part of the business. There is
a good level of consultation and debate at these
meetings. The list of Matters Reserved for the
Board sets out which matters need Board
approval and which decisions can be made at
Executive Committee level. Most significant
business decisions are made by the Board.
At the beginning of most Executive Committee
meetings one or more Senior Managers are
invited to join the meeting and talk to the
Committee about the issues in their department.
The Audit Committee
Information about the Audit Committee is given
in the Audit Committee Report on page 54.
The Remuneration Committee
Information about the Remuneration
Committee and Remuneration Policy is given in
the Directors’ Remuneration Report on page 71.
The Nominations Committee
The Nominations Committee is chaired by
Michael Turner and the other members are
both independent non-Executive Directors.
The members during the period were John
Dunsmore (until his resignation on 25 July
2019), Juliette Stacey and Helen Jones.
The Board is satisfied that the Chairman’s
extensive understanding of the business and its
requirements puts him in a very good place
to lead the recruitment process for any new
Directors. The Board has prepared a detailed
skills matrix to identify the areas of expertise
required by the Board and any gaps within the
composition of the Board. This was used to
inform the recruitment carried out during
the year.
The Committee is responsible for leading the
process for appointment as Directors, for
approval by the Board although the full Board
will also typically informally discuss Board and
senior management appointments.
The members of the Committee liaised
effectively to carry out the recruitment of
a new Non-Executive Director following
Peter Swinburn’s unexpected resignation,
with the assistance of Odgers Berndtson.
The Committee is satisfied that Odgers
Berndtson has no connection with the Company
or individual Directors. The Board had previously
prepared a skills matrix to identify any additional
attributes which would be desirable in a new
appointment. Board members were kept
informed of the process and all of them
were involved in the final interview process.
Whilst the Board is alert to the need to ensure
diversity in all its form is promoted, the Board
believes appointments should be made on merit
and does not want to adopt targets that may
affect its ability to make the right decision for
the business and all its stakeholders. As and
when Board vacancies arise and, should the
support of an executive search firm be required,
the Board and the Nominations Committee will
ensure that it only uses firms that have signed up
to their industry’s Voluntary Code of Conduct
(prepared in response to Lord Davies’ report).
Further information on gender diversity across
the business can be found in the Corporate
Social Responsibility report on page 40.
Attendance at Board and
Committee Meetings
The table opposite gives details of attendance
at Board and Committee meetings during the
year relative to the total number of meetings
that took place whilst each Director was
in office.
The Board believes that all of its members
have sufficient time to discharge their duties
effectively. All Directors are required to seek
permission before accepting any external
appointments, therefore Board members
are kept fully aware of their colleagues’
other commitments.
50
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Attendance 2019/2020
Director
Michael Turner
Simon Emeny
Adam Councell1
Richard Fuller
Fred Turner
Sir James Fuller
Juliette Stacey
Helen Jones
Robin Rowland2
Peter Swinburn3
John Dunsmore4
Simon Dodd5
Jonathon Swaine6
Board
Executive
Audit
Remuneration
11 (11)
11 (11)
9 (9)
11 (11)
11 (11)
11 (11)
11 (11)
11 (11)
2 (2)
3 (3)
1 (2)
0 (0)
3 (3)
9 (9)
6 (6)
1 (1)
7 (8)
0 (0)
2 (3)
*
*
*
5 (5)
5 (5)
0 (0)
1 (1)
0 (1)
*
*
7 (7)
7 (7)
0 (0)
4 (4)
3 (3)
* These Directors are not members of the Committees but are invited to be in attendance at meetings.
1 Adam Councell was appointed to the Board with effect from 27 August 2019.
2 Robin Rowland was appointed to the Board with effect from 23 March 2020.
3 Peter Swinburn resigned from the Board with effect from 4 September 2019.
4 John Dunsmore resigned from the Board with effect from 25 July 2019.
5 Simon Dodd resigned from the Board with effect from 30 April 2019.
6 Jonathon Swaine resigned from the Board with effect from 4 September 2019.
Composition and Balance of the Board
The Chairman is responsible for leading the
Board and ensuring its effectiveness and
openness, and that shareholders are kept well
informed. The Chairman does not have any
commitments which constrain his ability to
fulfil his role. Simon Emeny is responsible
for all operational aspects of the Group.
During the period, following the disposal of the
Fuller’s Beer Business, Simon Dodd resigned
as Managing Director of The Fuller’s Beer
Company with effect from 30 April 2019.
Fred Turner was appointed as Retail Director
with effect from 1 June 2019. John Dunsmore
resigned as independent Non-Executive
Director with effect from 25 July 2019.
Adam Councell joined the Board as Finance
Director with effect from 27 August 2019.
Jonathon Swaine resigned as Managing
Director of Fuller’s Inns and Peter Swinburn
as independent Non-Executive Director
both with effect from 4 September 2019.
Richard Fuller stepped down from his role
as Corporate Affairs Director to join the
Non-Executive Directors with effect from
1 February 2020. Robin Rowland joined the
Board as independent Non-Executive Director
on 23 March 2020.
As required by provision 8 of the Code, it is
confirmed that none of the Non-Executive
Directors who resigned during the period
have expressed any concerns in writing to the
Chairman as to the operation of the Board
or the management of the Company.
On appointment, new Directors undertake
a tailored induction programme.
The Company has six Non-Executive Directors
of which three – Michael Turner, Sir James
Fuller and Richard Fuller – are family members.
The other three Non-Executive Directors, all
of whom are deemed independent under the
Code, are experienced business leaders and
all of the Non-Executives bring a wide range
of skills and experiences to the Board.
Although the Board (excluding the Chairman)
does not comprise of at least half independent
Non-Executive Directors, the Board considers
it is well balanced as it has the right number
of members for the size of the Group with
representation of the founding families on
the Board being considered very important
in a company with a high proportion of family
shareholders. The Directors agree that no one
individual dominates discussions and that each
makes a full and positive contribution.
The Directors’ biographies are on pages 42
and 43. Peter Swinburn was the Senior
Independent Director until his departure from
the Board when Juliette Stacey took over the
role. The Senior Independent Director offers
support and advice to the Chairman and all the
other Board members; they are in regular
dialogue with all Board members outside of
Board meetings and co-ordinate the views of the
Non-Executive Directors as and when required.
All of the Independent Non-Executive Directors
are determined by the Board to be independent
in character and judgement and there are no
relationships or circumstances which could
affect or appear to affect their judgement; all
are appointed for specified terms. The details
of the Non-Executive Directors’ respective
arrangements are as set out in the Directors’
Remuneration Report on pages 58 to 80 and
are available for inspection at the Company’s
registered office.
51
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Corporate Governance Report
Continued
of the appraisal process, individual training
and development needs are discussed.
The annual appraisal of the Non-Executive
Directors is conducted by the Chairman,
following consultation with the Executive
Team. The annual appraisal of the Chairman
is conducted by the Senior Independent
Director, following consultation with all the
other Directors and the Company Secretary.
Board Re-election
The Articles of Association of the Company
ensure that all Directors are subject to election
by shareholders at the first Annual General
Meeting after their appointment and to
re-election at three-yearly intervals.
The Board has considered the requirements
of provision 18 of the Code with regards to all
directors being subject to re-election at each
Annual General Meeting of the Company.
In view of the Company’s size, its ownership
structure and its history, the Board will keep
this requirement under review but is not
minded proposing the annual re-election
of all Directors for the time being.
Relations with Shareholders
The Company has an ongoing programme
of individual meetings with institutional
shareholders, allowing it to update
shareholders on the performance of the
business and the strategy for the future, and to
give them an opportunity to discuss corporate
governance matters. The Company’s brokers
also contact key shareholders to establish if
they would like to see the Chief Executive and
Finance Director in the days following their
presentation to the City on the preliminary
and half year results. The Chairman, Richard
Fuller and Sir James Fuller are the key
contacts with the Company’s family
shareholders and Sir James Fuller has a
specific role to keep in touch with those
shareholders. The Senior Independent
Director and the other Non-Executive
Directors are all willing to attend meetings
with shareholders or to be contacted by
shareholders should they have any concerns
which have not been resolved through the
normal channels. The Non-Executive
Directors have had no such requests during
the last financial year. All Board members
receive feedback from the City presentations
and meetings with shareholders, thus keeping
them in touch with shareholder opinion.
The Board supports the use of the Annual
General Meeting to communicate, in
particular, with private investors, and the
Chairman and Chief Executive make a detailed
presentation to shareholders updating them
on the Company’s performance and progress.
The Board is keen to encourage institutional
investors to attend the meeting, in line with
the duties set out in the Stewardship Code
for institutional shareholders as amended in
September 2012. Should they have concerns
over any issues being voted upon at the Annual
General Meeting, they can then meet all the
Directors and discuss them in person,
particularly if they have declined an invitation
for an individual meeting. The Chairman
arranges for the Chairman of each of the
Company’s Board Committees to answer
relevant questions at the meeting and
encourages all Directors to be present.
This year, in view of current circumstances,
the Board has taken the decision to hold the
Annual General Meeting behind closed doors.
However, shareholders will be invited to
submit questions they may have prior to the
meeting and answers will be provided via
the Company’s website.
Details of the engagement process with
shareholders regarding the new Directors
Remuneration Policy can be found in the
Remuneration Report on page 59.
The Group operates a whistleblowing policy
providing all staff the means of raising
concerns in confidence. Further details can be
found in the Report of the Audit Committee
on page 56.
By order of the Board
Séverine Béquin
Company Secretary
30 July 2020
Fuller, Smith & Turner P.L.C.
Pier House
86-93 Strand-on-the-Green
London W4 3NN
Advice for the Board
There is a procedure in place under which
Directors can obtain independent professional
advice. The Directors also have access to the
advice and services of the Company Secretary
whose appointment and removal is a matter
for the whole Board. The Company Secretary
is responsible to the Board for ensuring
that Board procedures are complied with.
The Directors are satisfied that any concerns
they raise at Board meetings are recorded
in the minutes. The Company maintains
appropriate insurance cover in respect of legal
action against its Directors and Officers.
Professional Development
All Directors attend training courses,
industry forums and specialist briefings relevant
to their role throughout the year. Occasionally,
specialists such as the Company’s legal advisers
join a Board meeting to brief the Board on a
particular topic. Executive Directors are
permitted to hold one other paid directorship,
with the Board’s consent, as the Board believes
that experience of how other boards work
enhances the Directors’ contribution to Fuller’s.
Board Evaluation
The annual Board evaluation is conducted
by way of a questionnaire, where all Board
members are asked to rate the Board’s work
across a number of different topics, with
constructive criticism encouraged, via the
medium of a questionnaire. The questionnaire
includes questions on the balance of skills,
experience, independence and knowledge,
diversity (including gender diversity), how
the Board works as a unit and other factors
relevant to its effectiveness. Where necessary
clarifications are sought on the responses
given; then the responses are consolidated
and reported back to the Board, highlighting
significant improvements and deteriorations
in any particular area by comparing results with
previous years’ outputs and agreeing actions
to tackle any areas requiring improvement.
Unattributed comments of significance are
shared with all. This year, the evaluation was
carried out by the Senior Independent
Director. The results were consistent with
last year’s scores and provided some insight
into areas that could be improved further,
and these were debated at a Board meeting
and were the Chairman’s focus in terms of
follow-up. The Audit and Remuneration
Committees conduct similar assessments
and their work is also commented upon in
the Board evaluation. The appraisal of
the Executive Directors and the Company
Secretary is conducted annually by the
Chairman or Chief Executive and, as part
52
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Audit Committee Report
“Membership of the
Committee has changed
over the period but at all
stages the Committee has
adapted, and adopted all
steps and procedures
necessary to conclude
its work.”
Statement of the Audit
Committee Chairman
Dear Shareholder,
On behalf of the Board, I am pleased to
present the Audit Committee report for
the 52 weeks ended 28 March 2020.
Membership of the Committee has changed
across the period but at all stages the
Committee has adapted, and adopted all steps
and procedures necessary to conclude its work.
As we report, with the full complement of
independent Non-Executive director members
supplying the Committee with a range of
experience covering Finance, Operations and
Retail, I am confident that the members have
the requisite skills and experience to fulfil the
responsibilities of the Committee.
The Audit Committee’s scheduled plan for
the year was heavily augmented in the first
half of the year by necessary additional
considerations following the implementation
of the new ERP system and the sale of the
Fuller’s Beer Business.
The closure of the estate in March has
curtailed some of the activities and reports
to the Committee that were planned, but
has facilitated fuller consideration of the future
structure of finance, internal audit and risk
management to better support the new shape
of the business, following the sale of the
Fuller’s Beer Business, as a premium pubs
and hotels operator.
In the second half of the year, the Financial
Reporting Council (“FRC”) undertook a
review of Grant Thornton UK LLP’s audit of
the Company’s financial statements for the year
ended 30 March 2019. The Committee has now
received the FRC’s report setting out the scope
of their review, their principal findings, and
Grant Thornton’s proposed actions to those
findings. The Committee reports on the FRC’s
findings below.
Juliette Stacey
Chair of the Audit Committee
30 July 2020
53
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Audit Committee Report
Continued
Committee Membership and
Meeting Attendance
The Committee normally comprises a
minimum of three independent Non-
Executive Directors and details of the
meetings are set out on page 51. In the
period between Peter Swinburn leaving the
Board and Robin Rowland joining the Board,
the Committee comprised only two members.
The Committee is advised internally by the
Company Secretary, Séverine Béquin, who
also acts as secretary to the Committee.
In addition to the four meetings normally
scheduled, several additional meetings were
required in the year, and by necessity, a
number of these were held by conference call.
All meetings are attended by the external
Auditors, the Chairman, the Chief Executive
and the Finance Director. Members of
the finance and risk management team also
attend relevant meetings at the Committee
Chairman’s request, and reports are received
on occasion from other members of the
management team as required by the agenda.
The Committee Chairman encourages
comprehensive debate and scrutiny of
reports received from management and the
external Auditor by the Committee members.
The Committee meets at least once a year with
the external Auditor, without management
present, to discuss any matters they may
wish to raise.
Role and Responsibilities of the
Audit Committee
The Audit Committee’s responsibilities
are outlined in the Committee’s terms
of reference which are available on the
Company’s website. The terms of
reference were last reviewed in early 2018.
The Committee will review them against the
requirements of the 2018 Code this year.
The Committee has a meeting planner which
sets out the key items to be covered at its
regular meetings which include reviewing the
financial statements and announcements,
monitoring changes in accounting practices
and policies and reviewing decisions with a
significant element of judgement.
In addition, the Audit Committee is
responsible for ensuring that the Company’s
risk monitoring programme, internal audit
processes and regulatory compliance are
appropriate. At all scheduled meetings an
update on risk management is presented.
The Committee encourages debate and
discussion of topical issues outside of the
routine agenda items and ensures that such
discussions are held at least twice a year in
the normal course. The effectiveness of
the Committee formed part of the Board
evaluation process described in the Corporate
Governance Report on page 52.
Financial Reporting and Significant Judgment
The Committee monitors the integrity of the
financial information published in the interim
and annual financial statements and considers
the extent to which suitable accounting policies
have been adopted, presented and disclosed.
During its review of the Group’s financial
statements for the period to 28 March 2020,
the Audit Committee has reviewed the key
judgements applied in the preparation of the
consolidated financial statements, including
those communicated by the Auditors during
their reporting. These are described in the
accounting policies detailed in note 1 to the
financial statements. The Board was made fully
aware of any significant financial reporting
issues and judgements made in connection
with the preparation of the financial statements.
This financial year, these judgements included
the accounting for the sale of the Fuller’s Beer
Business, the return of capital to shareholders,
the acquisitions made in the year and the
application of IFRS 16 Leases.
The key issues and judgements considered
by the Audit Committee are detailed in the
accompanying table:
Key accounting judgement
How the issue was addressed
Separately Disclosed
Items
The Audit Committee considered the nature of items classified as “separately disclosed items” in the financial
statements. The Committee was satisfied that the items management proposed to be shown as separately disclosed
items were not linked to the underlying trading of the Group. Separately disclosed items include:
– the net gain recognised on the sale of the Fuller’s Beer Business to Asahi Holdings Europe Limited
– replacement of core IT systems costs
– profit or loss on property disposals
– transaction costs on site acquisitions both completed and aborted
– impairment on properties, right-of-use assets and goodwill
– net movement on revaluation of financial instruments that do not meet the requirements for hedge accounting
– net interest expense on the Group’s defined benefit pension plan.
In addition, the Committee reviewed these disclosures within the 2020 Annual Report and Accounts to ensure they
clearly identified and reconciled to the relevant GAAP measure.
The Committee considered the proposed impairment of property assets, right-of-use assets and goodwill for both the
Half Year Report and the Annual Report. The Committee was satisfied with the approach presented by management
and the judgements made for those properties at risk of impairment.
Impairment Testing
of Intangible Assets,
Right-of-Use Assets
and Property, Plant
and Equipment
54
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Key accounting judgement
How the issue was addressed
Pension Accounting
The pension liability is sensitive to the actuarial assumptions applied in measuring future cash outflows. The use of
assumptions such as discount rate and inflation which have an impact on the valuation of the defined benefit pension
scheme, was assessed by the Committee. The Committee was satisfied with the proposed accounting treatment and
disclosures of the Group’s defined benefit plan in the financial statements.
Acquisition Accounting The Committee considered the fair values of the assets and liabilities recognised in the financial statements on the
Going Concern
IFRS 16
acquisition of Cotswold Inns & Hotels Limited. The Committee was satisfied with the approach presented by
management and the judgements made in the calculation of the fair values of the assets and liabilities.
The Committee considered the appropriateness of the going concern assessment and associated judgements around
material uncertainties. The Committee reviewed the scenarios and mitigations available to the Group as disclosed in
note 1 and are satisfied the disclosures are appropriate.
The Group implemented IFRS 16 Leases during the year using the modified retrospective method. The transition
adjustments required judgement to determine the discount rate applied in calculating lease liabilities, specifically
in assessing the Group’s Incremental Borrowing Rate (“IBR”). The Committee reviewed a management paper and
challenged the judgement and estimates used in the calculation of the transition adjustments and concurred that
the IBR applied by the Group was appropriate. Due to the significance of IFRS 16 the Committee has chosen to
disclose pre and post IFRS 16 results to enable better comparison with the prior year.
Going Concern and Viability Statement
The Audit Committee assessed the going
concern and viability reviews undertaken by
management as detailed in the Financial Review
on page 31. The Committee was satisfied with
the approach presented by management
including the judgements made in the estimation
of future cash flows, the Group’s financing and
considering the high proportion of freehold
property that underpins the estate.
Fair, Balanced and Understandable
The Audit Committee has responsibility for the
oversight of the external audit function. At the
request of the Board, the Audit Committee
provides confirmation to the Board as to how
it has discharged its responsibilities so that
the Board can be satisfied that information
presented in the Annual Report is fair,
balanced and understandable.
Internal Control and Risk Management
The Board has overall responsibility for
the Group’s system of internal control
and management of risks and reviewing
its effectiveness. The system was designed
to provide reasonable but not absolute
assurance of:
– the mitigation of risks which might
cause the failure of business objectives
– no material misstatements or losses
– the safeguarding of assets against
unauthorised use or disposal
– the maintenance of proper accounting
records and the reliability of financial
information used within the business
or for publication
– compliance with applicable laws and regulations.
The Directors’ statement on the Company’s
system of internal controls is set out below.
Early in the year the Committee discussed
the Company’s risk management process,
a selection of individual risks from the risk
register, the internal audit work completed
during the year and progress on actions arising
from both risk management and internal audits.
This year, the focus has continued to be on
critical matters, such as the implementation
and operation of the ERP system and the
sale of the Fuller’s Beer Business with the
operation of the Transitional Services
Agreement until 27 April 2020.
Other matters pertinent to the operations
of the Group, such as food safety and the
increasing risk of allergens, have been the
focus of detailed reviews in the year with
policy and procedural updates as necessary.
The Group maintains business continuity plans
and tests these plans on an annual basis, usually
towards the end of the financial year. Due to
the coronavirus pandemic and the closure of
the estate before the year-end, it was not
possible to carry out the annual exercise for
the financial year ended 28 March 2020.
The Board and Audit Committee consider the
rapid and thorough response to the coronavirus
pandemic by the Executive Committee, and
broader management team, as solid evidence of
the effectiveness of existing disaster recovery
and business continuity plans.
Management within the Finance Department
are responsible for the appropriate maintenance
of financial records and processes that ensure
all financial information is relevant, reliable,
in accordance with the applicable laws and
regulations, and distributed both internally
and externally in a timely manner.
The implementation of a new ERP system in
October 2018 and the subsequent process of
disposing of the Fuller’s Beer Business which
straddled 2019 and 2020 have remained an
area of focus for the Finance Department
during this financial year.
Throughout that period, the Executive
Committee provided relevant and timely
financial commentary to the Board to
supplement the financial reporting, ensuring
the Board and the Audit Committee were
informed of the financial position and results
of the Group.
55
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Audit Committee Report
Continued
The Group does not have a formal internal
audit function. The Group employs a team
of retail business auditors who monitor the
controls in the Managed Pub estate, The
Stable sites and Bel & The Dragon sites, in
particular those over stock and cash with
relevant management attending the Audit
Committee meetings twice a year to discuss
the issues being addressed. After review by the
Audit Committee, the Board has confirmed
that it believes that the existing arrangements
for internal audit remain appropriate.
Management may from time to time augment
the internal resource for these audits with
specialist external resources.
Whistleblowing
The Committee is responsible for reviewing
the arrangements by which staff can raise
concerns, in confidence, about any possible
improprieties relating to financial reporting
or other matters.
The Committee has reviewed the policy in the
year and ensured it has been widely published
and reissued regularly in order to maintain a good
awareness of the whistleblowing arrangements
throughout the Company. The policy enables
staff to raise any concerns in confidence, directly
with the Chairman of the Audit Committee.
The Committee is satisfied the policy has been
effective during the year with good visibility of
any issues raised.
External Auditor Performance
The Audit Committee has considered the
performance of Grant Thornton during
the year and is satisfied that the level of
communication and reporting is in line
with expectation and requirements.
The Audit Committee ensures that evaluation
of the audit planning, process, and reporting is
combined with confirming the quality of the
financial statements, remaining informed and
satisfied of the auditors identification of audit
risks, the setting of materiality and planning of
the work and judgements made throughout
the audit.
Financial Reporting Council’s audit
quality inspections
Each year, the Audit Quality Review team
(“AQR”) of the FRC issues a report setting
out the principal findings of audit quality
inspections conducted in the previous calendar
year across a sample of audits of all major
firms. The report highlights improvements
required to promote audit quality and areas
of good practice in support of their objective
to monitor and promote improvements in
the quality of auditing.
The FRC publishes separate reports on the
individual firms, including Grant Thornton.
In response to the FRC’s 2018/19 report
Grant Thornton commented that the firm’s
Audit Improvement Plan which they started
to develop in late 2018, incorporates a root
and branch change programme to ensure that
the firm’s 2021 report meets the FRC target
of audits being at a standard of good (or with
limited improvements).
The Board and Audit Committee have
considered the effectiveness of the Group’s
system of internal control taking account of
material changes in the operations of the
Group following the sale of the Fuller’s Beer
Business, the coronavirus pandemic and
further relevant developments since the
year end such as the implementation of the
coronavirus Job Retention Scheme and,
more recently, the Group’s reopening plans.
Key elements of the system of internal control
designed to address significant risks and
uncertainties, as documented on pages 32
to 34, include:
– clearly defined levels of responsibility and
delegation throughout the Group, together
with well-structured reporting lines up to
the Board
– the preparation of annual budgets for each
division, including commentary on key
business opportunities and risks, approved
by the Executive Committee and further
reviewed by the Board on a consolidated
basis
– an Executive Committee review of actual
monthly results against budget, together
with commentary on significant variances
and updates of both profit and cash flow
expectations for the year
– detailed investment approval process
requiring Board authorisation for all
major projects
– post-implementation appraisals of major
capital expenditure projects
– regular reporting of legal and accounting
developments to the Board
– regular review of the Group’s risk register
and discussion of significant risks by the
Board and Audit Committee, which among
other things takes account of the
significance of environmental, social and
governance matters to the business
– monitoring of accident statistics and the
results of health and safety audits.
56
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The Committee has confirmed to the Board that
it recommends to shareholders the re-election
of Grant Thornton UK LLP. The Committee
intends to undertake a review of the external
audit appointment during the year.
Accountability
The Committee imposes an upper limit of
£50,000 per annum on the amount that the
finance team can spend with the auditors for
non-audit items without specific approval
from the Committee. It is Group policy to
seek quotations from multiple providers for
significant non-audit services and only to
appoint the provider (which could then be the
Auditors) that offers the best combination of
price and expertise. In 2020, the fees paid
to Grant Thornton UK LLP for audit services
were £345,000 including £39,000 for
non-recurring audit services, other assurance
services were £1,000 and non-audit related
services were £1,500.
Juliette Stacey
Chair of the Audit Committee
30 July 2020
AQR review of Fuller, Smith and Turner’s
2019 audit by Grant Thornton
During the year, the 2019 audit of Fuller’s was
reviewed by the FRC’s AQR. Certain matters
for improvement were identified, though these
were limited in comparison to the scope of the
AQR as set out in the FRC’s letter to the
Audit Committee’s Chairman.
The matters for improvement included the
audit team’s risk assessment of certain key
audit risks, sufficiency of certain audit
procedures, completing all planned testing as
well as supplementing this with further sample
testing of certain items and how the audit team
should ensure that quality control and review
procedures identify where procedures have
not been performed.
The Audit Committee and Grant Thornton
have discussed the issues identified and the
firm’s proposed action and are satisfied with
their responses to be implemented in the
2020 audit. Overall, the results of the review
raised no issues which cast doubt on the
fundamental quality of Fuller’s external audit
and the Committee remains satisfied with the
efficiency and effectiveness of the audit.
The Audit Committee has a primary
responsibility for making recommendations
to the Board on the re-appointment and
removal of external auditors. The Company
put the role of the auditors to tender during
2013 and following tenders from three firms
for audit services, the Group appointed Grant
Thornton UK LLP. The Audit Partner rotated
as usual, taking effect for 2019. Since the
interim results for 2020 were reported,
Grant Thornton have appointed a new audit
partner with the Board’s full approval.
57
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
“During the year the
Committee undertook
a review of the
Remuneration Policy
to ensure that it continues
to support our strategy
of achieving long-term
sustainable value creation
for our shareholders.”
Dear Shareholder,
On behalf of the Board, I am pleased to
present the Remuneration Report for the
52 weeks ended 28 March 2020, which
includes our revised Directors’ Remuneration
Policy (“Policy”) which will be put to
shareholders for approval at the AGM
on 10 September 2020.
Remuneration for 2019/20
In April 2019 Fuller’s completed the sale of
its Beer Business to Asahi Europe Limited
with part of the proceeds being returned to
shareholders. Going forwards Fuller’s will be
a focused, premium pub and hotel operator
with the aim of achieving long-term sustainable
shareholder value creation though operational
excellence and the continued investment in
our high-quality estate.
We made good progress against this strategy
during the year, delivering excellent revenue
growth and receiving positive customer
feedback while our sites remained opened.
In October 2019, we completed the
acquisition of Cotswold Inns & Hotels adding
a number of high-quality sites to our portfolio
positioning the business for further growth.
The outbreak of coronavirus and the steps
taken by the UK Government to limit its
spread, including the enforced closure of pubs
and hotels, has had a significant impact on the
business. The Chief Executive and Chairman’s
statements on pages 8 and 2 outlined this
impact in more detail and the steps the Group
has taken to mitigate this. As part of these
actions, the Executive Directors and Non-
Executive Directors have volunteered to
temporarily reduce their salary and fees
by 25% to support the business in managing
costs. With the estate gradually reopening,
salaries and fees reverted to normal with effect
from 1 July 2020.
The annual bonus for the year was based
two-thirds on Group adjusted profit before tax
("Adjusted profit") performance and one-third
of the Group’s like for like sales performance
compared to growth in the Coffer Peach
Business Tracker which includes other
companies in managed pub, restaurant and bar
sector in the UK. Adjusted profit performance
targets were not met. To the end of February
2020, the Group was tracking for like for like
sales growth to exceed the Peach Tracker by
more than 2% and therefore this element of
the annual bonus was due to pay-out in full.
However, in light of the broader business
circumstances following the outbreak of
coronavirus, the Committee and the Executive
Directors have agreed that it is not appropriate
to pay this portion of the annual bonus.
LTIP awards granted in 2017 were based on
Group adjusted earnings per share ("EPS")
performance for the financial year 2019/20.
The EPS targets were not met and therefore
these awards will lapse. The Committee did not
exercise discretion in relation to LTIP outcomes.
Directors’ Remuneration Policy review
It has been a number of years since Fuller’s
has undertaken a detailed review of executive
directors’ remuneration. In light of this, in
late 2019 and early 2020 the Committee
undertook a full review of the current policy to
ensure that our approach remains appropriate
to support our strategy of achieving long-term
sustainable value creation for our shareholders
and to ensure that our remuneration
arrangements appropriately reflect best
practice and shareholder expectations.
For Executive Directors, Fuller’s currently
operates an annual bonus plus a long-term
incentive plan. The Committee continues
to believe that this framework is appropriate
for the Company and the Committee has not
made any changes to the overall remuneration
framework. We are, however, proposing a
number of changes to the policy to better
reflect the size and complexity of the
organisation, the introduction of the 2018 UK
Corporate Governance Code as well as evolving
shareholder expectations and best practice.
58
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. This review was undertaken prior to the
coronavirus outbreak and the Committee
considered whether it was appropriate
to continue with the proposed changes.
The Committee concluded that given the
policy framework is intended to apply for
the next three years, the strong level of
shareholder feedback and the enhancements
made to governance features, that it remained
appropriate to seek shareholder approval for
the revised Policy. However, in light of the
coronavirus outbreak and the impact of this on
the business for the current financial year, the
approach to implementing the policy for
2020/21 has been modified.
The proposed changes to our remuneration
policy are summarised below.
Repositioning of incentive opportunities
to better reflect our size and complexity
As noted above it has been a number of years
since the Company last undertook a review of
remuneration arrangements and therefore our
incentive opportunities have fallen behind
typical market practice for a company of
our size and complexity.
The Committee has therefore amended
the policy to increase the annual bonus
opportunity from 75% of salary to 100% of
salary. Any bonus earned above 75% of base
salary would be deferred into shares for a
period of three years to support executive
shareholdings and alignment with shareholder
interests. The Committee has also amended
the policy to increase the LTIP opportunity
from 110% of salary (82.5% of salary for the
Retail Director) to 125% of salary.
The Committee believes that these revised
incentive opportunities are a more appropriate
reflection of a company of our size and
complexity. Following these incentives total
compensation will be positioned at between
lower quartile and median compared to other
companies of a similar size in our sector.
Governance changes
In addition to the changes outlined above
the Committee has also made the following
changes to better align with best practice and
to reflect the changes to the UK Corporate
Governance Code.
– Holding period introduced – A post-vesting
holding period has been introduced for LTIP
awards such that executive directors will be
required to hold any vested LTIP shares for
two years following the end of the three-
year performance period
– Shareholding guidelines increased –
Executive directors’ shareholding guideline
will be increased from 100% of base salary
to 200% of base salary to enhance
alignment with shareholders over the
long-term and to align with shareholder
expectations. Executive directors will be
expected to retain at least 50% of the
post-tax value of any vested LTIP shares
until their guideline has been reached
– Post-employment shareholding guidelines –
A post-employment shareholding guideline
has been introduced. Following stepping down
from the board Executive Directors will be
expected to maintain a minimum shareholding
of 200% of salary (or actual shareholding if
lower) for the first 12 months and 100% of
salary (or actual shareholding if lower) for the
subsequent 12 months. This guideline applies
to shares that vest following the adoption of
this guideline. Any shares purchased by the
executives would not be subject to the
guideline. The Committee believes that this
proposed approach encourages Executive
Directors to continue to retain an appropriate
level of shareholding in the Company
following their departure from the business.
This will ensure that their interests remain
aligned with shareholders and in support of
long-term decision making
– Pensions for new hires – for any new
Executive Directors appointed to the Board
from 1 April 2020 the pension opportunity
will be in-line with the maximum employer
contribution available for the majority of
the workforce
– Malus and clawback – malus and clawback
provisions will be expanded to reflect a
broader range of circumstances including
where payments are based on erroneous or
misleading data, corporate failure and
serious reputational damage
– Discretion – the Committee has included in
incentive arrangements the ability to exercise
discretion to adjust incentive pay-outs (both
upwards and downwards) if the original
outcome is not considered to reflect the
underlying performance of the Company or
the participant over the period, the outcome
is not considered appropriate in the context
of circumstances that were unexpected
or unforeseen at the time the targets were
set or in the context of the experience
of shareholders or other stakeholders.
As part our review of remuneration policy,
I consulted with our largest shareholders
and I am pleased with the level of support we
received for the changes we proposed to bring
our approach to remuneration more in-line
with typical practice of other similar sized
FTSE listed businesses.
Implementation of Remuneration Policy
for 2020/21
In determining its approach to implementing
the remuneration policy for 2020/21 the
Committee has sought to ensure that it
reflects the business circumstances and
the experience of our shareholders while
continuing to motivate executives to ensure
that the business recovers as quickly and as
efficiently as possible from the enforced
closures following the coronavirus outbreak.
Base salaries
Base salaries for Executive Directors will
not be increased from 1 June 2020 and will
therefore remain as follows: Chief Executive
– £500,000, Finance Director – £315,000
and Retail Director – £200,000. As noted
above from 1 April 2020, the Executive
Directors have volunteered to temporarily
reduce their salary by 25% and the Non-
Executive Directors a similar temporary
reduction to their fees. With the estate
gradually reopening, salaries and fees reverted
to normal with effect from 1 July 2020.
59
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
I hope that you find the report clear and
comprehensive and that it helps demonstrate
how the remuneration of your Directors is
very much linked to the performance of your
Company, and that you are able to support the
resolutions on remuneration being presented
to you at this year’s Annual General Meeting.
Helen Jones
Chair of the Remuneration Committee
30 July 2020
Annual bonus
We will not be operating an annual bonus
for the first half of the financial year as
the Committee did not consider that it was
appropriate to operate a scheme while our
business remained closed and we continued
to receive support from the UK Government
with most of our workforce being furloughed.
Our intention is to operate a pro-rata annual
bonus (maximum 50% of salary) for the second
half of this financial year if it is considered
appropriate to do so at the time. The Committee
will look to set bonus measures and targets at the
start of the second half of the financial year.
These will be outlined in next year’s Director’s
Remuneration Report.
LTIP
The Committee intends to continue to
grant LTIP awards for 2020/21 to ensure that
management are aligned with shareholders and
incentivised to deliver long-term performance.
Awards will be granted at the revised policy
level of 125% of base salary. The Committee is
aware of shareholder guidance regarding
reviewing award levels where there has been a
fall in share price. We are not planning to grant
awards until September. The Committee will
therefore continue to monitor the share price
and will determine final award levels prior to
grant, taking into account the share price at
that point and the need to continue to
motivate and retain management.
The LTIP will be based on pre-tax EPS
performance as the Committee considers
that this provides a clear objective for
management and supports our strategy.
The portion of the LTIP award that vests for
threshold performance will be reduced from
40% of maximum to 25% of maximum to
reflect feedback from shareholders. In order to
simplify the approach to target setting and to
provide greater transparency for management
and shareholders, going forward EPS targets
will be set on an absolute basis rather than
relative to RPI. For 2020 LTIP awards,
EPS targets have been set as absolute pence
targets for 2022/23 in light of the impact of
coronavirus on the base year and to provide a
clear focus for management on the required
level of performance. For this year’s LTIP
awards, 25% will vest for pre-tax EPS of 50.16
pence with 100% for pre-tax EPS performance
61.09 pence (straight-line vesting in between).
60
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Report on Directors’ Remuneration Policy
The following table sets out our Remuneration Policy for Directors (the "Policy"). This policy will be put forward to shareholders for their binding
approval at the Annual General Meeting to be held on 10 September 2020 and will apply to payments made from this date.
The Committee believes that our Policy is clear and transparent and aligned with our culture. We operate a simple incentive framework of an annual
bonus and a LTIP only. Award levels are capped with pay-out linked to performance against a limited number of measures which are well linked to
our strategy. Stretching but fair targets are set. This ensures that potential reward outcomes are clear and aligned with performance achieved, with
the Committee having the discretion to adjust pay-outs where this is not considered to be the case.
Pay levels are set taking into account external market levels as well as internal practice to ensure pay remains competitive while being equitable
within the Company. Malus and clawback and discretion provisions, LTIP holding periods and shareholding guidelines, including post-employment,
are in place to mitigate reputational and other risk.
Further details regarding the operation of the Policy for the current financial year can be found on pages 66 to 71. Details of how the previous
Policy was applied for the financial year ended 28 March 2020 can be found on pages 71 to 80.
Executive Directors (“Executives”)
Purpose and how the
element supports the short
and long-term strategic
objectives of the Company
Operation
Element
Base Salary To recruit, retain and
reward high calibre
Executive Directors to
deliver the Company’s
strategy. The salary will
reflect each role, the
importance of that
role to the business and
the experience the
individual brings to it.
The Committee sets base salary taking
into account:
– the individual’s skills, experience and their
performance
– salary levels at other companies of a similar
size and complexity
– pay and conditions elsewhere in the Group.
Any salary increases are normally effective
from 1 June.
Performance measures
and reason for selection
Not applicable.
Maximum opportunity
Whilst there is no maximum
salary, increases will normally
be in line with the typical
increases awarded to other
employees in the Group.
However, increases may be
above this level in certain
circumstances such as:
– where an Executive Director
has been appointed to the
Board at a lower than typical
market salary to allow for
growth in the role, larger
increases may be awarded
to move salary positioning
closer to typical market level
as the Executive Director
gains experience
– where an Executive Director
has been promoted or has
had a change in
responsibilities
– where there has been a
significant change in market
practice or the size and
complexity of the organisation.
61
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
Element
Benefits
Purpose and how the
element supports the short
and long-term strategic
objectives of the Company
To recruit and retain
Executive Directors
by providing
competitive benefits
which also protect
Executives and
provide preventative
care for them.
Annual
Bonus
To incentivise
Executive Directors to
deliver performance in
line with the Group
strategy and to
align their interests
with those of
shareholders.
62
Operation
The Company offers Executives a range
of benefits which include:
– car allowance
– life assurance
– private medical insurance
– subscriptions to professional bodies or
other relevant organisations
– regular medical check-ups
– permanent health insurance.
Executive Directors may participate in the Share
Incentive Plan or Savings Related Share Option
Plan or any other all-employee plans on the
same basis as other eligible employees up to
HMRC-approved limits.
The Committee may introduce other benefits
if it is considered appropriate to do so.
Executive Directors shall be reimbursed for all
reasonable expenses and the Company may
settle any tax incurred.
Where an Executive Director is required to
relocate to perform their role, the appropriate
one-off or ongoing benefits may be provided
(e.g. housing, schooling, etc.).
Any bonus earned of up to 75% of salary will
normally be paid in cash following the year-end.
Any bonus earned in excess of 75% will normally
be deferred into shares under the Bonus and
Deferred Bonus plan for three years subject
to continued employment.
The Committee may decide to pay the
entire bonus in cash where the amount to be
deferred into shares would, in the opinion of
the Committee, be so small it is administratively
burdensome to apply deferral.
Bonuses are not pensionable.
Bonuses are based on annual performance
targets.
The Committee may, in its discretion adjust
annual bonus payments if it considers that
the outcome does not reflect the underlying
financial or non-financial performance of
the participant or the Group over the relevant
period or that such payout level is not
appropriate in the context of circumstances
that were unexpected or unforeseen when the
targets were set. When making this judgment
the Committee may take into account such
factors as the Committee considers relevant.
Malus and clawback provisions apply, detailed
on page 65.
Performance measures
and reason for selection
Not applicable.
Maximum opportunity
The cost of the provision of
allowances and benefits varies
from year to year depending on
the cost to the Company and
there is no prescribed maximum
limit. However, the Committee
monitors annually the overall
cost of the benefits provided,
to ensure that it remains
appropriate.
Maximum annual bonus
opportunity of 100% of
base salary.
Normally 50% of the bonus
shall pay out for on-target levels
of performance. The annual
bonus normally starts to accrue
for meeting threshold levels
of performance.
The Committee
shall determine
performance measures
for the bonus each year.
These may include
financial measures (for
example profitability)
and other metrics linked
to the delivery of the
business strategy.
No less than 70% of the
annual bonus will be
based on financial
measures.
The Committee has the
discretion in exceptional
circumstances to adjust
the performance targets
and/or set different
measures if events occur
outside of management’s
control or where
the target no longer
satisfies its original
purpose to ensure that
pay is aligned with
performance.
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Purpose and how the
element supports the short
and long-term strategic
objectives of the Company
Element
Share Options
Operation
Maximum opportunity
Long-Term
Incentive
Plan
(“LTIP”)
To reward the efforts
of Executive Directors
in line with the
Company’s objective
of creating
shareholder value and
support alignment
with shareholder
interests.
Awards can be in the form of conditional
shares or in such other form that the Committee
determines has the same economic effect.
Awards can be over ‘A’ (listed), and ‘B’ and ‘C’
(unlisted) ordinary shares and the Committee
may alter the distribution between the different
classes of shares, provided that there is no
increase in the aggregate market value of
the award.
The LTIP also acts as
a retention tool.
Awards normally vest based on performance
assessed over a period not shorter than
three years.
The maximum annual award
in respect of a financial year
is 125% of base salary.
Normally 25% of awards vest
for threshold levels of
performance.
Performance measures
and reason for selection
Awards granted in
2020/21 will vest
subject to pre-tax EPS
performance which will
normally be measured
over a period of three
years.
The Committee may use
different performance
measures for future
awards it is deemed
appropriate.
Awards granted from 2020/21 onwards will
normally be subject to a post-vesting holding
period of two years following the end of the
performance period.
The Committee may, in its discretion, adjust
LTIP vesting levels if it considers that the
outcome does not reflect the underlying
financial or non-financial performance of the
participant or the Group over the relevant period
or that such vesting level is not appropriate in the
context of circumstances that were unexpected
or unforeseen when the targets were set or in
the context of the experience of shareholders or
other stakeholders. When making this judgment,
the Committee may take into account such
factors as the Committee considers relevant.
Malus and clawback provisions apply, as detailed
on page 65.
A tax-advantaged market value share
option plan.
Executive Directors may be granted market
value options up to a maximum total value set
by HMRC.
Options vest based on performance over a
three-year period.
Once vested, options must be exercised before
the tenth anniversary of grant.
Executive
Share
Option
Scheme
(“ESOS”)
To align the interest of
Executive Directors
with those of
shareholders.
Executives may be granted
and hold options up to the
maximum value set by HMRC
(currently £30,000) at any
one time.
An ESOS option will vest in full
if the threshold performance
level is achieved.
The vesting of ESOS
options is subject to
the achievement of
performance conditions
which will normally be
measured over a period of
not less than three years.
The Committee
intends to use EPS as
the performance
condition.
The Committee may,
however, use different
performance measures
if it is deemed appropriate.
63
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
Element
Pension
Purpose and how the
element supports the short
and long-term strategic
objectives of the Company
To provide Executive
Directors with
long-term pension
provisions on a
competitive basis.
Operation
Maximum opportunity
The Company operates a variety of pension
benefits. Executive Directors are either deferred
members of the defined benefit pension plan
– now closed to future accruals – or the
Company’s defined contribution pension plan
or receive a salary supplement or a mixture
of these.
The maximum annual pension
contribution or cash allowance
is 17.5% of base salary
Executive Directors will
normally be expected to make
a net contribution of 8% of
base salary themselves.
Performance measures
and reason for selection
Not applicable.
The Chief Executive is a
member of the main section
of the defined benefit pension
plan which is closed to future
accrual.
For any new Executive
Director to the Board from
1 April 2020, the pension
opportunity will be in line with
the policy for the majority of
the workforce.
Not applicable.
Not applicable.
Share
ownership
guidelines
Align the interests of
Executive Directors
and shareholders
and encourage
long-term
shareholding and
commitment to the
Company both in and
post-employment.
Executive Directors are expected to build and
maintain a holding of shares in the Company
equal to at least 200% of base salary.
Executive Directors are expected to retain 50%
of any post-tax shares that vest under any share
incentive arrangements until this shareholding
is reached.
The Committee also has a policy to promote
interests in shares following cessation of
employment to enable the interest of former
Executive Directors to remain aligned with the
interests of shareholders for an extended period
after leaving employment.
Following ceasing to be an Executive Director,
Executive Directors will normally be expected
to maintain a minimum shareholding of 200%
of base salary (or actual shareholding if lower)
for the first 12 months following departure from
the Board and 100% of base salary (or actual
shareholding if lower) for the subsequent
12 months. The Committee retains discretion
to waive this guideline if it is not considered
appropriate in the specific circumstances.
64
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Purpose and how the
element supports the short
and long-term strategic
objectives of the Company
Element
Non-Executive Directors
Basic and
Additional
Fees
To attract and retain
high calibre Non-
Executive Directors
by offering market
competitive fee levels
that recognise the
time that the
Non-Executive
Directors commit to
their various roles.
Operation
Maximum opportunity
The fees are paid in cash.
The fees paid to the Chairman are determined
by the Remuneration Committee.
There is no maximum fee level
other than as provided by Article
112 of the Company’s articles
of association.
Performance measures
and reason for selection
Not applicable.
The fees paid to the other Non-Executive
Directors are determined by the Chairman
and the Executive Committee.
Fees are set taking into account the time
commitment required to fulfil the role and
typical practice at other similar companies.
The policy in relation to Non-Executive
Directors’ fees is to pay a basic fee for
membership of the Board, and additional fees
for the Senior Independent Director and for
chairmanship of a Committee to take into
account the additional responsibilities and
time commitment of these roles.
Additional fees may be paid to reflect
additional Board or Committee responsibilities
as appropriate (such as liaising with family
shareholders).
Benefits
To provide suitable
arrangements to allow
Non-Executive
Directors to discharge
their duties effectively.
Reasonable costs in relation to travel and
accommodation are reimbursed to the
Chairman and Non-Executive Directors.
The Company may meet any tax liabilities
that may arise on such expenses.
There is no maximum benefit
opportunity.
Not applicable.
The Chairman and Non-Executive Directors
do not participate in incentive schemes.
None of the Non-Executive Directors are
members of any Group pension scheme with
the exception of Michael Turner and Richard
Fuller who are both pensioners of the director’s
section of the defined benefit pension plan.
Both also receive life assurance cover.
The Chairman also receives private medical
insurance.
Additional non-significant benefits may be
introduced if considered appropriate.
Information Supporting the Policy
Malus and clawback
Cash annual bonus payments may be clawed back for a period of three years from the date of payment. Malus and clawback provisions apply
under the Bonus and Deferred Bonus Plan (“BDBP”) and LTIP from award to the third anniversary of the grant date in the case of BDBP awards
and sixth anniversary of the award date for LTIP awards. The circumstances in which malus/clawback may apply are a material misstatement of
financial results, an error in assessing performance or in the information/assumptions used, a material failure of risk management, serious
reputational damage, serious misconduct by the participant, or any other similar circumstances.
65
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
Share plan operation
The Committee will operate the annual bonus, BDBP, LTIP and ESOS in accordance with the Rules of the plans. Awards under any of the Company’s
share plans may:
– have any performance conditions applicable to them amended or substituted by the Committee in circumstances where the Committee
determines an amended or substituted performance condition would be more appropriate and not materially less difficult to satisfy
– incorporate the right to receive an amount equal to the value of dividends which would have been paid on the shares under an award that vests up
to the time of vesting (this provision does not apply to the ESOS). This amount may be calculated assuming that the dividends have been
reinvested in the Company’s shares on a cumulative basis
– be settled in cash at the Committee’s discretion (this provision does not apply to the ESOS). For Executive Directors, this provision will only be
used in exceptional circumstances such as where for regulatory reasons it is not possible to settle awards in shares
– be adjusted in the event of any variation of the Company’s share capital or any demerger, delisting, special dividend or other event that may affect
the Company’s share price.
Summary of Decision-making Process and Changes to Policy
It has been a number of years since Fuller’s has undertaken a detailed review of Executive Directors’ remuneration. During the year the Committee
undertook a full review of the Policy to ensure that our approach remains appropriate to support our strategy of achieving long-term sustainable
shareholder value creation. The Committee continues to believe that the overall framework of an annual bonus and LTIP is appropriate for the
Company. The annual bonus and LTIP opportunity set out in this policy have, however, been increased to better reflect the size and complexity of the
organisation. Changes have also been made to reflect the introduction of the 2018 UK Corporate Governance Code as well as evolving shareholder
expectations and best practice.
In determining the new Remuneration Policy, the Committee followed a robust process which included discussions on the content of the Policy at
Remuneration Committee meetings during the year. The Committee considered input from Management and our independent advisors, as well as
considering best practice and guidance from major shareholders. A summary of the changes to the new Policy compared to the 2017 Policy is set
out below:
– Increase in annual bonus and LTIP opportunity – The maximum annual bonus opportunity has been increased to 100% of salary (previously 75%
of salary) and the maximum LTIP award has been increased to 125% of salary (previously 110% of salary) to better reflect the size and complexity
of the Company
– Bonus deferral – A provision has been introduced such that any bonus earned in excess of 75% of salary will be deferred into shares
– Holding period – From 2020 onwards awards granted under the LTIP will normally be subject to a post-vesting holding period of two years
following the end of the performance period
– Shareholding guideline – The in-employment shareholding guideline for Executive Directors has been increased from 100% of salary to 200% of
salary to reflect best practice and shareholder expectations. A post-employment shareholding guideline has been introduced
– Other changes have been made to the wording of the policy to increase flexibility, to aid operation, to increase transparency and to reflect typical
market practice.
Approved Payments
The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions
available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out above where the terms of the
payment were agreed (i) before the policy set out above came into effect, provided that the terms of the payment were consistent with any applicable
shareholder-approved directors’ remuneration policy in force at the time they were agreed or where otherwise approved by shareholders; or (ii) at a
time when the relevant individual was not a Director of the Company (or other persons to whom the Policy set out above applies) and, in the opinion
of the Committee, the payment was not in consideration for the individual becoming a Director of the Company or such other person. For these
purposes “payments” includes the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the
payment are “agreed” no later than the time the award is granted. This Policy applies equally to any individual who is required to be treated as a
director under the applicable regulations.
66
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Selection of Performance Measures
Annual bonus
The annual bonus performance measures are intended to incentivise Executive Directors to achieve the financial objectives of the Group and deliver
the business strategy. The particular bonus metrics are selected by the Committee each year to ensure that Executive Directors are appropriately
focused on the key objectives for the next twelve months.
LTIP and ESOS
Our long-term strategic objective is to provide long-term sustainable returns for all of our shareholders. It is intended that awards made in 2020/21
will be based on adjusted pre-tax EPS performance to provide a clear incentive for executives to deliver on this objective.
Performance targets for the annual bonus, LTIP and ESOS are set taking into account internal budget forecasts, external expectations and the need
to ensure that targets remain motivational.
Remuneration arrangements throughout the Group
Remuneration arrangements are determined throughout the Group based on the same principle; that the Remuneration policies and practices should
be aligned to Company purpose and values and support the delivery of the strategy and promote long-term sustainable success.
Remuneration outcomes in different performance scenarios
The charts below set out an illustration of the Policy for 2020/21. The charts provide an illustration of the proportion of total remuneration made up
of each component of the Remuneration Policy and the value of each component.
Four performance scenarios have been illustrated for each Executive Director:
Below threshold performance
In-line with expectations
Maximum performance
– Fixed remuneration (base salary, benefits and pension)
– No annual bonus pay-out
– No vesting under the LTIP
– Fixed remuneration (base salary, benefits and pension)
– 50% annual bonus pay-out
– 50% vesting under the LTIP
– Fixed remuneration (base salary, benefits and pension)
– 100% annual bonus pay-out
– 100% vesting under the LTIP
Maximum performance plus 50%
share price growth
– Fixed remuneration (base salary, benefits and pension)
– 100% annual bonus pay-out
– 100% vesting under the LTIP plus 50% share price growth
67
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
The charts have been prepared on the following basis:
– Base salary – the base salary in place at 1 June 2020
– Benefits – based on the disclosed benefits value in the single figure for 2019/20
– Pensions – based on a contribution of 17.5% of base salary
– Bonus – the normal maximum annual bonus is 100% of base salary. For the financial year 2020/21, the intention is that we will operate a bonus
for the second half of the financial year only. For the purpose of the scenario chart the maximum bonus is shown as 50% of base salary
– LTIP – based on the maximum award of 125% of base salary (note the ESOS has not been included on the basis that awards are not granted at
regular intervals).
No payment of dividend equivalents has been assumed. Potential benefits under all-employee share plans have not been included. No share price
growth has been assumed other than where stated.
Simon Emeny – CEO
£000
Adam Councell – Finance Director
£000
Fred Turner – Retail Director
£000
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1,800
52%
14%
34%
1,488
42%
17%
41%
1,050
30%
12%
58%
613
100%
Minimum
In line with
expectation
Maximum Maximum
plus share
price growth
1,200
1,000
800
600
400
200
0
1,142
52%
945
42%
16%
14%
669
29%
12%
393
100%
59%
42%
34%
Minimum
In line with
expectation
Maximum Maximum
plus share
price growth
800
700
600
500
400
300
200
100
0
733
51%
608
42%
16%
14%
433
28%
12%
258
100%
60%
42%
35%
Minimum
In line with
expectation
Maximum Maximum
plus share
price growth
Fixed1
Bonus
LTIP
1 “Fixed” includes salary, benefits and pension.
Remuneration Policy for Newly Appointed Directors
When determining the remuneration package for a newly appointed Executive Director, the Committee would seek to apply the following principles:
– The package should be market competitive to facilitate the recruitment of individuals of sufficient calibre to lead the business. At the same time, the
Committee would intend to pay no more than it believes is necessary to secure the required talent
– New Executive Directors will normally receive a base salary, benefits and pension contributions in line with the policy described on pages 61 to 65 and
would also be eligible to join the bonus and equity incentive plans up to the limits set out in the Policy
– In addition, the Committee has discretion to include any other remuneration component or award which it feels is appropriate taking into account the
specific circumstances of the recruitment, subject to the limit on variable remuneration set out below. The key terms and rationale for any such
component would be disclosed as appropriate in the Remuneration Report for the relevant year
– Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous employer as a result of their appointment, the
Committee may offer compensatory payments or awards, in such form as the Committee considers appropriate, taking into account all relevant factors
including the form of awards, expected value and vesting timeframe of forfeited opportunities. When determining any such “buyout”, the guiding
principle would be that awards would generally be on a “like for like” basis unless this is considered by the Committee not to be practical or appropriate
– The maximum level of variable remuneration which may be awarded (excluding any “buyout” awards referred to above) in respect of recruitment is 225%
of salary, which is in line with the current maximum limit under the annual bonus and LTIP
– Where an Executive Director is required to relocate from their home location to take up their role, the Committee may provide assistance with
relocation (either via one off or on-going payments or benefits)
– In the event that an internal candidate is promoted to the Board, legacy terms and conditions would normally be honoured, including any accrued pension
entitlements and any outstanding incentive awards.
68
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. To facilitate any buyout awards outlined above, in the event of recruitment the Committee may grant awards to a new Executive Director relying
on the exemption in the Listing Rules which allows for the grant of awards, to facilitate, in unusual circumstances, the recruitment of an Executive
Director, without seeking prior shareholder approval or under any other appropriate Company incentive plan.
The remuneration package for a newly appointed Non-Executive Director would normally be in line with the structure set out in the policy table
for Non-Executive Directors on page 65.
Service Contracts/Payments on Loss of Office
When determining leaving arrangements for an Executive Director, the Committee takes into account any contractual agreements including the
provisions of any incentive arrangements, typical market practice and the performance and conduct of the individual.
Executive Directors have rolling service contracts terminable on no more than one year’s notice served by the Company or Director. Our Policy is
that in the event of early termination a payment equal to the salary due for the unexpired period of their notice would be made, payable in monthly
instalments, subject to mitigation. The Committee retains discretion to pay any unexpected notice in the form of a lump sum payment if this is
considered appropriate.
Simon Emeny’s contract has been in place for a number of years. In the event of early termination, he would be entitled to a payment equal to his
base salary and the value of all benefits for the unexpired period of his notice, without any reduction for mitigation.
The Committee may make any other payments in connection with a Director’s cessation of office or employment where the payments are made
in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of settlement of any claim
arising in connection with the cessation of a Director’s office or employment. Any such payments may include but are not limited to paying any fees
for outplacement assistance and/or the Director’s legal and/or professional advice fees in connection with their cessation of office or employment.
Annual Bonus
The Committee may determine that an Executive Director may remain eligible to receive a pro-rata bonus for the financial year in respect of the
period they remained in employment. The Committee will determine the level of bonus taking into account time in employment and performance.
Share Plan Leaver Rules
The treatment of leavers under the Company’s long-term incentive plans is determined by the rules of the relevant plans.
Good leavers*
BDBP
If a participant dies, their BDBP award will vest. If a participant
becomes a good leaver for any other reason, BDBP awards would
normally continue and vest in full on the normal vesting date.
The Committee may exercise discretion to allow awards to vest at the
time of cessation of employment or to pro-rate the vesting level to
reflect the proportion of the vesting period served.
LTIP
If a participant becomes a good leaver, LTIP awards will not lapse,
but will normally be pro-rated to reflect the proportion of the
performance period served and remain subject to performance
conditions. LTIP awards will normally vest on the normal vesting date.
The Committee may determine that LTIP award should vest as soon
as practical following cessation of employment.
ESOS
If a participant dies, ESOS awards will not lapse, but may be exercised
for a period of 12 months following death. If a participant becomes a
good leaver for any other reason, ESOS awards will not lapse, but may
be exercised until six months after the third anniversary of grant (or
six months after cessation if later). ESOS awards will continue to be
subject to performance conditions.
All-employee share plans
Leavers in other circumstances
Awards lapse.
Awards lapse.
If a participant ceases employment during the holding period (other than
in the event of gross misconduct) then awards will normally continue and
be released at the normal release date. The Committee may exercise
discretion to allow awards to be released at the time of cessation of
employment.
Awards lapse.
Leaver provisions are determined in accordance with HMRC-approved provisions.
* Death, ill-health, injury, disability, redundancy, retirement, the sale of their employing entity out of the Group, or for any other reason at the Committee’s discretion.
69
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
Terms and Conditions for the Chairman and Non-Executive Directors
The Chairman and Non-Executive Directors serve the Company on the basis of renewable letters of appointment which can be terminated by
written notice by either party. No compensation is awarded on termination. Letters of appointment are available for inspection at the Annual
General Meeting and at the Company’s registered office.
Service Contracts and Fee Letters
The following sets out the date of Directors service contracts and fee letters:
Executive Directors
Simon Emeny
Adam Councell
Fred Turner
Date of contract
13 January 1999
15 March 2019
23 May 2019
Non-Executive Directors
Date of letter of appointment
Michael Turner
Sir James Fuller
Juliette Stacey
Helen Jones
Richard Fuller d
Robin Rowland*
1 July 2013
1 June 2010
24 March 2018
12 March 2019
1 February 2020
23 March 2020
Notice period
12 months
12 months
12 months
Term expires
June 2022
May 2022
March 2021
March 2023
February 2022
March 2021
* Subject to approval of the re-appointment by the Board of Directors during the period at the Annual General Meeting.
Change of Control
In the event of a takeover or winding up of the Company, share awards may vest early, subject (where relevant) to the extent to which performance
conditions have been satisfied. Awards (other then awards under the BDBP) will normally be pro-rated for time since award unless the Committee
determines otherwise. In the case of a demerger, special dividend or similar circumstances, awards may, at the Committee’s discretion, vest early on
the same basis as for a takeover.
Consideration of Employment Conditions Elsewhere in the Company
The Committee is advised of the proposed annual pay review for staff in advance of them considering the proposed pay reviews for Directors, so
that this can be taken into account when determining Directors’ remuneration for the relevant financial year. Salary increases will ordinarily be (in
percentage terms) in line with those of the wider workforce, and significant variances would only be expected where there had been a significant
change in an individual’s responsibilities or a market review had been conducted which suggested that an individual’s salary was no longer competitive,
or where the Committee wanted to take account of an individual’s performance or experience. The Committee would also be advised if there were
any other key changes to the terms and conditions on which staff are employed.
Consideration of Employee Views
The Committee does not formally consult directly with employees on executive pay or in drawing up the Remuneration Policy but does receive
periodic updates from the People & Talent Director. Share ownership amongst the Company’s employees is encouraged through the SAYE Scheme
and SIP. These tax-advantaged schemes allow employees to participate as shareholders and align their interests with those of the shareholders.
Consideration of Shareholder Views
In developing this Remuneration Policy, the Committee consulted in detail with our largest shareholders and was pleased with the level of support
received for the changes. Our intention is that shareholder views will be are sought when there is any significant change to Directors’ remuneration.
Should shareholders have any concerns about the Remuneration Policy, the Committee Chairman would endeavour to meet with them, as
appropriate, to understand and respond to any issues they may have.
70
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Annual Remuneration Implementation Report
The information on pages 71 to 80 has been audited.
The Remuneration Committee
The Remuneration Committee consists entirely of Independent Non-Executive Directors and the members during the period were Helen Jones
(Chair from 5 June 2019), Juliette Stacey, Robin Rowland (joined the Board and Committee on 24 March 2020), John Dunsmore (Chair and
member to 5 June 2019) and Peter Swinburn (member to 4 September 2019). The Chairman of the Company, Michael Turner, and the Chief
Executive, Simon Emeny, are invited to attend the Committee meetings and to advise, where appropriate, on the remuneration and performance
of the Executive Directors and related matters. The Committee is advised internally by the Company Secretary, Séverine Béquin, who also acts
as Secretary to the Committee.
The Committee’s terms of reference – which were reviewed and updated in March 2018 and are available on the Company’s website – state that
the Committee is responsible for determining the total remuneration package (including pensions, service agreements and termination payments)
of the Executive Directors. The Committee also reviews the remuneration of the members of the Executive Committee in consultation with the
Chief Executive. Members of the Committee have no personal financial interest in the Company, other than as shareholders and Directors.
The Committee’s Advisors
Deloitte LLP was appointed by the Committee during the year to provide the Committee and the Company with advice in connection with
remuneration matters as well as the Company’s LTIP and share option schemes.
Deloitte is a founding member of the Remuneration Consultants’ Group (“RCG”), which is responsible for the development and maintenance of
the voluntary Code of Conduct that clearly sets out the role of executive remuneration consultants and the professional standards by which they
advise their clients. Fees are charged on a time and expenses basis and totalled £43,250 (plus VAT) during 2019/20. During the year Deloitte also
provided other unrelated tax advice to the Company. The Committee is satisfied that advice received from Deloitte during the year was objective
and independent and that all individuals who provided remuneration advice to the Committee have no connections with Fuller’s or its Directors that
may impair their independence. The Committee reviewed the potential for conflicts of interest and judged that there were appropriate safeguards
against such conflicts.
XPS Pension Group provides the Company with advice on matters relating to pensions. XPS Pension Group is authorised and regulated by the
Financial Conduct Authority and its actuaries are also separately required to abide by Actuarial Profession Standards which include the requirement
for them to provide objective and independent advice.
Statement of Implementation of Remuneration Policy for 2020/21
As outlined in the Chair’s statement on pages 58 to 60, the Committee undertook a detailed review of the Directors’ Remuneration Policy
during the year to ensure that the Policy remains appropriate to support our strategy of achieving long-term sustainable shareholder value creation.
Our intention is to continue with the current overall framework of an annual bonus plus a long-term incentive plan. We have, however, made
changes to our incentive opportunities and other parts of our policy to better reflect the size and complexity of the organisation as well as, reflect
the introduction of the 2018 UK Corporate Governance Code and evolving shareholder expectations and best practice.
The outbreak of coronavirus in January and the steps taken by the UK Government to limit its spread has had a significant negative impact on the
economy. The Group has been significantly impacted by the enforced closure of its pub estate and as a result of social distancing measures
implemented in the UK in the later part of 2019/20 and the early part of 2020/21.
In light of this we intend to modify our approach to executive remuneration for 2020/21 to ensure it remains fair and appropriate in the context
of the experience of our shareholder, employees and other stakeholders as we recover from the enforced closures. Our intended approach is
summarised below:
Base salaries
Executive Directors base salaries will not be increased from 1 June 2020 and therefore remain at the following levels:
–
Chief Executive
Finance Director –
–
Retail Director
£500,000
£315,000
£200,000
There has been no change to the fees payable to the Non-Executive Directors which were last reviewed in January 2018.
With effect from 1 April 2020, the Executive Directors and Non-Executive Directors have volunteered to temporarily reduce their salary and
fees by 25% to support the business in managing costs. With the estate gradually reopening, salaries and fees reverted to normal with effect from
1 July 2020.
71
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
Annual bonus
We will not be operating an annual bonus for the first half of the financial year as the Committee did not consider that it was appropriate to operate
a scheme while our business remained closed and we continued to receive support from the UK Government with most of our workforce being
furloughed.
Our intention is to operate a pro-rata annual bonus (maximum 50% of salary) for the second half of this financial year if it is considered appropriate
to do so at the time. The Committee will look to set bonus measures and targets at the start of the second half of the financial year. These will be
outlined in next year’s Director’s Remuneration Report.
LTIP
The Committee intends to continue to grant LTIP awards for 2020 to ensure that management are aligned with shareholders and incentivised to
deliver long-term performance. Awards will be granted at the revised policy level of 125% of base salary. The Committee is aware of shareholder
guidance regarding reviewing award levels where there has been a fall in share price. We are not planning to grant awards until September.
The Committee will therefore continue to monitor the share price and will determine final award levels prior to grant, taking into account
the share price at that point and the need to continue to motivate and retain management.
The LTIP will be based on pre-tax EPS performance as the Committee considers that this provides a clear objective for management and supports
our strategy. The portion of the LTIP award that vests for threshold performance will be reduced from 40% of maximum to 25% of maximum to
reflect feedback from shareholders. In order to simplify the approach to target setting and to provide greater transparency for management and
shareholders, going forward pre-tax EPS targets will be set on an absolute basis rather than relative to RPI. For 2020 LTIP awards, EPS targets have
been set as absolute pence targets for 2022/23 in light of the impact of coronavirus on the base year and to provide a clear focus for management
on the required level of performance.
We want to measure the performance of our Executive Directors against a criterion that aligns the Executive Directors’ interest with the long-term
interests of our shareholders. We believe that an earnings per share measure is more appropriate than a simple profit measure as the latter could
be improved by, for example, the issuance of shares to raise cash or to finance an acquisition having a consequent diluting effect on existing
shareholders’ interests. Additionally, given the aim of encouraging long-term performance, we believe that the earnings per share figure should not
reflect short-term non-trading impacts on profit, whether positive or negative, for example, profits or losses on the sale of freehold properties, or
profits or losses on the disposal of a component business such as the Beer Business, and such items should be adjusted for. Lastly, given that changes
in tax rates are unrelated to Executive Directors’ performance, we believe the any earnings per share measure for the LTIP should be based on
pre-tax earnings.
Pre-tax EPS targets for the 2020/21 awards are proposed as follows:
Pre-tax EPS pence in 2022/23
Straight-line vesting in between.
Target
(25% vesting)
Maximum
(100% vesting)
50.16
61.09
Pension and benefits
There are no changes to the pension and benefits provision for Executive Directors. Executive Directors receive a pension allowance of 17.5%
of base salary. The Committee is aware of shareholder guidance that pensions for Executive Directors should be aligned with the wider workforce.
However, given the current rate for the Executive Directors represents an existing contractual commitment and that their overall pay is towards the
lower end of market practice, the Committee does not consider that it is appropriate to make a reduction at this stage. The Committee will keep this
approach under review.
For any new Executive Directors appointed to the Board from 1 April 2020 the pension opportunity will be in-line with the maximum employer
contribution available for the majority of the workforce.
72
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Implementation of Remuneration Policy for 2019/20
Single Total Figure of Remuneration Table
The following table shows a breakdown of the remuneration of individual Directors who served in all or part of the year:
Salary/Fees
Taxable benefits1
Annual bonus2
LTIP/Options3
Pensions
2020
£000
489
189
167
250
50
162
71
61
3
104
17
21
33
2019
£000
430
–
–
250
50
185
65
5
–
244
200
65
62
2020
£000
2019
£000
2020
£000
25
13
19
26
–
20
–
–
–
10
2
–
–
25
–
–
26
–
23
–
–
–
21
23
–
–
1
–
1
–
–
1
–
–
–
1
50
–
–
2019
£000
156
–
–
–
–
25
–
–
–
58
15
–
–
2020
£000
20194
£000
2020
£000
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
–
2
–
–
–
–
2
–
–
85
33
30
–
–
27
–
–
–
18
3
–
–
2019
£000
75
Total
2020
£000
600
20194
£000
687
–
–
–
–
32
–
–
–
33
17
–
–
235
217
276
50
210
71
61
3
133
72
21
33
–
–
276
50
267
65
5
–
356
257
65
62
Simon Emeny
Adam Councell5
Fred Turner6
Michael Turner
Sir James Fuller
Richard Fuller7
Juliette Stacey
Helen Jones
Robin Rowland8
Jonathon Swaine9
Simon Dodd10
John Dunsmore11
Peter Swinburn12
1 Taxable benefits include car allowances and private medical insurance.
2 Bonus refers to the annual bonus scheme based on performance in the period under review and the value of free shares awarded under the SIP (£993). As detailed below for
2020 the annual performance bonus was zero however several specific project-related bonuses were paid in the year as included in the table above.
3 LTIP/Options includes the value transferred to Directors from the LTIP, ESOS, SESOS and SAYE Schemes. Benefit is calculated as the share price at the year end less the
exercise price multiplied by the number of vested options. Options are considered to have vested if substantially all of the performance criteria have been met in the
financial year, in which case the number of vested options is estimated based on performance against performance measures. The table below sets out how the award is
linked to performance of the Group.
4 The 2019 figures for LTIP/options have been recalculated based on the actual vesting of the LTIP in 2019. Totals for 2019 have been updated accordingly.
5 From his appointment on 27 August 2019.
6 From his appointment on 1 June 2019.
7 Richard Fuller was an Executive Director until 1 February 2020, when he became a Non-Executive Director for which he received fees of £7,500 in the period to 28 March
2020, included in the figure above. In addition, he received payments for loss of office, as detailed on page 78.
8 From his appointment to the Board on 23 March 2020.
9 Until his resignation on 4 September 2019. In addition, he received payments for loss of office, as detailed on page 78.
10 Until his resignation on 30 April 2019. In addition, he received payments for loss of office, as detailed on page 78.
11 Until his resignation on 25 July 2019.
12 Until his resignation on 4 September 2019.
Base Salary
The Committee undertook a detailed review of Executive Directors’ salaries at the beginning of the financial year as it had been a number of
years since salaries had been reviewed. Following this review the Committee determined that it was appropriate to increase the CEO’s salary to
£500,000 per annum from 1 June 2019 to more appropriately reflect the size and the scope of his role and his ability to add value to the business
as a focused, premium pub and hotel operator. The salary for the Retail Director and Finance Director roles were set on appointment to the Board
at £200,000 and £315,000 respectively.
As announced on 3 April the Executive Directors and Non-Executive Directors have volunteered to temporarily reduce their salary and fees from
1 April 2020 by 25% to support the business in managing costs. With the estate gradually reopening, salaries and fees reverted to normal with
effect from 1 July 2020.
Annual Bonus
The annual bonus for the year was based two-thirds on Group adjusted profit before tax (“Adjusted PBT”) performance and one-third of Fuller’s
like for like sales performance compared to the Coffer Peach Business Tracker which includes other companies in managed pub, restaurant and bar
sectors in the UK.
Adjusted PBT performance was significantly impacted by the closure of pubs and hotels in the UK following the outbreak of coronavirus and the
stretching Adjusted PBT performance targets were not met. To the end of February, the Company was tracking for like for like sales growth to
exceed the Peach Tracker by more than 2% and therefore this element of the annual bonus was due to pay out in full. However, in light of the
broader business circumstances following the outbreak of coronavirus, the Committee and the Executive Directors have agreed that it is not
appropriate to pay this portion of the annual bonus.
73
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
The following sets out details of performance against targets set:
Measure
Adjusted PBT performance
Like for Like sales vs. Coffer Peach
Business Tracker
Proportion of bonus
Two-thirds
One-third
Threshold
(10% payable for PBT,
0% for LFL sales)
Target
(50% payable for PBT,
75% for LFL sales)
Maximum (100%)
Actual performance
£34.5m
£37.3m
£40.0m
£19.7m
Performance equal
to Peach Tracker
Performance
equal to Peach
Tracker + 2%
Performance
equal to Peach
Tracker + 3%
more than 3% above
Peach Tracker
LTIP
LTIP awards granted in 2017 were based on Group adjusted earnings per share ("EPS") performance for the financial year 2019/20. The EPS
targets were not met and therefore these awards will lapse. The following sets out details of performance against targets set:
Performance measure
LTIP
EPS vs RPI
Target set
Minimum
(40% vesting)
EPS exceeds
RPI by +9%
Maximum
(100% vesting)
EPS exceeds
RPI by +24%
Value of award
Actual performance
Value of award
-56.9%
Percentage vest of
original grant:
Minimum – 40%
Maximum – 100%
nil% of maximum
award
The Committee did not exercise any discretion in relation to the LTIP outcomes. No portion of the LTIP awards relates to share price growth.
Total Pension Entitlements
Michael Turner and Richard Fuller are pensioners of the defined benefit Company pension plan, which is closed to future accrual, under the
Directors’ section.
Simon Emeny became a deferred member of the defined benefit Company pension plan, under the main section when the plan closed to future
accruals on 1 January 2015. Prior to closure, he received a salary supplement of 17.5% of the excess of his base salary over the earnings cap for
use as part of his retirement planning. Following closure of the pension plan, Simon Emeny is paid a salary supplement of 17.5% of his salary by
the Company which he is required to use as part of his overall retirement planning.
Adam Councell and Fred Turner are paid a salary supplement of 17.5% of their salaries by the Company which they are required to use as part of
their overall retirement planning. They are also required to contribute 8% of their salary to their pension or another investment vehicle.
The Committee considers that the policy operated as intended during the year.
Percentage Change in Remuneration of Chief Executive
The table below shows the percentage change in the remuneration of the Chief Executive compared to that of the average of all of the Group’s
employees taken as a whole between the financial years ended 30 March 2019 and 28 March 2020:
Change in annual salary
Change in taxable benefits
Change in annual bonus1
Chief Executive
Employees
+14.4%
nil%
–36.1%
+2.2%
-1.2%
+0.3%
1 “Change in annual bonus” reflects the increase or decrease in the percentage of annual salary paid out as bonus and excludes the value of free shares awarded under the SIP.
The employee comparator group excludes pub staff and The Stable employees who receive bonus incentives through other bonus incentive schemes. It also excludes staff
who transferred on the disposal of the Fuller’s Beer Business on 27 April 2019 as they were only employed within the Group for one month of the year.
External Directorship Fees
The Board may give approval for Executives to have one Non-Executive role and to retain any related fees paid. Simon Emeny was appointed a
Non-Executive Director of The National Gallery Company Limited on 6 February 2018 for which he does not receive any remuneration. He is
the Senior Independent Director of WH Smith PLC for which he receives a remuneration of £67,000 per annum which he is entitled to retain.
74
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Scheme Interests Awarded During the Financial Year1,2
In respect of the 52 week period ended 28 March 2020 the following LTIPs, share options and SIP awards were granted:
Director
Simon Emeny
Total
Adam Councell
Total
Fred Turner
Total
Richard Fuller
Total
Jonathon Swaine4
Total
Scheme
LTIP
LTIP3
LTIP3
SIP
BDBP
BDBP3
LTIP
ESOS
LTIP
LTIP3
LTIP3
ESOS
SIP
LTIP3
LTIP3
SIP
SIP
Number of
‘A’ shares
Number of
‘B’ shares
Exercise
price per
‘A’ share
Exercise
price per
‘B’ share
Face value at
grant/award
Date of
grant/award
Performance
period ends
45,785
114,464
£9.70
£0.97 £555,145
15/01/20 31/03/22
4,662
4,265
96
4,424
515
11,655
£10.725
£1.073
£62,500
01/10/19
31/03/21
10,663
£10.725
£1.073
£57,178
01/10/19 31/03/20
£10.34
–
£993
16/08/19
–
–
–
–
–
£9.70
£9.61
n/a
–
–
– £50,000 28/08/19
–
£5,523
15/01/20
£731,339
£0.97 £349,735
15/01/20 31/03/22
–
£29,993
15/01/20 31/03/22
£379,728
59,747
136,782
28,844
72,112
3,121
31,965
13,735
–
72,112
34,339
£9.70
£0.97 £166,538
15/01/20 31/03/22
569
144
520
96
1,422
£10.725
360
£10.725
£1.073
£1.073
£7,628
01/10/19
31/03/21
£1,931
01/10/19 31/03/20
–
–
£9.61
£10.34
–
–
£4,997
15/01/20 31/03/22
£993
16/08/19
n/a
15,064
36,121
£182,087
1,504
1,376
96
3,760
£10.725
£1.073
£20,163
01/10/19
31/03/21
3,440
£10.725
£1.073
£18,447
01/10/19 31/03/20
–
£10.34
2,976
7,200
96
96
£10.34
–
–
–
–
£993
16/08/19
£39,603
£993
16/08/19
£993
n/a
n/a
% of award/
grant vesting
at minimum
threshold
40%
40%
40%
n/a
–
–
40%
100%
40%
40%
40%
100%
n/a
40%
40%
n/a
n/a
1 Face values have been calculated using the actual grant prices also shown in the table except for SAYE. For the SAYE Scheme this is based on an average price for the three
days before grant (shown above) although options are granted at a 20% discount.
2 Under the tax-advantaged ESOS only options worth £30,000 may be held at any time.
3 This was an adjustment made to subsisting awards on 1 October 2019 (being the record date for participating in the return of capital) to reflect the value the participants
would otherwise have received. The price used to determine the additional number of shares was the closing ‘A’ share price on 1 October 2019 (being £11.975) less the per
share value of the return of capital (being £1.25). This amounted to £10.725 for A ordinary shares under award and £1.0725 for B ordinary shares under award.
4 On his resignation as a Director on 4 September 2019, all awards made in the year to Jonathon Swaine lapsed.
Share Scheme Interests Outstanding at the Year End
Shares
The Company has Share Ownership Guidelines for Directors which state that Executives should hold shares worth at least 200% of their salary
(increased from 100% of base salary as part of the policy review). Accordingly, until their guideline is met, Executives are expected to retain:
– all shares they hold in the SIP
– all shares they acquire as a result of exercising SAYE options
– all shares that they acquire as a result of exercising options under the tax-advantaged ESOS net of the cost of those options
– at least 50% of any shares that they acquire as a result of exercising options under the non-tax-advantaged SESOS net of the cost of those
options and the costs of settling related tax and National Insurance (“NI”) thereon
– at least 50% of any post-tax and NI vested shares under the LTIP and the BDBP.
Based on the share price on 28 March 2020 of £6.50, Simon Emeny held shares with a value of 287% of salary, Fred Turner held shares with a value
of 472% of salary and Adam Councell held shares with a value of 5% of salary. All of the Executive Directors’ shareholdings therefore already meet
the guideline with the exception of Adam Councell who only joined the Company in August 2019.
75
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
Beneficial
interest at
28 March
2020¹
Non-beneficial
interest at
28 March
2020¹
Beneficial
interest at
30 March
2019
Non-beneficial
interest at
30 March
2019
500
110,913
500
113,509
1,055,684
2,000
2,250
1,471
447,633
99,065
4,324
271,378
2,988,394
624,260
71
88,942
–
–
–
–
–
–
–
–
–
–
–
–
1,055,684
2,000
n/a
n/a
n/a
n/a
n/a
271,378
2,988,394
624,260
71
88,942
–
–
n/a
n/a
n/a
n/a
n/a
–
–
–
–
–
–
–
10,415,881
612,050
9,199,214
2,702,003
–
2,702,003
10,591
500,000
10,094
500,000
3,065,726 10,935,015
3,065,726
10,935,015
20,000
303
1,250
–
–
38,227
180,535
1,991
997
6,484
1,000
23,305
4,000
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
303
1,250
–
n/a
38,131
180,535
1,991
997
6,484
1,000
23,305
4,000
–
–
–
–
n/a
–
–
–
–
–
–
–
–
Directors’ Shareholdings
Directors’ share interests
Simon Emeny
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
‘C’ ordinary 40p shares
Adam Councell
‘A’ ordinary 40p shares
Fred Turner
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
‘C’ ordinary 40p shares
2nd Preference £1 shares
Michael Turner
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
‘C’ ordinary 40p shares
2nd Preference £1 shares
Sir James Fuller
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
‘C’ ordinary 40p shares
Richard Fuller
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
‘C’ ordinary 40p shares
2nd Preference £1 shares
Juliette Stacey
‘A’ ordinary 40p shares
Helen Jones
‘A’ ordinary 40p shares
Robin Rowland
‘A’ ordinary 40p shares
Jonathon Swaine
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
‘C’ ordinary 40p shares
Simon Dodd
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
‘C’ ordinary 40p shares
John Dunsmore
‘A’ ordinary 40p shares
Peter Swinburn
‘A’ ordinary 40p shares
1 Or date of resignation as Director, if earlier.
There were no changes in the beneficial interests of any Director to 30 July 2020, other than the acquisition of 766 ‘A’ ordinary 40p shares by
Helen Jones on 12 May 2020.
76
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Share Options
Director
Scheme
As at
30 March
2019
Exercised
Lapsed
Granted
Simon Emeny
SESOS
5,190
(5,190)
SESOS
SESOS
SESOS
SESOS
ESOS
SAYE
SAYE
Total
Adam Councell ESOS
Total
Fred Turner
Total
ESOS
ESOS
SAYE
ESOS
515
(515)
6,398
(6,398)
9,446
(9,446)
4,945
(4,945)
3,296
3,410
467
33,667
–
–
2,590
489
3,975
–
7,054
–
–
–
–
–
–
–
Richard Fuller
SESOS
2,592
(2,592)
ESOS
SESOS
SESOS
SESOS
ESOS
SAYE
SAYE
SAYE
869
–
3,229
(3,229)
(4,765)
(3,747)
–
(401)
–
–
4,765
3,747
2,588
401
2,713
779
21,683
SESOS
709
(709)
ESOS
4,255
(4,255)
Total
Jonathon
Swaine1
SESOS
SAYE
ESOS
SAYE
SAYE
3,901
2,325
11,190
2,752
1,395
886
5,033
Total
Simon Dodd2
Total
(3,901)
(2,325)
–
(2,752)
(1,395)
–
(640)
(246)
–
–
–
–
–
–
–
–
–
(489)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
As at
28 March
2020
–
–
–
–
–
3,296
3,410
467
7,173
3,121
3,121
Exercise
price
Date
of grant
Exercisable
from
Expiry
date
Price at
exercise date Gain on exercise
£5.78 12/07/10 12/07/13 11/07/20 £10.575 £24,886.05
£6.30 30/11/10 30/11/13 29/11/20 £10.575
£2,201.63
£7.09 20/07/11 20/07/14 19/07/21
£10.575
£22,297.03
£7.05 12/07/12 12/07/15 11/07/22
£10.575
£33,297.15
£9.10 01/07/13 01/07/16 30/06/23
£10.575
£7,293.88
£9.10 01/07/13 01/07/16 30/06/23
£7.74 01/09/16 01/09/21 01/03/22
£7.70 01/09/18 01/09/23 01/03/24
£9.61
15/01/20 15/06/22 14/06/29
£89,975.74
2,590
£9.65 30/06/14 30/06/17 29/06/24
–
£10.23 27/06/16 27/06/19 26/06/26
3,975
520
7,085
–
869
–
–
–
£7.74 01/09/16 01/09/21 01/03/22
£9.61
15/01/20 15/06/22 14/06/29
£5.78 12/07/10 12/07/13 11/07/20
£10.50 £12,234.24
£5.78 12/07/10 12/07/13 11/07/20
£7.09 20/07/11 20/07/14 19/07/21
£10.50
£11,010.89
£7.05 12/07/12 12/07/15 11/07/22
£10.50 £16,439.25
£9.10 01/07/13 01/07/16 30/06/23
£10.50
£5,245.80
2,588
£9.65 30/06/14 30/06/17 29/06/24
–
£7.47 01/09/14 01/09/19 01/03/20
£11.65
£1,676.18
2,713
779
6,949
–
–
–
–
–
–
–
–
–
£7.74 01/09/16 01/09/21 01/03/22
£7.70 01/09/18 01/09/23 01/03/24
£46,606.36
£7.05 12/07/12 12/07/15 11/07/22
£11.65
£3,261.40
£7.05 12/07/12 12/07/15 11/07/22
£11.05
£17,020.00
£9.10 01/07/13 01/07/16 30/06/23
£7.74 01/09/16 01/09/19 01/03/20
£11.65
£11.65
£9,947.55
£9,090.75
£39,319.70
£10.90 29/06/15 29/06/18 28/06/25
£7.74 01/09/16 01/09/19 01/03/20
£11.65
£5,454.45
£8.12 01/09/17 01/09/20 01/03/21
£10.25
£1,363.20
£6,817.65
–
–
–
–
–
–
–
–
3,121
3,121
–
–
–
520
520
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Figures shown are applicable for the period until his resignation on 4 September 2019.
2 Figures shown are applicable for the period until his resignation on 30 April 2019.
The Executive Share Option Scheme (“ESOS”), Savings related share option scheme (“SAYE”) and Share Incentive Plan (“SIP”) are all tax-advantaged share
option schemes.
The Senior Executive Share Option Scheme (“SESOS”) is not a tax-advantaged share option scheme.
Vested but unexercised options
77
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
Directors’ Long-Term Incentive Plan Allocations
Director
Simon Emeny
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
Adam Councell
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
Fred Turner
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
Richard Fuller
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
Jonathon Swaine3
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
Simon Dodd3
‘A’ ordinary 40p shares
‘B’ ordinary 4p shares
Total held at
30 March
20191
Awarded
during
the year2
Vested
during
the year
Lapsed
during
the year
Total held at
28 March
2020
Monetary
value of vest
£0002
112,724
54,712
281,811
136,782
–
–
28,844
72,112
6,120
14,448
15,303
36,121
36,423
91,062
2,880
7,200
–
–
–
–
–
–
–
–
(36,129)
131,307
(90,322)
328,271
–
–
–
–
28,844
72,112
20,568
51,424
(39,303)
(98,262)
48,080
120,203
34,807
87,021
–
–
–
–
–
(48,080)
– (120,203)
–
–
(34,807)
(87,021)
–
–
–
–
–
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 Or date of appointment if subsequent.
2 This includes adjustment to subsisting awards on 1 October 2019 (being the record date for participating in the return of capital) to reflect the value the participants would
otherwise have received. The price used to determine the additional number of shares was the closing ‘A’ share price on 1 October 2019 (being £11.975) less the per share
value of the return of capital (being £1.25). This amounted to £10.725 for A ordinary shares under award and £1.0725 for B ordinary shares under award.
3 On the resignation of Jonathon Swaine on 4 September 2019 and Simon Dodd on 30 April 2019, all of their respective outstanding LTIPs lapsed.
The performance conditions for the LTIP are set out in the table on page 74 of this report.
Payments to Past Directors
There were no payments made to past Directors in the period.
Payments on Loss of Office
At the Extraordinary General Meeting held on 24 April 2019, shareholders approved the following payments to departing Directors. These payments fell
outside the Remuneration Policy but the Remuneration Committee and the Board believed were appropriate to ensure that each Director was treated in
a manner consistent with other employees of the Fuller’s Beer Business who were made redundant, for example by calculating the value of the redundancy
payments in a manner consistent with the formula applied to those employees who were being made redundant as a result of the disposal. In addition, the
Remuneration Committee and the Board believed that the retention bonus paid to Simon Dodd was appropriate and necessary to help ensure the Company
complied with its obligations to ensure the Fuller’s Beer Business, prior to completion of the disposal, carried on in the ordinary and normal course of business.
Following the termination of his employment on 30 April 2019, Simon Dodd received a lump sum payment of £150,000 equal to nine months’ salary
in lieu of notice (less any deductions for tax and national insurance the Company was required to make); an enhanced lump sum redundancy payment
(including statutory redundancy) of £42,308; a retention bonus payment of £50,000; and a contribution of £500 (together with VAT) towards the legal
fees incurred in connection with the termination of his employment, including advice on the terms of a settlement agreement. Simon Dodd obtained
alternative employment and therefore did not receive monthly payment of salary in lieu of notice in respect of months 10, 11 and 12 of his notice periods.
Following the termination of his employment on 4 September 2019, Jonathon Swaine received a lump sum payment of £183,000 equal to nine months’
salary in lieu of notice (less any deductions for tax and national insurance the Company is required to make) and an enhanced lump sum redundancy payment
(including statutory redundancy) of £164,220. Jonathon Swaine received a contribution of £500 (together with VAT) towards the legal fees incurred in
connection with the termination of his employment, including advice on the terms of a settlement agreement. Jonathon Swaine obtained alternative
employment and therefore did not receive monthly payment of salary in lieu of notice in respect of months 10, 11 and 12 of his notice period.
Following the termination of his employment on 31 January 2020, Richard Fuller received an enhanced redundancy payment (including statutory
redundancy) of £206,364. He also received a payment of £237,575 salary and benefits in lieu of notice in respect of his 12-month notice period
(commencing on 1 February 2020) in accordance with the provisions of his service contract. Richard Fuller received a contribution of £500 (together
with VAT) towards the legal fees incurred in connection with the termination of his employment, including advice on the terms of a settlement agreement.
78
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Performance Graph and Table
The graph below shows a comparison of the Total Shareholder Return (“TSR”) for the Company’s listed ‘A’ ordinary shares for the last 10 financial years
against the TSR for the companies in the FTSE All Share. The Company is a constituent of this Index and therefore it is an appropriate choice for this report.
18,300
16,300
14,300
12,300
10,300
8,300
6,300
4,300
2,300
300
Apr 10
Fuller, Smith & Turner P.L.C. 9,616
FTSE All Share 9,151
Apr 11
Apr 12
Apr 13
Apr 14
Apr 15
Apr 16
Apr 17
Apr 18
Apr 19
Apr 20
Fuller, Smith & Turner P.L.C.
FTSE All Share
Source: Thomson Data stream
The table below shows the total remuneration figure for the Chief Executive over the last 10 financial years and the annual bonus and LTIP pay-out
for each year as a percentage of the maximum available:
Single figure total remuneration (£000)
Annual bonus3
LTIP
2011
1,518
70%
85%
2012
944
56%
92%
2013
911
41%
56%
20141
977
77%
64%
2015
1,244
76%
96%
2016
1,418
85%
2017
2018
1,097
1,089
41%
48%
56%
2019
687
48%
nil
20202
600
nil
nil
100%
100%
1 Simon Emeny was appointed as Group Chief Executive in July 2013. This single total figure comprises the remuneration received by Simon Emeny in the financial year,
hence includes remuneration for the three months prior to this promotion.
2 One-third of the annual bonus was due to pay out reflecting the Company’s strong like for like sales performance vs. the Peach Tracker. However, in light of the broader business
circumstances following the outbreak of coronavirus, the Committee and the Executive Directors have agreed that it is not appropriate to pay this portion of the annual bonus.
3 Annual bonus as a percentage of the maximum available.
Relative Importance of Spend on Pay
The graph below shows the total remuneration for the Group’s employees compared to other key financial indicators:
160
140
120
100
80
60
40
20
0
£m
Remuneration
Taxes
payable to
HMRC1
Capital
expenditure &
business
combinations2
Dividends3
Share
buy-backs
2020 2019
1 Taxes payable to HMRC is based upon tax incurred in the year and includes corporation tax, VAT, PAYE, NI, duty, stamp duty, non-domestic rates, property licences,
environmental levies and machine game duty. Duty on the sale of beer only relates to one month for 2020 until the sale of the Fuller’s Beer Business on 27 April 2019.
2 Capital expenditure (including business combinations) represents cash paid in the year.
3 Dividends represents the one-off ‘D’ share dividend paid in October 2019 as part of the return of capital to shareholders and the interim dividend for 2020 paid in the year.
79
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Directors’ Remuneration Report
Continued
CEO Pay Ratio
The following table sets out CEO pay ratio figures, in respect of the financial year ending 28 March 2020.
Year
2019/20
Method
25th Percentile
Pay Ratio
Median Pay
Ratio
75th Percentile
Pay Ratio
Option B
33.0:1
32.6:1
31.6:1
The relevant individuals have been identified using Option B, as defined under the relevant regulations, as it is considered to be the most appropriate
methodology for Fuller’s based on the availability of data at the time the Annual Report was published. The respective single figure values for each
individual for 2019/20 have then been calculated. No estimates were required, and no elements of pay were omitted in calculating the relevant
single figures, except for incentives not representative of the average employee at the percentile such as amounts paid for Service Coach
responsibilities. The figures do not include amounts paid to individuals in respect of their tronc share.
The single figure values for individuals immediately above and below the identified employee at each quartile within the Gender Pay Gap analysis
were also reviewed.
The chosen individuals were reviewed to determine if they were representative of the 25th percentile, median and 75th centile employees. Where the
chosen individual had left the business or had changed roles during the financial year an alternative employee was used for the calculations. The alternative
employee used in each instance was the closest employee to the relevant percentile, who was considered representative of that percentile. For the
52 weeks ended 28 March 2020 no adjustment was needed for the median but alternative employees were selected for the 25th and 75th percentiles.
Year
2019/20
Supporting Information
Salary
Total Pay
25th Percentile
Pay Ratio
Median Pay
Ratio
75th Percentile
Pay Ratio
£17,406
£18,207
£18,059
£18,422
£17,384
£19,003
Statement of Voting at Annual General Meeting
At the Annual General Meeting held on 4 September 2019, votes cast by proxy in respect of the approval of the Directors’ Remuneration Report
were as follows:
Resolution text
Number of
votes cast for
Percentage of
votes cast for
Number of
votes cast
against
Percentage of
votes cast
against
Total
votes cast
Number of
votes withheld
Approval of Remuneration Report 2019
98,829,369
95.55% 4,599,977
4.45% 103,429,346
3,624,517
At the Annual General Meeting held on 25 July 2017, votes cast by proxy in respect of the approval of the Directors’ Remuneration Policy were as follows:
Resolution text
Number of
votes cast for
Percentage of
votes cast for
Number of
votes cast
against
Percentage of
votes cast
against
Total
votes cast
Number of
votes withheld
Approval of Remuneration Policy 2017
97,383,103
93.74% 6,503,340
6.26% 103,886,443
10,616
The Directors’ Remuneration Report, encompassing pages 71 to 80, was approved by the Board and signed on its behalf.
Helen Jones
Chair of the Remuneration Committee
30 July 2020
80
GovernanceAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Independent Auditor’s Report to the Members of Fuller, Smith & Turner P.L.C.
Our Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Fuller, Smith & Turner P.L.C. (the ‘parent company’) and its subsidiaries (the ‘Group’) for the 52 weeks
ended 28 March 2020 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the Group and Company
Balance Sheets, the Group and Company Statements of Changes in Equity, the Group and Company Cash Flow Statements and notes to the
financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent
company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
– the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 28 March 2020 and of the
Group’s profit for the 52 weeks then ended;
– the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
– the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as
applied in accordance with the provisions of the Companies Act 2006; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of the
Group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The impact of uncertainties arising from the UK exiting the European Union on our audit
Our audit of the financial statements requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence
of the effects of macro-economic uncertainties such as Covid-19 and Brexit. All audits assess and challenge the reasonableness of estimates made
by the directors and the related disclosures (such as those in relation to impairments, see note 13) and the appropriateness of the going concern
basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the company’s future
prospects and performance.
Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of this report their effects are
subject to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised
firm-wide approach in response to these uncertainties when assessing the company’s future prospects and performance. However, no audit should
be expected to predict the unknowable factors or all possible future implications for a company associated with these particular events.
Material uncertainty related to going concern
We draw attention to note 1, which notes that the coronavirus pandemic is an ever-evolving situation and management have therefore modelled a
range of scenarios from full closure for several months to operating at reduced capacity for the remainder of the financial year. From September
2020 under the base and downside forecast model the Group will fail a number of the covenant tests if these are not revised. In addition, in August
2021, the Group will need to refinance and obtain facilities at a similar level to the facilities at 28 March 2020. As stated in note 1, these events or
conditions, along with the other matters as set forth in note 1, indicate that a material uncertainty exists that may cast significant doubt on the
Group’s and parent company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
To respond to risks relating to going concern, our procedures evaluated management’s assessment of the impact of Covid-19 on the Group’s
working capital and covenant conditions by undertaking, inter alia, the following work:
– Obtained management’s base case forecasts covering the period to 31 December 2021 which included details of management’s key assumptions and an
assessment of the impact of coronavirus. We assessed how these forecasts were compiled and assessed the appropriateness of management’s forecasts
by challenging the assumptions used and applied sensitivities to the key assumptions made by management in preparing the forecasts;
– Evaluated the accuracy of management’s historic forecasting by considering the reliability of past forecasts to recent historical financial information;
obtained management’s downside scenario that reflects management’s assessment of further uncertainties, and which management consider to
be severe but plausible. We evaluated the assumptions regarding the forecast period of full closure and reduced trading levels. We considered
whether the assumptions are consistent with our understanding of the business obtained during the course of the audit;
– Assessed the impact of the mitigating factors available to management to restrict forecast cash outflows in management’s base case and
downside scenarios;
– Obtained the correspondence in relation to covenant waivers and amendments and confirmed the terms and conditions therein were consistent
with those applied by management in their base case and downside scenario forecasts and considered the reasonableness of the assumption
regarding the ability to refinance; and
– Assessed the adequacy of related disclosures within the Annual Report and financial statements.
81
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Independent Auditor’s Report to the Members of Fuller, Smith & Turner P.L.C.
Continued
Conclusions relating to principal risks, going concern and viability statement
We draw attention to the Viability Statement in the Annual Report at page 55 which indicates that in making the viability statement the Board
considered the material uncertainty related to going concern, as a result of the coronavirus pandemic, and the potential impact on the viability of
the Group over the assessment period.
Aside from the impact of the matter above and the matters disclosed in the material uncertainty related to going concern section, we have nothing
to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK) require us to report to you whether we
have anything material to add or draw attention to:
– the disclosures in the Annual Report set out on pages 32 to 34 that describe the principal risks, procedures to identify emerging risks and an
explanation of how they are being managed or mitigated (including the impact of Brexit);
– the directors’ confirmation, set out on page 31 of the Annual Report that they have completed a robust assessment of the principal and emerging risks
facing the Group (including the impact of Brexit), including those that would threaten its business model, future performance, solvency or liquidity;
– whether the directors’ statements relating to going concern and the prospects of the Group required under the Listing Rules in accordance with
Listing Rule 9.8.6R(3) are materially inconsistent with our knowledge obtained in the audit; or
– the directors’ explanation, set out on page 31 of the Annual Report as to how they have assessed the prospects of the Group, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
Overview of our audit approach
– Overall materiality: £1.045m, which represents 5% of the Group’s preliminary profit before taxation from continuing operations adjusted for the
impact of coronavirus;
– Key audit matters were identified as impairment of property, plant and equipment and right of use assets, impairment of goodwill, profit on sale
of discontinued operations (Beer business disposal), adoption and accounting for IFRS 16 ‘Leases’; Separately Disclosed Items, and going
concern; and
– Full scope audit procedures have been performed in respect of Group entities representing 92% of Group revenue and 100% of Group profit and
other components have been subject to targeted or analytical procedures.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those that had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the ‘material uncertainty related to going concern’ section, we have determined the matters described below
to be the key audit matters to be communicated in our report.
82
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Key Audit Matter – Group and Parent
How the matter was addressed in the audit – Group and Parent
Impairment of property, plant and equipment and right of use assets
As explained in note 1 to the financial
statements, the Directors are required to
undertake an impairment assessment for
property, plant and equipment and right
of use assets where events indicate that
the carrying value of the asset may not
be recoverable. The Directors have
considered coronavirus to be such an
event and have therefore undertaken
an impairment assessment.
Our audit work included, but was not restricted to:
– consideration of management’s assessment of the existence of any impairment indicators;
– obtaining an understanding of the design effectiveness of key controls relating to the impairment review process and
determination of cash flow forecasts;
– obtaining and checking the mechanical accuracy of management’s impairment model;
– testing the source data within the calculations, as well as performing a completeness review of all cash generating units
to ensure all relevant sites have been appropriately included in management’s impairment assessment;
– testing and challenging the assumptions utilised in the value in use models, in particular maintainable trading levels,
growth and discount rates, estimated fair values less cost of disposal (utilising a valuation and property specialists) and
including management’s consideration of the impact of coronavirus;
The process for measuring and recognising
impairment under International Accounting
Standard (IAS) 36 ‘Impairment of Assets’ is
complex and highly judgemental.
– where management’s experts (inhouse and external third party) have been used to value property, we have evaluated
their competence, capability and objectivity, gained an understanding of the work performed and evaluated the
appropriateness of their work;
– used our own property expert to review and challenge the property valuation approach and assumptions for a sample
In addition, the forecasting of future
cash flows and valuation of properties for
impairment testing is subject to the
increased uncertainties due to coronavirus
resulting in an increased risk of material
misstatement for assets of this nature.
We therefore identified the assessment
of impairment of property, plant and
equipment and right of use asset as a
significant risk, which was one of the
most significant assessed risks of
material misstatement.
of CGUs;
– performing sensitivity analysis on the various assumptions used for this model to consider the headroom levels for
various scenarios, including consideration to the risks and uncertainties arising from coronavirus;
– testing the accuracy of management’s forecasting through a comparison of budget to actual data and historical
variance trends;
– testing whether any impairment charges have been appropriately reflected in the Group’s accounting records;
– considering the accounting policy for compliance with IAS 36 and that the application by the Group is consistent with
the stated policy; and
– assessing whether disclosures made in the financial statement relating to impairments are appropriate.
The Group’s accounting policy on impairment of property, plant and equipment and right of use assets is shown in note 1
to the financial statements and related disclosures are included in note 13. The Audit Committee identified impairment
of property, plant and equipment and right of use assets as a key issue and judgement in its report on page 54, where the
Audit Committee also described the action that it has taken to address this issue.
Impairment of goodwill
As explained in note 1 to the financial
statements, the Directors are required to
annually test goodwill for impairment.
The process for measuring and recognising
impairment under International Accounting
Standard (IAS) 36 ‘Impairment of Assets’ is
complex and highly judgemental.
In addition the forecasting of future cash
flows for impairment testing is subject
to the increased uncertainties due to
coronavirus resulting in an increased risk
of material misstatement for assets of
this nature.
We therefore identified the impairment
of goodwill as a significant risk, which was
one of the most significant assessed risks
of material misstatement.
Key observations
Based on our audit work, we are satisfied that the judgements made, and assumptions used by management in
performing the impairment review and associated disclosures did not identify material misstatements of the impairment
of property, plant and equipment and right of use assets.
Our audit work included, but was not restricted to:
– consideration of management’s assessment of the existence of any impairment indicators;
– obtaining an understanding of the key controls relating to the impairment review process and determination of cash
flow forecasts;
– obtaining and checking the mechanical accuracy of management’s impairment model;
– considering management’s assessment of cash generating units;
– assessing whether impairment testing is being conducted for all relevant cash generating units;
– testing and challenging the assumptions utilised in the impairment models, in particular maintainable trading levels,
growth and discount rates, estimated fair values less cost of disposal (utilising a valuation and property specialists) and
including management’s consideration of the impact of coronavirus;
– where management’s expert has been used, evaluated competence, capability and objectivity of the management’s
expert, gained an understanding of the work performed and evaluated the appropriateness of that expert’s work;
– testing the accuracy of management’s forecasting through a comparison of budget to actual data and historical
variance trends;
– testing whether any impairment charges have been appropriately reflected in the Group’s accounting records;
– considering the accounting policy for compliance with IAS 36 and that the application by the Group is consistent with
the stated policy; and
– assessing whether disclosures made in the financial statement relating to impairments are appropriate.
The Group’s accounting policy on the impairment of goodwill is shown in note 1 to the financial statements and related
disclosures are included in note 10. The Audit Committee identified the impairment of goodwill as a significant issue
in its report on page 54, where the Audit Committee also described the action that it has taken to address this issue.
Key observations
Based on our audit work, we are satisfied that the judgements made, and assumptions used by management in
performing the impairment review and associated disclosures and did not identify material misstatements of the
impairment of goodwill.
83
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Independent Auditor’s Report to the Members of Fuller, Smith & Turner P.L.C.
Continued
Key Audit Matter – Group and Parent
How the matter was addressed in the audit – Group and Parent
Profit on sale of discontinued operations (Beer business disposal)
The disposal of the Beer Company on
27 April 2019 was a significant transaction
for the Group, giving rise to a net gain on
disposal after disposal costs of £162.4m,
and this represents significant risk because
the disposal is material and unusual
in nature.
We therefore identified the profit on sale
of discontinued operations as a significant
risk, which was one of the most significant
assessed risks of material misstatement.
Our audit work included, but was not restricted to:
– consideration of management’s assessment of the profit on disposal together with agreements related to the disposal;
– testing the arithmetical accuracy by reperforming the calculations for the profit on disposal;
– confirmed the key terms and conditions to the disposal and associated agreements, and considered how these had
been reflected by management in accordance with accounting standards;
– tested the value and nature of consideration recorded on the disposal including provisional amounts;
– confirmed the net assets disposed of, including goodwill, have been correctly removed and any provisions required on
disposal have been correctly accounted for, including consideration of related tax matters (utilising a tax specialist);
– tested transactions costs on a sample basis to supporting documentation;
– assessing whether disclosures made in the financial statement relating to the profit on sale of discontinued operations
are appropriate.
The Group’s accounting policy on the profit on sale of discontinued operations is shown in note 1 to the financial
statements and related disclosures are included in note 22. The Audit Committee identified the presentation of the
profit on sale of discontinued operations as a significant issue in its report on page 54, where the Audit Committee also
described the action that it has taken to address this issue.
Key observations
Based on our audit work we are satisfied that the judgements made, and assumptions used by management in calculating
the profit on the sale of discontinued operations and disclosures included in the accounts and did not identify material
misstatement of the profit recognised.
Adoption and accounting for IFRS 16 ‘Leases’
IFRS 16 is applicable to financial
statements with accounting year ends
commencing on or after 1 January 2019
and requires lessees to account for leases
‘on-balance sheet’ by recognising a
‘right-of-use’ asset and a lease liability.
This is a complex accounting standard
and as a result of the first-time adoption
there is an increased risk of material
misstatement arising in the Group’s
accounting records.
We therefore identified the adoption of
IFRS 16 as a significant risk, which was one
of the most significant assessed risks of
material misstatement.
Our audit work included, but was not restricted to:
– consideration of management’s assessment of the adoption and accounting for IFRS 16;
– testing management’s assessment including consideration of the model used, challenge of judgements and estimates
applied in the calculations, the incremental cost of borrowing rates applied and the practical expedients taken were in
accordance with the accounting standard;
– testing the arithmetical accuracy and integrity of the underlying data by reperforming the calculations for a sample
of leases;
– testing the key terms have been properly extracted from the lease agreements and used within management’s model
to check that the output from the model is appropriate;
– performing a completeness review to ensure all leases have been appropriately identified; and
– assessing whether disclosures made in the financial statement relating to IFRS 16 are appropriate.
The Group’s accounting policy on the adoption and accounting for IFRS 16 is shown in note 1 to the financial statements
and related disclosures are included in note 18. The Audit Committee identified IFRS 16 as a significant issue in its
report on page 55, where the Audit Committee also described the action that it has taken to address this issue.
Key observations
Based on our audit work we are satisfied that the judgements made, and assumptions used by management in the
adoption and accounting for IFRS 16 ‘Leases’, along with the disclosures made and did not identify a material
misstatement of the financial statements in this respect.
84
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Separately Disclosed Items
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Our audit work included, but was not restricted to:
– assessing the criteria used by management to determine the classification of specific transactions as a Separately
Disclosed Item;
– agreeing the classification was consistent with the Group’s stated accounting policy;
– considering whether the classification was appropriate, and if the presentation enhanced the clarity and
understanding of financial statements for the reporting period; and
– assessing whether disclosures made in the financial statement relating to the acquisition of Separately Disclosed
Items are appropriate and consistent with prior year.
The Group’s accounting policy on Separately Disclosed Items is shown in note 1 to the financial statements and related
disclosures are included in note 5. The Audit Committee identified Separately Disclosed Items as a significant issue in
its report on page 54, where the Audit Committee also described the action that it has taken to address this issue.
Key observations
As a result of the audit procedures performed, we did not identify any material misstatements in the classification of
Separately Disclosed Items.
As set out in the consolidated income
statement and note 5, the financial
statements include a net charge of
£14.8m (2019: £10.1m) before tax in
respect of Separately Disclosed Items
which, as set out in the accounting
policies, management considers to
merit separate presentation. There is
significant management judgement in
the determination of these items, which
are not defined by IFRSs as adopted by
the EU and which are reported upon
as part of an alternative performance
measure within the financial statements.
Consistency of presentation is important
for maintaining comparability between
reported results for each period.
Alternative performance measures can
provide shareholders with appropriate
additional information and understanding
of a group’s financial performance and
strategy. However, when improperly used
and presented, such measures might
prevent the Annual Report being fair,
balanced and understandable by confusing
the real financial position and results or by
making the results of the reporting entity
seem more attractive.
We therefore identified presentation of
Separately Disclosed Items as a significant
risk, which was one of the most significant
assessed risks of material misstatement.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit
work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Financial statements as a whole
Performance materiality used to
drive the extent of our testing
Specific materiality
£1.045m which represents 5% of preliminary profit before
taxation from continuing operations adjusted for the impact
of coronavirus. This benchmark is considered the most
appropriate because it is one of the key performance
indicators for the Board and its shareholders.
£1m which represents 5% of preliminary profit before
taxation from continuing operations adjusted for the impact
of coronavirus. This benchmark is considered the most
appropriate because it is one of the key performance
indicators for the Board and its shareholders.
Materiality for the current year is lower than the level
that we determined for the period ended 30 March 2019
reflecting lower levels of normalised profits before tax from
continuing operations.
Materiality for the current year is lower than the level that we
determined for the period ended 30 March 2019 reflecting
lower levels of normalised profits before tax from
continuing operations.
65% of financial statement materiality.
65% of financial statement materiality.
We determined a lower level of specific materiality for certain
areas such as for directors’ remuneration and related
party transactions.
We determined a lower level of specific materiality for certain
areas such as for directors’ remuneration and related
party transactions.
Communication of misstatements
to the audit committee
£50,000 and misstatements below that threshold that, in our
view, warrant reporting on qualitative grounds.
£50,000 and misstatements below that threshold that, in our
view, warrant reporting on qualitative grounds.
85
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Independent Auditor’s Report to the Members of Fuller, Smith & Turner P.L.C.
Continued
An overview of the scope of our audit
Our audit approach was based on a thorough understanding of the Group’s business and is risk based, and in particular included:
– evaluation by the Group audit team of identified components to assess the significance of that component and to determine the planned audit
response based on a measure of materiality. Although the Group financial statements are a consolidation of the parent company and its trading
subsidiaries, substantially all of the Group’s profit before taxation arose in the parent company on which we performed a full scope audit.
Targeted and analytical procedures were performed on other components of the Group; and
– recognition that the Group is organised into two principal operating divisions: Managed Pubs and Hotels and Tenanted Inns. We considered
applicable controls over the financial reporting systems identified as part of our risk assessment and supplemented this with substantive testing,
dependent on the level of assurance obtained from operating control effectiveness. We addressed critical accounting matters, including areas
where judgment and estimation is exercised by management, both in the determination and reporting of balances.
The Group disposed of its Beer Brewing division in April 2019. Our audit approach in the 52 weeks ended 28 March 2020 remained largely
unchanged from that adopted for the 52 weeks ended 30 March 2019 apart from reflecting the Beer Brewing division disposal.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit are to identify and assess the risks of material misstatement of the financial statements due to fraud or error; to obtain
sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud or error; and to respond appropriately to
those risks. Owing to the inherent limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may
not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK).
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations,
our procedures included the following:
– The Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined
that the following laws and regulations were most significant including IFRSs, UK Companies Act 2006, Listing Rules, UK Corporate governance
code, and taxation laws. We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial
statement items.
– We understood how the parent company and the Group is complying with those legal and regulatory frameworks by, making inquiries to
management, those responsible for legal and compliance procedures and the company secretary. We corroborated our inquiries through our
review of board minutes and papers provided to the Audit Committee.
– We assessed the susceptibility of the parent company’s and Group’s financial statements to material misstatement, including how fraud might
occur. Audit procedures performed by the Group engagement team and component auditors included:
• identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
• understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate
influence over the financial reporting process;
• challenging assumptions and judgments made by management in its significant accounting estimates; and
• identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report set out on
pages 1 to 80, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
86
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and
to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
– Fair, balanced and understandable set out on page 47 – the statement given by the directors that they consider the Annual Report and financial
statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s
performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
– Audit committee reporting – set out on pages 53 to 57 – the section describing the work of the audit committee does not appropriately address
matters communicated by us to the audit committee; or
– Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’ statement required under the Listing
Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Our opinions on other matters prescribed by the Companies Act 2006 are unmodified
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
– the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
– the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 47, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
87
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Independent Auditor’s Report to the Members of Fuller, Smith & Turner P.L.C.
Continued
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by the board of directors on 30 August 2013 to audit the financial
statements for the year ending 29 March 2014 and subsequent financial periods.
The period of total uninterrupted engagement is 7 years, covering the years ending 29 March 2014 to 28 March 2020.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent company and we remain
independent of the Group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and
the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Nick Jones
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants
London
30 July 2020
88
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Group Income Statement
for the 52 weeks ended 28 March 2020
Continuing operations
Revenue
Operating costs before separately disclosed items
Other income
Adjusted operating profit
Operating separately disclosed items
Operating profit
Finance costs before separately disclosed items
Financing separately disclosed items
Profit on disposal of properties
Profit before income tax
Adjusted profit before income tax
Total separately disclosed items
Profit before income tax
Tax
Analysed as:
Underlying trading
Separately disclosed items
(Loss)/profit from continuing operations
Net profit from discontinued operations
Profit for the year
Attributable to:
Equity shareholders of the Parent Company
Non-controlling interest
Note
3
4
3
4,5
6
5,6
5
5
7
7
7
22
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 161
52 weeks
ended
28 March
2020
£m
Restated2
52 weeks
ended
30 March
2019
£m
329.3
329.3
324.7
(307.1)
(308.0)
(284.7)
3.7
25.9
(23.9)
2.0
(7.9)
(0.5)
9.6
3.2
18.0
(14.8)
3.2
(4.2)
(6.2)
2.0
(1.0)
162.9
161.9
3.7
25.0
(17.3)
7.7
(5.3)
(0.5)
9.6
11.5
19.7
(8.2)
11.5
(5.8)
(6.5)
0.7
5.7
162.9
168.6
161.9
168.6
–
–
–
40.0
(11.2)
28.8
(6.9)
(0.8)
1.9
23.0
33.1
(10.1)
23.0
(5.2)
(6.5)
1.3
17.8
1.7
19.5
19.3
0.2
1 Pre IFRS 16 results have been prepared under IAS 17 for comparison purposes only.
2 Central overheads have not been recharged for the 52 weeks ended 28 March 2020. Prior year overheads have also not been recharged to allow comparison. For the
52 weeks ended 30 March 2019, £3.3 million of central overheads have been reclassified from discontinued operations to continuing operations to reflect this change.
89
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Group Income Statement
for the 52 weeks ended 28 March 2020
Continued
Group
Earnings per share per 40p ‘A’ and ‘C’ ordinary share
Basic
Diluted
Earnings per share per 4p ‘B’ ordinary share
Basic
Diluted
Continuing operations
Earnings per share per 40p ‘A’ and ‘C’ ordinary share
Basic
Diluted
Earnings per share per 4p ‘B’ ordinary share
Basic
Diluted
1 Pre IFRS 16 results have been prepared under IAS 17 for comparison purposes only.
Post IFRS 16
52 weeks
ended
28 March
2020
Pence
Pre IFRS 161
52 weeks
ended
28 March
2020
Pence
293.70
305.86
293.02
305.15
Restated
52 weeks
ended
30 March
2019
Pence
35.12
34.87
29.37
29.30
30.59
30.51
3.51
3.49
(1.81)
(1.81)
10.34
10.32
32.39
32.16
(0.18)
(0.18)
1.03
1.03
3.24
3.22
Note
8
8
8
8
8
8
8
8
90
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Group Statement of Comprehensive Income
for the 52 weeks ended 28 March 2020
Profit for the year
Items that may be reclassified to profit or loss
Net gains on valuation of financial assets and liabilities
Tax related to items that may be reclassified to profit or loss
Items that will not be reclassified to profit or loss
Net actuarial gain/(losses) on pension schemes
Tax related to items that will not be reclassified to profit or loss
Other comprehensive gain/(losses) for the year, net of tax
Total comprehensive income for the year, net of tax
Total comprehensive income attributable to:
Equity shareholders of the Parent Company
Non-controlling interest
1 Pre IFRS 16 results have been prepared under IAS 17 for comparison purposes only.
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 161
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
161.9
168.6
19.5
Note
28
7
25
7
0.2
(0.1)
5.9
(1.1)
4.9
0.2
(0.1)
5.9
(1.1)
4.9
166.8
173.5
166.8
173.5
17
–
–
0.3
–
(5.0)
0.8
(3.9)
15.6
15.4
0.2
91
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Group Balance Sheet
28 March 2020
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Other non-current assets
Right-of-use assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Other financial assets
Cash and cash equivalents
Assets classified as held for sale
Current tax receivable
Total current assets
Current liabilities
Trade and other payables
Current tax payable
Borrowings
Lease liabilities
Liabilities classified as held for sale
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Other financial liabilities
Retirement benefit obligations
Deferred tax liabilities
Provisions
Total non-current liabilities
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Own shares
Hedging reserve
Retained earnings
Total equity
1 Pre IFRS 16 results have been prepared under IAS 17 for comparison purposes only.
Approved by the Board and signed on 30 July 2020.
M J Turner, FCA
Chairman
Registered Number: 241882
92
Post IFRS 16
Group
2020
£m
Pre IFRS 161
Group
2020
£m
Note
10
11
12
15
18
20
21
14
24
22
23
24
18
22
27
24
18
14
25
7
27
29
29
29
29
28.3
617.7
4.8
0.1
107.0
757.9
4.0
12.6
–
20.3
2.6
6.2
45.7
(37.7)
–
(171.7)
(8.9)
–
(4.1)
(222.4)
(27.5)
(104.0)
(1.1)
(4.7)
(17.1)
–
(154.4)
426.8
22.8
4.2
3.7
(17.1)
(0.9)
414.1
426.8
35.5
617.7
4.8
0.1
–
658.1
4.0
9.7
–
20.3
2.6
4.5
41.1
(37.5)
–
(171.7)
–
–
(4.5)
(213.7)
(27.5)
–
(1.1)
(4.7)
(17.1)
(1.6)
(52.0)
433.5
22.8
4.2
3.7
(17.1)
(0.9)
420.8
433.5
Group
2019
£m
37.7
552.7
4.6
0.3
–
595.3
5.0
8.3
0.1
11.0
87.0
–
111.4
(29.6)
(2.8)
(50.0)
–
(30.0)
(0.5)
(112.9)
(206.2)
–
(1.4)
(36.4)
(9.2)
(2.1)
(255.3)
338.5
22.8
4.8
3.1
(19.8)
(0.8)
328.4
338.5
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Company Balance Sheet
28 March 2020
Post IFRS 16
Company
2020
£m
Pre IFRS 161
Company
2020
£m
Note
Company
2019
£m
10
11
12
15
18
16
20
21
14
24
22
23
24
18
22
27
24
18
14
25
7
27
29
29
29
29
2.6
593.8
4.8
0.1
96.6
122.4
820.3
3.5
19.4
–
19.2
2.6
6.1
50.8
(165.2)
–
(171.7)
(7.9)
–
(4.1)
(348.9)
(27.5)
(91.7)
(1.1)
(4.7)
(14.4)
–
(139.4)
382.8
22.8
4.2
3.7
(17.1)
(0.9)
370.1
382.8
9.8
593.8
4.8
0.1
–
122.4
730.9
3.5
16.7
–
19.2
2.6
5.1
47.1
(165.0)
–
(171.7)
–
–
(4.5)
(341.2)
(27.5)
–
(1.1)
(4.7)
(14.4)
(1.6)
(49.3)
387.5
22.8
4.2
3.7
(17.1)
(0.9)
374.8
387.5
8.3
526.7
4.6
0.3
–
122.3
662.2
4.5
37.9
0.1
9.2
62.6
–
114.3
(133.9)
(1.8)
(50.0)
–
(23.5)
(0.5)
(209.7)
(206.0)
–
(1.4)
(36.4)
(7.5)
(2.1)
(253.4)
313.4
22.8
4.8
3.1
(19.8)
(0.8)
303.3
313.4
Non-current assets
Intangible assets
Property, plant and equipment
Investment properties
Other non-current assets
Right-of-use assets
Investments in subsidiaries
Total non-current assets
Current assets
Inventories
Trade and other receivables
Other financial assets
Cash and cash equivalents
Assets classified as held for sale
Current tax receivable
Total current assets
Current liabilities
Trade and other payables
Current tax payable
Borrowings
Lease liabilities
Liabilities classified as held for sale
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Other financial liabilities
Retirement benefit obligations
Deferred tax liabilities
Provisions
Total non-current liabilities
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Own shares
Hedging reserve
Retained earnings
Total equity
1 Pre IFRS 16 results have been prepared under IAS 17 for comparison purposes only.
Profit attributable to ordinary shareholders and included in the financial statements of the Parent Company was £143.0 million (2019: £19.2 million).
Approved by the Board and signed on 30 July 2020.
M J Turner, FCA
Chairman
Registered Number: 241882
93
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Group Statement of Changes in Equity
for the 52 weeks ended 28 March 2020
Group
At 31 March 2018
Profit for the year
Other comprehensive loss
for the year
Total comprehensive income
for the year
Shares purchased to be held
in ESOT or as treasury
Shares released from ESOT
and treasury
Dividends (note 9)
Share-based payment charges
Adjustments arising from change in
non-controlling interest (note 17)
Total transactions with owners
At 30 March 2019
Profit for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Issue of share capital (note 29)
Reclassification of deferred shares
(note 29)
Cancellation of deferred shares
(note 29)
Shares purchased to be held
in ESOT or as treasury
Shares released from ESOT
and treasury
Dividends (note 9)
Share-based payment charges
Transfer to retained earnings
Tax debited directly to equity
(note 7)
Total transactions with owners
Capital
redemption
reserve
(note 29)
£m
Deferred
shares
£m
Share
capital
(note 29)
£m
22.8
–
–
–
–
–
–
–
–
–
Share
premium
account
(note 29)
£m
4.8
–
–
–
–
–
–
–
–
–
22.8
–
–
–
0.6
4.8
–
–
–
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.6)
–
0.6
–
–
–
–
–
–
–
–
–
(0.6)
0.6
–
–
–
–
–
–
(0.6)
4.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.6
3.7
3.1
–
–
–
–
–
–
–
–
–
3.1
–
–
–
–
–
Own shares
(note 29)
£m
(19.2)
–
–
–
(3.2)
2.6
–
–
–
(0.6)
(19.8)
–
–
–
–
–
–
(0.5)
3.2
–
–
–
–
2.7
(17.1)
Hedging
reserve
£m
Retained
earnings
£m
Total
£m
Non-
controlling
interest
(note 17)
£m
(1.1)
–
328.4
338.8
19.3
19.3
(3.9)
0.2
Total
equity
£m
334.9
19.5
0.3
(4.2)
(3.9)
–
(3.9)
0.3
15.1
15.4
0.2
15.6
–
–
–
–
–
–
(0.8)
–
0.1
0.1
–
–
–
–
–
–
–
(0.2)
–
(0.2)
(0.9)
–
(3.2)
(1.5)
(10.9)
1.0
(3.7)
(15.1)
328.4
161.9
1.1
(10.9)
1.0
(3.7)
(15.7)
338.5
161.9
4.8
4.9
166.7
166.8
–
–
–
–
–
–
–
(0.5)
(1.1)
2.1
(80.5)
(80.5)
0.5
0.2
0.5
–
(0.1)
(0.1)
(81.0)
(78.5)
414.1
426.8
–
–
–
–
3.7
3.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3.2)
1.1
(10.9)
1.0
–
(12.0)
338.5
161.9
4.9
166.8
–
–
–
(0.5)
2.1
(80.5)
0.5
–
(0.1)
(78.5)
426.8
At 28 March 2020
22.8
94
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Company Statement of Changes in Equity
for the 52 weeks ended 28 March 2020
Company
At 31 March 2018
Profit for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Shares purchased to be held in ESOT
or as treasury
Shares released from ESOT and treasury
Dividends (note 9)
Share-based payment charges
Total transactions with owners
At 30 March 2019
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Issue of share capital (note 29)
Reclassification of deferred shares (note 29)
Cancellation of deferred shares (note 29)
Shares purchased to be held in ESOT
or as treasury
Shares released from ESOT and treasury
Dividends (note 9)
Transfer to retained earnings
Share-based payment charges
Tax debited directly to equity (note 7)
Total transactions with owners
At 28 March 2020
Share capital
(note 29)
£m
22.8
–
–
–
–
–
–
–
–
Share
premium
account
(note 29)
£m
4.8
–
–
–
–
–
–
–
–
22.8
4.8
–
–
–
0.6
(0.6)
–
–
–
–
–
–
–
–
22.8
–
–
–
(0.6)
–
–
–
–
–
–
–
–
(0.6)
4.2
Capital
redemption
reserve
(note 29)
£m
Deferred
shares
£m
Own shares
(note 29)
£m
Hedging
reserve
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.6
(0.6)
–
–
–
–
–
–
–
–
3.1
(19.2)
–
–
–
–
–
–
–
–
3.1
–
–
–
–
–
0.6
–
–
–
–
–
–
–
–
–
(3.2)
2.6
–
–
(0.6)
(19.8)
–
–
–
–
–
–
(0.5)
3.2
–
–
–
–
0.6
3.7
2.7
(17.1)
(1.1)
–
0.3
0.3
–
–
–
–
–
–
0.1
0.1
–
–
–
–
–
–
(0.2)
–
–
(0.2)
(0.9)
(0.8)
303.3
Retained
earnings
£m
299.7
19.2
(4.2)
15.0
–
(1.5)
(10.9)
1.0
Total
£m
310.1
19.2
(3.9)
15.3
(3.2)
1.1
(10.9)
1.0
(11.4)
(12.0)
143.0
4.8
147.8
–
–
–
–
(1.1)
313.4
143.0
4.9
147.9
–
–
–
(0.5)
2.1
(80.5)
(80.5)
0.2
0.5
(0.1)
(81.0)
370.1
–
0.5
(0.1)
(78.5)
382.8
95
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Group Cash Flow Statement
for the 52 weeks ended 28 March 2020
Profit before tax for continuing operations
Net finance costs before separately disclosed items
Separately disclosed items
Depreciation and amortisation
Difference between pension charge and cash paid
Contribution to pension fund
Share-based payment charges
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Cash impact of operating separately disclosed items
Cash generated from operations
Tax paid
Cash generated from operating activities – continuing operations
Cash generated from operating activities – discontinued operations
Net cash generated from operating activities
Cash flow from investing activities
Business combinations
Purchase of property, plant and equipment
Sale of property, plant and equipment
Cash absorbed by investing activities – continuing operations
Cash generated/(absorbed by) investing activities – discontinued operations
Net cash inflow/(outflow) from investing activities
Cash flow from financing activities
Purchase of own shares
Receipts on release of own shares to option schemes
Interest paid
Preference dividends paid
Equity dividends paid
Drawdown of bank loans
Repayment of bank loans
Cost of refinancing
Principal elements of lease payments
Cash (absorbed by)/generated from financing activities – continuing operations
Net cash (outflow)/inflow from financing activities
Net movement in cash and cash equivalents
Cash acquired on acquisition
Cash and cash equivalents at the start of the year
Net cash and cash equivalents at the end of the year
Included in the assets of the disposal group
Total cash and cash equivalents as the end of the year
Post IFRS 16
Group
52 weeks
ended
28 March
2020
£m
Pre IFRS 161
Group
52 weeks
ended
28 March
2020
£m
Group
52 weeks
ended
30 March
2019
£m
3.2
7.9
14.8
28.5
54.4
(2.3)
(24.0)
0.5
(1.1)
1.1
(1.1)
(5.0)
22.5
(10.1)
12.4
0.6
13.0
(32.8)
(47.6)
11.4
(69.0)
225.4
156.4
(0.5)
2.3
(4.7)
(0.1)
11.5
5.3
8.2
19.0
44.0
(2.3)
(24.0)
0.5
(1.1)
1.1
(1.9)
(5.0)
11.3
(10.1)
1.2
0.6
1.8
(32.8)
(47.6)
11.4
(69.0)
225.4
156.4
(0.5)
2.3
(4.7)
(0.1)
(80.5)
(80.5)
–
–
(65.4)
(65.4)
–
(11.2)
(160.1)
(160.1)
9.3
–
11.0
20.3
–
20.3
–
–
(148.9)
(148.9)
9.3
–
11.0
20.3
–
20.3
23.0
6.9
10.1
19.5
59.5
(2.2)
–
1.0
3.0
(0.9)
(11.6)
(7.5)
41.3
(8.6)
32.7
0.3
33.0
(20.1)
(28.5)
7.3
(41.3)
(4.2)
(45.5)
(3.2)
1.1
(6.2)
(0.1)
(10.9)
42.3
(6.0)
(0.2)
–
16.8
16.8
4.3
0.3
11.7
16.3
(5.3)
11.0
Note
6
5,6
4
5
22
19
22
29
9
9
24
24
1 Pre IFRS 16 results have been prepared under IAS 17 for comparison purposes only. IFRS 16 does not impact actual cash, the impact is only presentational.
96
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Company Cash Flow Statement
for the 52 weeks ended 28 March 2020
Post IFRS 16
Company
52 weeks
ended
28 March
2020
£m
Pre IFRS 161
Company
52 weeks
ended
28 March
2020
£m
Company
52 weeks
ended
30 March
2019
£m
Note
Profit before tax for continuing operations
Net finance costs before separately disclosed items
Separately disclosed items
Depreciation and amortisation
Difference between pension charge and cash paid
Contribution to pension fund
Share-based payment charges
Change in trade and other receivables
Change in inventories
Change in trade and other payables
Cash impact of operating separately disclosed items
Cash generated from operations
Tax paid
Cash generated/(absorbed by) operating activities – continuing operations
Cash absorbed by operating activities – discontinued operations
Net cash generated/(absorbed by) from operating activities
Cash flow from investing activities
Business combinations
Purchase of property, plant and equipment
Sale of property, plant and equipment
Cash absorbed by investing activities – continuing operations
Cash generated/(absorbed by) investing activities – discontinued operations
Net cash inflow/(outflow) from investing activities
Cash flow from financing activities
Purchase of own shares
Receipts on release of own shares to option schemes
Interest paid
Preference dividends paid
Equity dividends paid
Drawdown of bank loans
Repayment of bank loans
Cost of refinancing
Principal elements of lease payments
Cash (absorbed by)/generated from investing activities – continuing operations
Net cash (outflow)/inflow from financing activities
Net movement in cash and cash equivalents
Cash acquired on acquisition
Cash and cash equivalents at the start of the year
Net cash and cash equivalents at the end of the year
Included in the assets of the disposal group
Total cash and cash equivalents as the end of the year
5
19
29
9
9
24
24
(17.8)
10.3
35.8
25.6
53.9
(2.3)
(12.1)
8.0
31.7
16.9
44.5
(2.3)
(24.0)
(24.0)
0.5
(10.9)
1.1
0.8
(4.8)
14.3
(10.1)
4.2
–
4.2
(34.1)
(46.2)
11.4
(68.9)
225.4
156.5
(0.5)
2.3
(4.7)
(0.1)
0.5
(10.9)
1.1
0.1
(4.8)
4.2
(10.1)
(5.9)
–
(34.1)
(46.2)
11.4
(68.9)
225.4
156.5
(0.5)
2.3
(4.7)
(0.1)
(80.5)
(80.5)
–
–
(57.1)
(57.1)
–
(10.1)
–
–
(150.7)
(140.6)
(150.7)
(140.6)
10.0
–
9.2
19.2
–
19.2
10.0
–
9.2
19.2
–
19.2
1 Pre IFRS 16 results have been prepared under IAS 17 for comparison purposes only. IFRS 16 does not impact actual cash, the impact is only presentational.
(5.9)
28.8
21.7
8.4
13.5
18.5
(62.1)
(2.2)
–
1.0
0.4
(5.6)
(6.8)
(9.7)
39.2
(7.8)
31.4
(2.6)
(20.1)
(27.8)
7.3
(40.6)
(3.5)
(44.1)
(3.2)
1.1
(6.2)
(0.1)
(10.9)
42.3
(6.0)
(0.2)
–
16.8
16.8
1.5
0.3
9.7
11.5
(2.3)
9.2
97
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Notes to the Financial Statements
1. Authorisation of Financial Statements and Accounting Policies
Authorisation of Financial Statements
The financial statements of Fuller, Smith & Turner P.L.C. and its subsidiaries (the “Group”) for the 52 weeks ended 28 March 2020 were authorised
for issue by the Board of Directors on 30 July 2020 and the Balance Sheet and financial statements on pages 89 to 158 were signed on the Board’s
behalf by M J Turner. Fuller, Smith & Turner P.L.C. is a public limited company incorporated and domiciled in England and Wales. The Company’s
ordinary ‘A’ shares are traded on the London Stock Exchange.
Significant Accounting Policies
Basis of preparation
The Group’s and Company’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”)
as adopted for use in the European Union and applied to the financial statements of the Group and the Company for the 52 weeks ended 28 March
2020, in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Group and by the Company
are set out in the accounting policies below.
The Group and Company financial statements are presented in Sterling and all values are shown in millions of pounds (£m) rounded to the nearest
hundred thousand, except where otherwise indicated.
As permitted by Section 408 of the Companies Act 2006 a separate Income Statement for the Parent Company has not been prepared.
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the
Strategic Report on pages 6 to 41 and include the section entitled ‘Principal Risks and Uncertainties’ on pages 32 to 34. In the Financial Review
section on pages 28 to 31 it describes the financial position of the Group, its cash flows and liquidity position. In addition, note 28 to the financial
statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives, details of its
financial instruments and hedging activities, borrowing facilities, and its exposure to credit risk and liquidity risk.
The Group has prepared the 2020 financial statements on a going concern basis. The Board is confident that the Group has sufficient liquidity
and the ability to access resources when the Group needs to refinance to withstand a prolonged period of closure as a result of the coronavirus
pandemic. At 28 March 2020, the Group had a strong Balance Sheet with 91% of the estate being freehold properties and, as at the signing date,
headroom on facilities of £186.5 million.
The coronavirus pandemic is an ever-evolving situation with the possible outcomes continually being re-assessed. Management have therefore
modelled a range of scenarios from full closure for several months to operating at reduced capacity for the remainder of the financial year. The base
model assumes that the estate will not open until August 2020 and there will be significant impact on sales for the rest of the financial year as a
result of the social distancing restrictions that will need to be implemented and the risk that customer behaviour will change.
Since the closure of the pubs at the end of March the Group took a number of initial actions to reduce the cash expenditure each month including
furloughing the majority of staff, pay cuts for the Main Board and Executive Team of 25% and 20% respectively, taking advantage of business rates
holidays as agreed by the Government and the cancellation of the final dividend.
At 28 March 2020, the Group had existing facilities of £225 million; £33 million is due to expire in August 2020 with the rest expiring in August
2021. The facilities are subject to two main covenants, which are tested quarterly: net debt to EBITDA (leverage) and EBITDA to net finance
charges. Post year end, in recognition of the current macroeconomic uncertainty, the Group’s banks have revised the covenant tests for the
quarters ending March, June and September 2020. As the previous covenant tests were still in place at the year end the Group has reclassified all
loans to current as the Group assessed the covenants were breached. Subsequent to year end £145.6 million has been reclassified to non-current
when the March covenant was formally revised. From September 2020, under the base and downside forecast model the Group would fail a
number of covenant tests if not revised. Management are in discussion with the lenders to revise the covenants beyond this date and have informally
received their confirmation that this will be agreed.
Since the year end the Group has increased its available facilities by accessing the Bank of England Covid Corporate Financing Facility (“CCFF”)
programme which has already issued £100 million of commercial paper with further access to a further £50 million. The CCFF provides short-term
unsecured debt and is repayable in May 2021.
In August 2021, the Group will need to refinance and obtain facilities at a similar level to the facilities at 28 March 2020. There are mitigating
actions that the Group could take in addition to the ones discussed above which have not been factored into the model, including reducing central
overheads, a complete halt in all capital expenditure and the sale of freehold properties.
The Board has considered a downside scenario that reflects the current unprecedented uncertainty in the UK economy and which management
consider to be severe but plausible. The scenario considered full closure of the estate for four months to the end of July and then operating at 40%
of the original budget for 2020/21. The results of this scenario show the potential for a covenant breach during the going concern assessment
period. Subject to further covenant amends being agreed with the lenders in the period up to the refinance in August 2021, the Group would have
sufficient liquidity in the going concern assessment period under this scenario.
98
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The Board is confident in securing both the revision of the covenant beyond September 2020 and obtaining facilities beyond August 2021 but given that
these are not in place at the date of approving these financial statements a material uncertainty exists that may cast significant doubt on the Group and
the Parent Company’s ability to continue as a going concern. Accepting these represent a material uncertainty that may cast significant doubt about
the Group’s ability to continue as a going concern, the Board has a reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the Annual Report
and Accounts.
Significant accounting judgements, estimates and assumptions
The areas of estimation and assumption which are considered to be significant in the preparation of the financial statements are as follows:
The Group determines whether goodwill is impaired on an annual basis and this requires an estimation of the value in use of the cash-generating
units to which the goodwill is allocated. This involves estimation of future cash flows and choosing a suitable discount rate. Full details are supplied in
note 13, together with an analysis of the key assumptions.
The Group reviews for impairment all property, plant and equipment at cash-generating unit level where there is any indication of impairment.
This requires an estimation of the value in use and involves estimation of future cash flows and choosing a suitable discount rate. See note 13,
which describes the assumptions used together with an analysis of the key assumptions.
Measurement of defined benefit pension obligations requires estimation of future changes in salaries and inflation, as well as mortality rates, the
expected return on assets and the selection of a suitable discount rate. These have been determined on advice from the Group’s qualified actuary.
The estimates used and the key assumptions are provided in note 25.
The calculation of lease liabilities requires the Group to determine an incremental borrowing rate (“IBR”) to discount future minimum lease
payments. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the
Group ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms
and conditions of the lease. A sensitivity analysis has been conducted on the lease liabilities which shows that increasing the discount rate by 1% will
decrease the lease liability by £6.8 million and decrease the right-of-use asset by £7.0 million. See note 18 for further details.
Estimation is required to determine the expenditure that will result from a present legal obligation arising from a past event. In the current year,
the Group have estimated the expected expenditure for a legal claim. The Directors believe the recognised provision in relation to this specific
matter reflects the best estimate of the most likely current outcome at the reporting date, based on a probability weighting with a material range
of potential outcomes. The claim has still not been resolved at the date of signing and any further details have not been disclosed for serious
prejudicial reasons.
The assessment of fair values for the assets and liabilities recognised in the financial statements on the acquisition of a business, the valuation
of additional consideration and the date that control is obtained require significant estimate. Management assess fair values, particularly for
property, plant and equipment, with reference to current market prices. See note 19 for business combinations made in the year. In the current
year, estimation was required in assessing the fair value of the consideration on the acquisition of Cotswold Inns & Hotels.
The areas of judgement which are considered to be significant in the preparation of the financial statements are as follows:
In concluding that there was a material uncertainty over going concern the Directors had to consider a number of possible scenarios due to the
uncertainty of when and how the closure of the estate will end. They also needed to use their judgement to assess the most likely scenario and the
impact this would have on the covenants and the facilities to assess what the material uncertainty was. Refer to going concern on page 98 for details
of the scenarios judged most likely.
Judgement is required when determining the provision for taxes as the tax treatment of some transactions cannot be finally determined until a
formal resolution has been reached with the tax authorities. Tax benefits are not recognised unless it is probable that the benefit will be obtained.
Tax provisions are made if it is probable that a liability will arise. The Group reviews each significant tax liability or benefit to assess the appropriate
accounting treatment. See note 7.
Judgement is used to determine those items, that should be separately disclosed to allow a better understanding of the underlying trading
performance of the Group. The judgement includes assessment of whether an item is of a nature that is not consistent with normal trading
activities or of sufficient size or infrequency. See note 5. Judgement was also required in assessing how to present the transition to IFRS 16.
Due to the significance it was decided to show pre IFRS 16 to allow better comparison.
99
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
1. Authorisation of Financial Statements and Accounting Policies continued
Basis of consolidation
The Group financial statements consolidate the financial statements of Fuller, Smith & Turner P.L.C. and the entities it controls (its subsidiaries) drawn up
for the 52 weeks ended 28 March 2020 (2019: 52 weeks ended 30 March 2019). Subsidiaries are consolidated from the date of their acquisition, being
the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Control comprises the power to
direct the relevant activities of the subsidiary which significantly affect the return of the subsidiary, so as to obtain benefit from its activities, and is
achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual
agreement. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated.
Adoption of new standards and interpretations
The following new and amended IFRS and IFRIC interpretations are effective for the Group’s period commencing 31 March 2019:
– IFRS 16 Leases
– Amendments to IFRS 9: Prepayment Features with Negative Compensation
– Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures
– Amendments to IAS 19 Employee Benefits: Plan Amendment, Curtailment or Settlement
– Annual Improvements to IFRS Standards 2015–2017 Cycle
– IFRIC 23 Uncertainty over Income Tax Treatments.
IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating Leases-Incentives and
SIC-27 Evaluating the substance of transactions involving the legal form of a lease. The standard sets out the principles for the recognition,
measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the Balance Sheet.
The Group adopted IFRS 16 using the modified retrospective approach from 31 March 2019. Modified retrospective does not require the
comparative figures to be restated and the cumulative impact is recognised as an adjustment to the opening Balance Sheet retained earnings
at the date of application. See note 33.
Other than the application of IFRS 16, the Directors do not believe the adoption of the new standards and interpretations has had any significant
impact on the amounts reported in the financial statements.
Intangible assets
Business combinations are accounted for under IFRS 3 Business Combinations using the purchase method. Any excess of the consideration of
the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised
in the Balance Sheet as goodwill and is not amortised. To the extent that the net fair value of the acquired entity’s identifiable assets, liabilities and
contingent liabilities is greater than the cost of the investment, a gain is recognised immediately in the Income Statement. Intangible assets with
indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Goodwill
After initial recognition, goodwill is stated at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment, at
least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired. Any impairment of goodwill made
cannot be reversed if circumstances subsequently change.
Any contingent consideration recognised on business combinations are measured at fair value using Level 3 valuation techniques.
For the purpose of impairment testing, goodwill is allocated to the related cash-generating units (or group of cash-generating units) monitored
by management. Where the recoverable amount of the cash-generating unit is less than its carrying amount, including goodwill, an impairment
loss is recognised in the Income Statement.
The carrying amount of goodwill allocated to a cash-generating unit is taken into account when determining the gain or loss on disposal of the unit,
or of an operation within it.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and any impairment in value. Depreciation is
calculated on a straight-line basis to write down the cost to the estimated residual value over the expected useful life of the asset as follows:
Freehold buildings – Hotel accommodation and offices
Up to 50 years
Freehold buildings – Licensed retail property, unlicensed property and brewery
50 to 100 years
Leasehold improvements
Roofs
The term of the lease
From 10 to 50 years
Plant, machinery and vehicles, containers, fixtures and fittings
From three years up to 25 years
100
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. As required under IAS 16 Property, Plant and Equipment, expected useful lives and residual values are reviewed every year. Land is not depreciated. An item
of property, plant and equipment and any significant part initially recognised is derecognised upon disposal (i.e., at the date the recipient obtains control) or
when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is included in the Income Statement when the asset is derecognised.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that
the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises
as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the
Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the Balance Sheet and transferred
to the Income Statement on a systematic basis over the useful economic life of the related assets.
Coronavirus Job Retention Scheme (“CJRS”)
Under this scheme, HMRC will reimburse up to 80% of the wages of certain employees who have been asked to stop working (“furloughed”),
but who are being kept on the payroll. The scheme is designed to compensate for staff costs, so amounts received are recognised in the Income
Statement over the same period as the costs to which they relate. In the Income Statement payroll costs are shown net of grant income.
Hive-up transaction
When a subsidiary transfers its business to its parent immediately after acquisition (hive-up transaction) the assets are transferred at market value
and the investment is reduced to reflect the net effect of a return of capital in the form of the underlying net assets.
Investment property
The Group owns properties that are not used for the production of goods or services but are held for capital appreciation or rental purposes.
These properties are classified as investment properties and their carrying values are based on cost less impairment. Depreciation is calculated on
a straight-line basis to write down the cost to the estimated residual value over the expected useful life of the asset, which for investment properties
is between 50 to 100 years.
Impairment
Carrying values are reviewed for impairment if events indicate that the carrying value of the asset may not be recoverable. If such an indicator exists
and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable
amounts. An asset’s recoverable amount is the greater of the fair value less costs to sell, and the value in use. In assessing value in use, the estimated
future cash flows are discounted to present value using a pre-tax discount rate that reflects the current market assessments of the time value of
money and risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such
transactions can be identified, an appropriate valuation model is used. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the smallest cash-generating unit to which the asset belongs.
The Group bases its impairment calculation on most recent management approved budgets and forecast calculations, which are prepared separately
for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of two
years. A long-term growth rate is calculated and applied to project future cash flows after the second year.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised
impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last
impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Impairment losses, and any reversal of such losses, are recognised in the Income Statement.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets.
The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
a) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-
use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities.
The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before
the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the lease term.
101
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
1. Authorisation of Financial Statements and Accounting Policies continued
b) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index
or a rate, and amounts expected to be paid under residual value guarantees. Variable lease payments that do not depend on an index or a rate are
recognised as expenses in the period in which the event or condition that triggers the payment occurs. The lease payment also includes the exercise
price of a purchase option reasonably certain to be exercised by the Group and payment of penalties for terminating a lease, if the lease term reflects
the Group exercising the option to terminate. Extensions to leases are recognised when it is reasonably certain the option is going to be exercised.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate
implicit in the lease is not readily determinable. The carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term or
a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments).
The Group’s lease liabilities are included in Cash, Borrowings and Net Debt (see note 24).
c) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of equipment (i.e., those leases that have a lease term of
12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition
exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets
are recognised as expense on a straight-line basis over the lease term.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating
leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the Income Statement due
to its operating nature.
Assets held for sale and discontinued operations
Assets are classified as held for sale when the carrying amount will be recovered principally through a sale transaction rather than continuing use.
The criteria for held for sale classification are regarded as met only when the sale is highly probable and the asset or disposal group is available for
immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale
will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to
be completed within one year from the date of the classification.
Assets held for sale are valued at the lower of the carrying amount and fair value less costs to sell. No depreciation is charged whilst assets are
classified as held for sale.
In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, results for the discontinued operations are presented
separately in the Group’s Income Statement (for which the comparatives and related notes have been restated). Additional disclosures are provided
in note 22. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the ‘First In First Out’ method. The cost of own beer
consists of materials with the addition of relevant overhead expenses. Net realisable value is the estimated selling price in the ordinary course of
business less estimated costs of completion and the costs to be incurred in marketing, selling and distribution.
Financial instruments
Initial recognition and derecognition
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and
substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Financial assets
Recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income
(“OCI”), and fair value through profit or loss. The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a
significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant
financing component are measured at the transaction price in accordance with IFRS 15.
102
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets
classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual
cash flows while financial assets classified and measured at fair value through OCI are held within a business model with the objective of both
holding to collect contractual cash flows and selling.
There are three measurement categories into which the Group classifies its debt instruments:
– Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and
interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest
rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with
foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss. The Group’s cash and
cash equivalents, trade and other receivables fall into this category.
– Fair value through OCI (“FVOCI”): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the
assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken
through OCI and will be recycled upon derecognition of the asset.
– Fair value through PL (“FVPL”): Assets that do not meet the criteria for amortised cost or Fair value through OCI are measured at FVPL. A gain
or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses)
in the period in which it arises.
Impairment
IFRS 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the expected credit loss (“ECL”)
model. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader
range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and
supportable forecasts that affect the future cash flows of the instrument.
When assessing impairment for trade receivables, the Group has applied the simplified approach to expected credit losses as per IFRS 9 Financial
Instruments. The model focuses on an appraisal of the risk that a receivable will default rather than whether a loss has been incurred. This involves an
unbiased assessment of a range of possible outcomes and their probabilities of occurrence, and is supported by past experience of collecting payments
as well as changes in economic conditions that correlate with default on receivables. Expected credit losses are initially determined based on the
Group’s historical credit loss experience, any forward-looking factors specific to a particular trade receivable and the current economic environment.
The timing of initial recognition for impairment losses is the same period that the asset is recognised. Movements in expected credit losses are
recognised in the Income Statement within operating costs. At the point a trade receivable is written off the ledger as uncollectable, the cost is
charged against the allowance account and any subsequent recoveries of amounts previously written off are credited to the Income Statement.
In the parent company, amounts due from subsidiary undertakings are recognised at their original amount less allowance for impairment based
on the ECL model. In determining the model the Company considers the net assets and the resources available to that subsidiary.
Financial liabilities
Recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables,
or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable
transaction costs.
The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative
financial instruments.
For purposes of subsequent measurement, financial liabilities are classified in two categories:
– Financial liabilities at fair value through profit or loss which are measured subsequently at fair value with gains or losses recognised in the
Income Statement
– Financial liabilities at amortised cost (loans and borrowings) which are measured using the effective interest method
Bank loans, overdrafts and debentures
Interest bearing bank loans, overdrafts and debentures are initially recorded at the fair value of proceeds received, net of direct issue costs, and
thereafter at amortised cost. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for
on an effective interest rate basis in the Income Statement. Finance charges are added to the carrying amount of the instrument to the extent that
they are not settled in the period in which they arise.
103
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
1. Authorisation of Financial Statements and Accounting Policies continued
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a
currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle
the liabilities simultaneously.
Derivative financial instruments and hedge accounting
Recognition and measurement
The Group uses derivative financial instruments mainly interest rate swaps to hedge its interest rate risks. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as
financial assets when the fair value is positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as:
– Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment
– Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised
asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment
– Hedges of a net investment in a foreign operation
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it wishes to apply hedge
accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the Group will
assess whether the hedging relationship meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and
how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
– There is ‘an economic relationship’ between the hedged item and the hedging instrument.
– The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship.
– The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and
the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below.
The Group only has interest rate swaps which are classified as cash flow hedges. The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in the cash flow hedge reserve within equity. The gain or loss relating to the ineffective
portion is recognised immediately in profit or loss, within other gains/(losses).When a hedging instrument expires, or is sold or terminated, or when
a hedge no longer meets the criteria for hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging that were reported in
equity are immediately reclassified to profit or loss. If the hedging relationship ceases to meet the effectiveness conditions, hedging accounting is
discontinued and the related gain or loss is held in the equity reserve until the forecast transaction occurs.
Classification of shares as debt or equity
When shares are issued, any component that creates a financial liability of the Company or Group is presented as a liability in the Balance Sheet;
measured initially at fair value net of transaction costs and thereafter at amortised cost until extinguished on conversion or redemption.
The corresponding dividends relating to the liability component are charged as interest expense in the Income Statement. The initial fair value of the
liability component is determined using a market rate for an equivalent liability without a conversion feature.
The remainder of the proceeds on issue is allocated to the equity component and included in shareholders’ equity, net of transaction costs.
The carrying amount of the equity component is not remeasured in subsequent years.
The Group’s ordinary shares are classified as equity instruments. For the purposes of the disclosures given in note 29, the Group considers its
capital to comprise its ordinary share capital, share premium, capital redemption reserve, hedging reserve and accumulated retained earnings plus
its preference shares which are classified as a financial liability in the Balance Sheet. There have been no changes to what the Group considers to
be capital since the prior year.
Preference shares
The Group’s preference shares are reported under non-current liabilities. The corresponding dividends on preference shares are charged as interest
in the Income Statement. Preference share dividends are at fixed rates.
104
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Revenue
Revenue is recognised under IFRS 15 upon application of the following steps:
– Identify the contract with a customer
– Identify the performance obligations in the contract
– Determine the transaction price
– Allocate the transaction price to each performance obligation
– Recognise revenue when a performance obligation is satisfied by transferring a promised good or service to a customer.
Managed Pubs and Hotels and Tenanted Inns revenue primarily consists of food, drink and accommodation sales. Food and drink revenue is
recognised when control of the goods/services has transferred, being at the point the customer purchases the food or drink. The Group also takes
bookings for events and accommodation which require a deposit to secure the booking. A contract liability for the deposit is recognised at the time
of the sale. The contract liability is released and revenue is recognised on a straight-line basis over the duration of the room occupation or event.
A contract liability is recognised until the event is complete or the guest has occupied the room.
Revenue in relation to The Fuller’s Beer Business has been recognised for operations for the one month ended 27 April 2019. The Fuller’s Beer
Business revenue consists of sales primarily as a result of the brewing and distribution of beer, cider, wines, spirits and soft drinks. Revenue is
recognised when control of the goods has transferred, being when the goods have been shipped to a specific location (delivery). A receivable is
recognised by the Group when the goods are delivered as this represents the point in time at which the right to consideration becomes
unconditional, as only the passage of time is required before payment is due.
Following the sale of the Fuller’s Beer Business to Asahi Europe Ltd, the Group entered into a Transitional Services Agreement (“TSA”) to provide
certain services to facilitate the successful separation of the two companies. The revenue is recognised over the period the services are provided.
Revenue is recognised under IFRS 16 where the Group receives rental income from Tenanted and unlicensed properties. This is recognised on a
straight-line basis over the lease term. Some rental income includes turnover rent which is based on the percentage of the income generated by that pub.
This is recognised when the revenue is earned. Revenue is recognised for machine income when net takings are earned.
Borrowing costs
Borrowing costs directly attributable to the acquisition or construction of an asset that takes a substantial period of time to get ready for use are
capitalised as part of the cost of the asset being created. This is applied to development projects where the development is expected to last in excess
of six months at the commencement of the project. All other borrowing costs are expensed in the period in which they occur. Borrowing costs
consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Separately disclosed items
The Group presents as separately disclosed items on the face of the Income Statement those material items of income and expense which, because
of the nature or expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the
elements of financial performance in the year, so as to facilitate comparison with prior periods and to better assess trends in financial performance.
Separately disclosed items are a key element used to demonstrate the underlying performance of the Group and reported as an alternative
performance measure within the management commentary for the reporting period.
Share-based payments
The Group has an employee Share Incentive Plan that awards shares to employees based on the reported profits of the Group for the year, and a
Long-Term Incentive Plan that awards shares to Directors and Senior Executives subject to specific performance criteria. The Group also issues equity-
settled share-based payments to certain employees under approved and unapproved share option schemes and a Savings Related Share Option Scheme.
The cost of equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they
are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled
to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting
conditions. The Group has no equity-settled transactions that are linked to the price of the shares of the Company (market conditions).
No expense is recognised for awards that do not ultimately vest. At each Balance Sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management’s best estimate of the achievement or otherwise of non-market
conditions and of the number of equity instruments that will ultimately vest. The movement in cumulative expense since the previous Balance Sheet
date is recognised in the Income Statement, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on
the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the
new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the
fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.
105
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
1. Authorisation of Financial Statements and Accounting Policies continued
Where an equity-settled award is cancelled (including when a non-vesting condition within the control of the entity or employee is not met),
it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the Income Statement for the award is expensed
immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any
excess over fair value being treated as an expense in the Income Statement.
Own shares
Shares to be awarded under employee incentive plans and those that have been awarded but have yet to vest unconditionally are held at cost by
an employee share ownership trust (“ESOT”) and shown as a deduction from equity in the Balance Sheet. ESOT is an independently managed trust
and not controlled by the Group.
In addition to the purchase of shares by the various ESOTs for specific awards, the Group also from time to time acquires own shares to be held as
treasury shares. These shares are occasionally but not exclusively used to satisfy awards under various share option schemes. Treasury shares are
held at cost and shown as a deduction from total equity in the Balance Sheet.
Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from sale and the original
cost being taken to reserves. No gain or loss is recognised in the profit or loss on the purchase, sale, issue or cancellation of treasury shares.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The current tax payable is based on taxable profit for the year using UK tax rates enacted or substantively enacted at the Balance Sheet date and
any adjustment to tax payable in respect of previous years. Taxable profit differs from net profit as reported in the Income Statement because it
excludes items of income or expense that are taxable or deductible in other years or are never taxable or deductible.
Deferred tax
Deferred tax is recognised on temporary differences at the Balance Sheet date between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences,
carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which they can be utilised.
Such deferred tax assets and liabilities are not recognised where the asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit
or loss. The carrying amount of deferred tax assets is reviewed at each Balance Sheet date.
Deferred tax is not recognised in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the
reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the
deferred tax balance relates to the same taxation entities.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the periods when the asset is realised or the liability
is settled, based on tax rates and laws enacted or substantively enacted at the Balance Sheet date.
Current and deferred tax for the year
Current and deferred tax are recognised in the Income Statement except when they relate to items that are recognised in the Statement of
Comprehensive Income or in equity, in which case the current and deferred tax are also recognised in the Statement of Comprehensive Income
or directly in equity respectively.
Pensions and other post-employment benefits
Defined contribution schemes
Payments to defined contribution retirement benefit schemes are charged to the Income Statement as they fall due.
Defined benefit schemes
The Group operated a defined benefit pension plan for eligible employees where contributions were made into a separate fund administered by
Trustees. The Scheme closed to future accrual in January 2015.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method calculated by qualified actuaries.
This attributes entitlement to benefits to the current period (to determine current service cost) and to the current and prior periods (to determine
the present value of defined benefit obligation) and is based on actuarial advice. Past service costs are recognised in the Income Statement on a
straight-line basis over the vesting period or immediately if the benefits have vested.
106
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction
in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured using current actuarial
assumptions and the resultant gain or loss is recognised in the Income Statement during the period in which the settlement or curtailment occurs.
The Group determines the net interest charge/(credit) on the net defined benefit liability/(asset) for the period by applying the discount rate used
to measure the defined benefit obligation at the beginning of the period to the net pension liability/(asset) at the beginning of the period. The net
interest charge/(credit) is recognised immediately as a separately disclosed finance cost/(income) in the Income Statement. Actuarial gains and
losses are recognised in full in the Statement of Comprehensive Income in the period in which they occur.
The defined benefit pension asset or liability in the Balance Sheet comprises the total of the present value of the defined benefit obligation (using a
discount rate based on high quality corporate bonds), less any past service cost not yet recognised and less the fair value of plan assets out of which
the obligations are to be settled directly. Fair value is based on market price information and in the case of quoted securities is the published bid
price. The value of a net pension benefit asset is restricted to the sum of any unrecognised past service costs and the present value of any amount
the Group expects to recover by way of refunds from the plan or reductions in the future contributions.
Foreign currencies
Transactions denominated in foreign currencies are recorded at the rates of exchange ruling at the dates of the transactions. Monetary assets and
liabilities are translated at the year end exchange rates and the resulting exchange differences are taken to the Income Statement, except where
hedge accounting is applied.
Dividends
Dividends recommended by the Board but unpaid at the year end are not recognised in the financial statements until they are paid (in the case of
the interim dividend) or approved by shareholders at the Annual General Meeting (in the case of the final dividend).
Financial guarantee contracts
Where the Company enters into contracts to guarantee the indebtedness of other companies within the Group, the Company considers these to be
insurance arrangements, and accounts for them as such. In this respect the Company treats the guarantee contracts as a contingent liability until
such time as it becomes probable that the Company will be required to make a payment under the guarantee.
The Company’s investments in subsidiaries
In its separate financial statements, the parent company recognises its investment in its subsidiaries on the basis of cost less provision for impairment.
New standards and interpretations issued but not yet applied
The IASB and IFRIC have issued the following standards and interpretations with an effective date for periods starting on or after the date on which
these financial statements start:
– IFRS 17 Insurance Contracts (effective 1 January 2021)
– Amendments to IAS 1 and IAS 8: Definition of Material (effective 1 January 2020)
– Amendments to IFRS 3: Definition of a Business (effective 1 January 2020)
– Amendments to References to the Conceptual Framework in IFRS Standards (effective 1 January 2020).
The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in
future periods.
2. Segmental Analysis
Operating Segments
For management purposes, the Group’s operating segments are:
– Managed Pubs and Hotels, which comprises managed pubs, managed hotels, The Stable Pizza & Cider Limited, Bel & The Dragon and Cotswold
Inns & Hotels
– Tenanted Inns, which comprises pubs operated by third parties under tenancy or lease agreements.
The most important measure used to evaluate the performance of the business is adjusted profit, which is the profit before income tax, adjusted
for separately disclosed items. The Managed Pubs and Hotels operating segments have been aggregated to one reportable segment on the
basis that they have similar economic characteristics as the pubs and hotels are in the same geographical location. Economic indicators assessed
in determining that the aggregated operating segments share similar economic characteristics include expected future financial performance,
operating and competitive risks and return on invested capital. As such, the operating segments meet the aggregation criteria in paragraph 12
IFRS 8 Operating Segments (amended). More details of these segments are given in the Strategic Report on pages 6 to 41 of this report.
As segment assets and liabilities are not regularly provided to the Chief Operating Decision Maker (“CODM”), the Group has elected, as provided
under IFRS 8 Operating Segments (amended), not to disclose a measure of segment assets and liabilities.
107
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
2. Segmental Analysis continued
Change in information presented to CODM
Central overheads were previously recharged to each of the segments and that was how information was presented to the CODM. However, in the
current year, the costs have not been recharged to reflect how information is now reported to the CODM and the prior year numbers have been
adjusted to allow comparison.
52 weeks ended 28 March 2020
Revenue and other income
Segment result
Operating separately disclosed items
Operating profit
Profit on disposal of properties
Net finance costs
Profit before income tax
Other segment information
Additions to property, plant & equipment
Business combinations
Depreciation
Impairment of property, right-of-use assets and goodwill
Managed
Pubs and
Hotels
£m
299.6
29.5
Post IFRS 16
Tenanted
Inns
£m
29.7
11.8
Unallocated1
£m
3.7
(15.4)
Total
continuing
operations
£m
333.0
25.9
(23.9)
2.0
9.6
(8.4)
3.2
24.5
32.8
26.4
18.2
3.6
–
2.0
0.7
23.6
–
0.1
–
51.7
32.8
28.5
18.9
1 Unallocated expenses represent primarily the salaries and costs of central management. Unallocated revenue represents Transitional Services Agreement (“TSA”) income
while unallocated capital expenditure relates to the purchase of a new head office.
Pre IFRS 16
52 weeks ended 28 March 2020
Revenue and other income
Segment result
Operating separately disclosed items
Operating profit
Profit on disposal of properties
Net finance costs
Profit before income tax
Other segment information
Additions to property, plant & equipment
Business combinations
Depreciation and amortisation
Impairment of property and goodwill
Managed
Pubs and
Hotels
£m
299.6
28.7
Tenanted
Inns
£m
29.7
11.7
Total
continuing
operations
£m
Unallocated1
£m
3.7
333.0
(15.4)
25.0
(17.3)
7.7
9.6
(5.8)
11.5
51.7
32.8
19.0
12.3
24.5
32.8
17.0
11.6
3.6
–
1.9
0.7
23.6
–
0.1
–
1 Unallocated expenses represent primarily the salaries and costs of central management. Unallocated revenue represents Transitional Services Agreement (“TSA”) income
while unallocated capital expenditure relates to the purchase of a new head office.
108
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. 52 weeks ended 30 March 2019
Revenue and other income
Segment result
Operating separately disclosed items
Operating profit
Profit on disposal of properties
Net finance costs
Profit before tax
Other segment information
Additions to property, plant & equipment
Business combinations
Depreciation and amortisation
Impairment of property
Reversal of impairment on property
Managed
Pubs and
Hotels
£m
293.8
42.7
Tenanted
Inns
£m
30.9
13.8
Unallocated1
£m
–
(16.5)
Total
continuing
operations
£m
324.7
40.0
(11.2)
28.8
1.9
(7.7)
23.0
25.5
18.1
17.2
3.0
3.0
–
1.8
–
(1.3)
(0.5)
–
–
0.5
–
–
28.5
18.1
19.5
3.0
(1.8)
1 Unallocated expenses represent primarily the salaries and costs of central management.
Geographical Information
All of the Group’s business is within the UK and therefore the Group only has one distinct geographical market.
3. Revenue
Revenue disclosed in the Income Statement is analysed as follows:
Sale of goods and services
Rental income
Accommodation income
Revenue
Transitional Services Agreement revenue1
Other income
Revenue and other income
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
296.5
292.9
9.5
23.3
329.3
3.7
3.7
11.1
20.7
324.7
–
–
333.0
324.7
1 Following the sale of the Fuller’s Beer Business to Asahi Europe Ltd, the Group entered into a Transitional Services Agreement (“TSA”) to provide certain services to
facilitate the successful separation of the two companies. This included finance, IT and payroll services. The TSA was completed post year end on 27 April 2020.
109
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
4. Operating Costs
Production costs and cost of goods used in retailing
Staff costs
Repairs and maintenance
Depreciation of property, plant and equipment
Depreciation of right-of-use asset
Amortisation of intangible assets
Rental expense in relation to short-term and low-value leases
Variable lease payments1
Operating lease rentals – minimum lease payments
Property costs
Utilities
Separately disclosed items (note 5)
IT, retail and communication costs
Professional fees
Pub operational costs
Training
Other operating costs
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
83.7
116.9
14.1
17.9
10.6
–
1.4
2.0
–
16.9
8.4
23.9
4.5
3.2
16.6
2.0
8.9
83.7
116.9
14.1
17.9
–
1.1
–
2.0
11.9
16.9
8.4
17.3
4.5
3.2
16.6
2.0
8.8
52 weeks
ended
30 March
2019
83.0
107.2
12.1
18.5
–
1.0
–
1.6
12.0
15.6
6.9
11.2
2.6
2.6
15.0
1.7
4.9
331.0
325.3
295.9
1 Variable lease payments are dependent on turnover levels.
Details of income and direct expenses relating to rental income from investment properties are shown in note 12.
a) Auditors’ Remuneration
Fees payable to Company’s auditors:
– Statutory audit fees of Group financial statements
– Reporting accountants
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
0.3
–
0.3
0.3
0.2
0.5
Also included in auditors’ remuneration are fees of £26,000 comprising a half year review. Also incurred in the period were non-audit related
services of £39,000 relating to the sale of the Fuller’s Beer Business, other audit related services of £1,000 comprising covenant reporting and
non-audit services of £1,500 comprising iXBRL tagging.
b) Employee Benefit Expenses1
Wages and salaries2
Social security costs
Pension benefits
Other staff costs
Includes Executive Directors.
1
2 Includes share-based payment expense of £0.5 million (2019: £1.0 million).
110
£m
100.9
7.4
2.1
6.5
£m
94.8
6.9
1.6
3.9
116.9
107.2
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. c) Average Number of Employees1
The average monthly number of persons employed by the Group (including part-time staff) was as follows:
Continuing operations
Pub, hotel & restaurant teams
Support office2
Number
Number
4,957
209
5,166
4,757
181
4,938
Includes Executive Directors.
1
2 Support office includes Finance, People, IT and other support staff. Previously some support office employees were recharged to each of the segments and shown in Pub, hotel &
restaurant teams. In the current year employee costs have not been recharged so staff numbers are now shown in Support office and the prior year has been updated for comparison.
d) Directors’ Emoluments
Full details are provided in the Directors’ Remuneration Report and tables on pages 58 to 80.
5. Separately Disclosed Items
The Group presents separately disclosed items on the face of the Income Statement those material items of income and expense which, because of
the nature or expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the
elements of financial performance in the year.
Amounts included in operating profit:
Acquisition costs
Reorganisation costs
Impairment and reversal of impairment of intangible assets, properties and right-of-use assets
IT maintenance, support and rectification costs
Onerous lease provision charge
Guaranteed Minimum Pension (“GMP”) charge
Total separately disclosed items included in operating profit
Profit on disposal of properties
Separately disclosed finance costs:
Finance charge on net pension liabilities
Finance credit on the cancellation of interest rate swaps
Total separately disclosed finance costs
Total separately disclosed items before tax
Separately disclosed tax:
Profit on disposal of properties
Other items
Total separately disclosed tax
Total separately disclosed items
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
(1.4)
(2.1)
(18.9)
(1.5)
–
–
(1.4)
(2.1)
(12.3)
(1.5)
–
–
(23.9)
(17.3)
9.6
9.6
(0.6)
0.1
(0.5)
(14.8)
(1.9)
3.9
2.0
(12.8)
(0.6)
0.1
(0.5)
(8.2)
(1.9)
2.6
0.7
(7.5)
(0.6)
(0.5)
(1.2)
(6.7)
(1.9)
(0.3)
(11.2)
1.9
(0.8)
–
(0.8)
(10.1)
(0.3)
1.6
1.3
(8.8)
Acquisition costs of £1.4 million during the 52 weeks ended 28 March 2020 (30 March 2019: £0.6 million) relate to transaction costs on property
and business acquisitions.
The reorganisation costs of £2.1 million during the 52 weeks ended 28 March 2020 (30 March 2019: £0.5 million) were principally incurred as
a result of the reorganisation of the Group due to the disposal of the Fuller’s Beer Business, in order for the Group to transition to a simplified
structure and reduce central overheads.
111
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
5. Separately Disclosed Items continued
The total impairment charge of £18.9 million during the 52 weeks ended 28 March 2020 relates to the write down of a number of licensed properties to their
recoverable value as well as the write down in value of previously acquired goodwill recognised on acquisition of The Stable Pizza & Cider Limited (30 March
2019: £1.2 million). Post IFRS 16 includes impairment of right-of-use assets of £6.6 million in relation to five properties (30 March 2019: £nil). See note 13.
The expenditure of £1.5 million (30 March 2019: £6.7 million) relates to ongoing maintenance, support and rectification costs in respect of core IT
systems. The costs incurred primarily relate to consultancy and incremental staff costs.
The profit on disposal of properties of £9.6 million during the 52 weeks ended 28 March 2020 (30 March 2019: £1.9 million) relates to the disposal
of three licensed and unlicensed properties including two pubs (2019: seven properties).
The cash impact of operating separately disclosed items before tax for the 52 weeks ended 28 March 2020 was £5.0 million cash outflow
(30 March 2019: £7.5 million cash outflow).
6. Finance Costs
Finance Income
Interest income from financial assets
Finance Costs
Interest expense arising on:
Financial liabilities at amortised cost – loans and debentures
Financial liabilities at amortised cost – preference shares
Financial liabilities at amortised cost – lease liabilities
Total interest expense for financial liabilities
Unwinding of discounts on provisions
Net finance costs before separately disclosed items
Finance charge on net pension liabilities (note 25)
Finance credit on cancellation of interest rate swaps (note 5)
Total finance costs after separately disclosed items
7. Taxation
Tax on Profit on Ordinary Activities
Group
Tax charged in the Income Statement
Current income tax:
Current tax on profits for the year
Adjustments for current tax on prior periods
Total current income tax expense
Deferred income tax:
Origination and reversal of temporary differences
Change in corporation tax rate
Adjustments for current tax on prior periods
Total deferred tax expense/(benefit)
Total tax charged in the Income Statement
Analysed as:
Before separately disclosed items
Separately disclosed items
112
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
0.2
0.2
–
(5.3)
(0.1)
(2.7)
(8.1)
–
(7.9)
(0.6)
0.1
(8.4)
(5.3)
(0.1)
(0.1)
(5.5)
–
(5.3)
(0.6)
0.1
(5.8)
(6.7)
(0.1)
–
(6.8)
(0.1)
(6.9)
(0.8)
–
(7.7)
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
0.8
0.1
0.9
1.4
1.6
0.3
3.3
4.2
6.2
(2.0)
4.2
2.4
0.1
2.5
1.4
1.6
0.3
3.3
5.8
6.5
(0.7)
5.8
5.6
0.1
5.7
(0.7)
–
0.2
(0.5)
5.2
6.5
(1.3)
5.2
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Reconciliation of the Total Tax Charge
The tax expense in the Income Statement for the year is higher (2019: higher) than the standard rate of corporation tax in the UK of 19%
(2019: 19%). The differences are reconciled below:
Profit from continuing operations before income tax expense
Accounting profit multiplied by the UK standard rate of corporation tax of 19% (2019: 19%)
Items not deductible for tax purposes
Current and deferred tax under provided in previous years
Other
Total tax charged in the Income Statement
Deferred Tax Relating to Items Charged/(Credited) to the Income Statement
Deferred tax depreciation
Rolled over capital gains
Retirement benefit obligations
Employee share schemes
Pub acquisition costs
Deferred tax in the Income Statement
Tax Relating to Items Charged/(Credited) to the Statement of Comprehensive Income
Deferred tax:
Valuation gains on financial assets and liabilities
Net actuarial gains/(losses) on pension scheme
Total tax charged/(credited) in the Statement of Comprehensive Income
Tax Relating to Items Charged/(Credited) Directly to Equity
Deferred tax:
Increase in deferred tax liability due to indexation
Share-based payments
Total tax charged to equity
Post IFRS 16
52 weeks
ended
28 March
2020
£m
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
3.2
0.6
1.6
2.0
–
4.2
–
2.6
0.6
0.1
–
3.3
0.1
1.1
1.2
–
0.1
0.1
11.5
2.2
1.6
2.0
–
5.8
–
2.6
0.6
0.1
–
3.3
0.1
1.1
1.2
–
0.1
0.1
52 weeks
ended
30 March
2019
£m
23.0
4.4
0.6
0.3
(0.1)
5.2
(1.0)
0.3
0.2
0.1
(0.1)
(0.5)
–
(0.8)
(0.8)
0.1
(0.1)
–
The Finance Bill 2020, which has now been substantively enacted, provided for the main rate of corporation tax to remain at 19% from 1 April 2020
rather than to reduce to 17% as previously enacted. As a result deferred tax balances are stated at 19%. In 2019 balances were stated at either 17% or
19% depending on when the timing differences on which they were calculated might reverse. The impact of this is a charge of £1.6 million to the
Income Statement.
113
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
7. Taxation continued
Deferred Tax Provision
The deferred tax included in the Balance Sheet is as follows:
Deferred tax
Deferred tax asset/(liability)
Accelerated
tax
depreciation
£m
Rolled over
capital gains
£m
Pension
spreading
£m
(9.3)
(0.3)
–
(0.1)
–
–
(9.7)
(2.6)
–
–
–
–
–
–
–
–
–
–
3.5
–
–
–
(7.5)
1.1
–
–
(3.1)
0.7
(8.8)
–
–
–
(3.3)
(12.1)
(12.3)
3.5
2.0
Other
£m
0.9
0.1
–
–
–
1.0
2.0
–
–
–
–
Total
£m
(9.3)
0.7
0.8
–
(3.1)
1.7
(9.2)
(3.3)
(1.2)
(0.1)
(3.3)
(17.1)
2020
£m
7.3
(24.4)
(17.1)
2019
£m
9.3
(18.5)
(9.2)
Group
Balances at 31 March 2018
(Charge)/credit to Income Statement
Credit to other comprehensive income
(Charge)/credit taken directly to equity
Acquisitions/disposals
Reclassification of available for sale asset
Balances at 30 March 2019
(Charge)/credit to Income Statement
(Charge) to other comprehensive income
(Charge) taken directly to equity
Acquisitions
Retirement
benefit
obligations
£m
5.4
(0.1)
0.8
–
–
–
6.1
(4.1)
(1.1)
–
–
Tax losses
carried
forward
£m
0.6
–
–
–
–
–
0.6
–
–
–
–
Balances at 28 March 2020
0.9
0.6
Employee
share
schemes
£m
0.3
(0.1)
–
0.1
–
–
0.3
(0.1)
–
(0.1)
–
0.1
Financial
assets
£m
0.3
–
–
–
–
–
0.3
–
(0.1)
–
–
0.2
Deferred tax assets
Deferred tax liabilities
114
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Deferred tax
Company
Balances at 31 March 2018
(Charge)/credit to Income Statement
Credit to other comprehensive income
(Charge)/credit taken directly to equity
Reclassification of available for sale asset
Balances at 31 March 2019
(Charge)/credit to Income Statement
(Charge) to other comprehensive income
(Charge) taken directly to equity
Acquisitions
Retirement
benefit
obligations
£m
5.4
(0.3)
0.8
–
–
5.9
(4.1)
(1.1)
–
–
Tax losses
carried
forward
£m
0.3
–
–
–
–
0.3
–
–
–
–
Balances at 28 March 2020
0.7
0.3
Deferred tax assets
Deferred tax liabilities
8. Earnings Per Share
Group
Profit attributable to equity shareholders
Separately disclosed items net of tax
Adjusted earnings attributable to equity shareholders
Weighted average share capital
Dilutive outstanding options and share awards
Diluted weighted average share capital
40p ‘A’ and ‘C’ ordinary share
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Diluted adjusted earnings per share
4p ‘B’ ordinary share
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Diluted adjusted earnings per share
Deferred tax asset/(liability)
Employee
share
schemes
£m
Financial
(liabilities)/
assets
£m
Accelerated
tax
depreciation
£m
Rolled over
capital gains
£m
Pension
spreading
£m
0.3
(0.1)
–
0.1
–
0.3
(0.1)
–
(0.1)
–
0.1
0.3
–
–
–
–
0.3
–
(0.1)
–
–
0.2
(7.9)
0.9
–
–
0.7
(6.3)
0.1
–
–
(2.8)
(9.0)
(9.3)
(0.3)
–
(0.1)
–
(9.7)
(2.5)
–
–
–
–
–
–
–
–
–
3.5
–
–
–
Other
£m
1.8
0.1
–
–
(0.2)
1.7
0.3
–
–
–
Total
£m
(9.1)
0.3
0.8
–
0.5
(7.5)
(2.8)
(1.2)
(0.1)
(2.8)
(12.2)
3.5
2.0
(14.4)
2020
£m
6.8
(21.2)
(14.4)
2019
£m
8.5
(16.0)
(7.5)
Post IFRS 16
52 weeks
ended
28 March
2020
£m
161.9
(149.6)
12.3
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
168.6
(154.9)
13.7
52 weeks
ended
30 March
2019
£m
19.3
15.2
34.5
55,124,000
128,000
55,252,000
55,124,000
128,000
54,957,000
389,000
55,252,000
55,346,000
Pence
293.70
293.02
22.31
22.26
Pence
29.37
29.30
2.23
2.23
Pence
305.86
305.15
24.85
24.80
Pence
30.59
30.51
2.49
2.48
Pence
35.12
34.87
62.78
62.33
Pence
3.51
3.49
6.28
6.23
115
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
8. Earnings Per Share continued
Continuing operations
Profit attributable to equity shareholders
Separately disclosed items net of tax
Adjusted earnings attributable to equity shareholders
Weighted average share capital
Dilutive outstanding options and share awards
Diluted weighted average share capital
40p ‘A’ and ‘C’ ordinary share
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Diluted adjusted earnings per share
4p ‘B’ ordinary share
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Diluted adjusted earnings per share
Post IFRS 16
52 weeks
ended
28 March
2020
£m
(1.0)
12.8
11.8
Number
55,124,000
128,000
55,252,000
Pence
(1.81)
(1.81)
21.41
21.36
Pence
(0.18)
(0.18)
2.14
2.14
Pre IFRS 16
52 weeks
ended
28 March
2020
£m
5.7
7.5
13.2
52 weeks
ended
30 March
2019
£m
17.8
8.8
26.6
Number
Number
55,124,000
128,000
54,957,000
389,000
55,252,000
55,346,000
Pence
10.34
10.32
23.95
23.89
Pence
1.03
1.03
2.39
2.39
Pence
32.39
32.16
48.40
48.06
Pence
3.24
3.22
4.84
4.81
The Directors have determined the profit or loss and the weighted average number of shares that is attributable to each class of ordinary share to
calculate the earnings per share for the 40p ‘A’ and ‘C’ ordinary shares and the 4p ‘B’ ordinary shares. The earnings per share calculation is based on
earnings from continuing operations and on the weighted average ordinary share capital which excludes shares held by trusts relating to employee
share options and shares held in treasury of 1,860,777 (2019: 2,027,034).
Diluted earnings per share is calculated using the same earnings figure as for basic earnings per share, divided by the weighted average number of
ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
Adjusted earnings per share is calculated on profit before tax excluding separately disclosed items and on the same weighted average ordinary share
capital as for the basic and diluted earnings per share. An adjusted earnings per share measure has been included as the Directors consider that this
measure better reflects the underlying earnings of the Group.
116
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. 9. Dividends
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2019: 4.35p (2018: 12.00p)
Second interim dividend for 2019: 8.00p (2018: 0p)
First interim dividend for 2020: 7.80p (2019: 7.80p)
‘D’ Share single dividend for 2020: 125p (2019: 0p)
Equity dividends paid
Dividends on cumulative preference shares (note 6)
Declared and paid after the year
Second interim dividend for 2020: 0p (2019: 8.00p)
Proposed for approval at the Annual General Meeting:
Final dividend for 2020: 0p (2019: 4.35p)
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
2.4
4.4
4.3
69.4
80.5
0.1
–
–
6.6
–
4.3
–
10.9
0.1
4.4
2.4
The pence figures above are for the 40p ‘A’ ordinary shares and 40p ‘C’ ordinary shares. The 4p ‘B’ ordinary shares carry dividend rights of
one-tenth of those applicable to the 40p ‘A’ ordinary shares. Own shares held in the employee share trusts do not qualify for dividends as the
Trustees have waived their rights. Dividends are also not paid on own shares held as treasury shares.
As indicated in the circular published on 28 March 2019 relating to the disposal of the Fuller’s Beer Business, the Board made an additional cash
return of £1.25 per ‘A’ and ‘C’ ordinary share and 12.5p per ‘B’ ordinary share through a ‘D’ share scheme. Each ordinary shareholder as at the
record date was issued with ten ‘D’ shares for every existing ‘A’ and ‘C’ ordinary share and one ‘D’ share for every one ‘B’ ordinary share held at the
time. Numis (acting as principal, and not as agent, nominee or trustee for the Company) made an offer to purchase the ‘D’ shares for an amount
of 12.5p per ‘D’ share (free of all expenses and commissions). The Company accepted the offer on behalf of shareholders and paid a single dividend
to Numis as holder of all the ‘D’ shares of £69.4 million representing the sum of 12.5p per ‘D’ share plus the stamp duty payable by Numis in
connection with the purchase of all the ‘D’ shares in issue.
Following the approval of all the resolutions presented to the Company’s Extraordinary General Meeting on 1 October 2019, 552,318,406 ‘D’
shares of 0.1p each were allotted and issued to shareholders on 2 October 2019 on the basis of ten ‘D’ shares for every existing ‘A’ and ‘C’ ordinary
share of 40p each and one ‘D’ share for every existing ‘B’ ordinary share of 4p each held at the record date. Following the purchase by Numis of all
of the ‘D’ shares, and payment by the Company of a single dividend to Numis of £69.4 million as holder of all of the ‘D’ shares on 7 October 2019,
the ‘D’ shares were reclassified as deferred shares of 0.1p and were immediately repurchased and cancelled by the Company on 8 October 2019.
No final dividend for 2020 has been proposed for approval at the Annual General Meeting due to the temporary closure of the business as a result
of the coronavirus pandemic.
117
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
10. Intangible Assets
Cost
At 31 March 2018
Additions
Acquisitions
Transfers to assets held for sale
At 30 March 2019
Transfer to right-of-use assets
Acquisitions (note 19)
At 28 March 2020
Amortisation and impairment
At 31 March 2018
Provided during the year – continuing operations
Provided during the year – discontinued operations
Transfer to assets held for sale
At 30 March 2019
Transfer to right-of-use assets
Impairment
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
Net book value at 31 March 2018
1 The Company net book value at 28 March 2020 is £2.6 million of goodwill.
Post IFRS 16
Group and Company
Lease
assignment
premiums
£m
Distribution
rights
£m
Goodwill
£m
Brand
£m
Group
Total
£m
Company1
Total
£m
32.7
–
1.8
(4.5)
30.0
–
2.6
32.6
0.6
–
–
–
0.6
–
3.7
4.3
28.3
29.4
32.1
7.2
–
–
(7.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.2
9.6
3.5
–
–
13.1
(13.1)
–
–
3.8
1.0
–
–
4.8
(4.8)
–
–
–
8.3
5.8
1.2
–
–
(1.2)
–
–
–
–
0.9
–
0.3
(1.2)
–
–
–
–
–
–
0.3
50.7
3.5
1.8
(12.9)
43.1
(13.1)
2.6
32.6
5.3
1.0
0.3
(1.2)
5.4
(4.8)
3.7
4.3
28.3
37.7
45.4
10.8
3.5
–
(1.2)
13.1
(13.1)
2.6
2.6
4.7
1.0
0.3
(1.2)
4.8
(4.8)
–
–
2.6
8.3
6.1
118
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Cost
At 31 March 2018
Additions
Acquisitions
Transfer to assets held for sale
At 30 March 2019
Acquisitions (note 19)
At 28 March 2020
Amortisation and impairment
At 31 March 2018
Provided during the year – continuing operations
Provided during the year – discontinued operations
Transfer to assets held for sale
At 30 March 2019
Provided during the year
Impairment
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
Net book value at 31 March 2018
Pre IFRS 16
Group and Company
Lease
assignment
premiums
£m
Distribution
rights
£m
Group
Total
£m
Company1
Total
£m
Goodwill
£m
Brand
£m
32.7
–
1.8
(4.5)
30.0
2.6
32.6
0.6
–
–
–
0.6
–
3.7
4.3
28.3
29.4
32.1
7.2
–
–
(7.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
7.2
9.6
3.5
–
–
13.1
–
13.1
3.8
1.0
–
–
4.8
1.1
–
5.9
7.2
8.3
5.8
1.2
–
–
(1.2)
–
–
–
0.9
–
0.3
(1.2)
–
–
–
–
–
–
0.3
50.7
3.5
1.8
(12.9)
43.1
2.6
45.7
5.3
1.0
0.3
(1.2)
5.4
1.1
3.7
10.2
35.5
37.7
45.4
10.8
3.5
–
(1.2)
13.1
2.6
15.7
4.7
1.0
0.3
(1.2)
4.8
1.1
–
5.9
9.8
8.3
6.1
1 The Company net book value at 28 March 2020 is £2.6 million of goodwill and £7.2 million of lease premiums.
Brand
On 20 February 2018, the Company purchased 100% of the shares in The Dark Star Brewing Company Limited, a manufacturer of beer, for
£5.3 million. The value of the acquired brand was calculated using the royalty replacement method.
On 25 January 2019, the Group entered into an agreement for the sale of its entire Beer Business to Asahi Europe Ltd (“AEL”), including Dark Star
Brewing Company Limited. Under the terms of sale, AEL acquired the brands of the Beer Business and therefore the intangible asset forms part of
the assets held for sale at 30 March 2019. Refer to note 22.
119
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
10. Intangible Assets continued
Lease Assignment Premiums
Amounts paid to acquire leasehold property (“lease assignment premiums”) were previously amortised on a straight-line basis over the remaining
useful life of the lease. The amortisation was charged in the Income Statement in the line item “Operating costs” (note 4). There are ten pubs on
which we carry lease assignment premiums at 28 March 2020 (2019: ten). Lease assignment premiums have been transferred to right-of-use assets
on transition to IFRS 16 and are now being depreciated as part of the right-of-use asset, refer to note 33.
Distribution Rights
Distribution rights represent amounts paid to acquire the exclusive import and distribution rights to Sierra Nevada products within the UK.
The amortisation is charged over the period of the rights in the Income Statement in the line item “Operating costs” (note 4). This was fully
amortised in the 52 weeks ended 30 March 2019.
Goodwill
Goodwill is allocated to cash-generating units as follows:
Gales estate
Jacomb Guinness estate
The Stable Pizza & Cider Limited
Bel & The Dragon
Cotswold Inns & Hotels
2020
2019
Managed
£m
Tenanted
£m
9.1
1.2
–
1.8
2.6
13.6
–
–
–
–
Total
£m
22.7
1.2
–
1.8
2.6
£m
22.7
1.2
3.7
1.8
–
14.7
13.6
28.3
29.4
During the 52 weeks ended 28 March 2020, the Group recognised an impairment loss of £3.7 million in relation to previously acquired goodwill
recognised on acquisition of The Stable Pizza & Cider Limited, refer to note 13.
120
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. 11. Property, Plant & Equipment
Group
Cost
At 31 March 2018
Additions
Acquisitions (note 19)
Disposals
Derecognition of assets
Transfer to assets held for sale
At 30 March 2019
Additions
Acquisitions (note 19)
Disposals
Transfer to investment property (note 12)
Transfer to assets held for sale
At 28 March 2020
Depreciation and impairment
At 31 March 2018
Provided during the year – continuing operations
Provided during the year – discontinued operations
Disposals
Impairment loss net of reversals
Derecognition of assets
Transfer to assets held for sale
At 30 March 2019
Provided during the year
Disposals
Impairment loss net of reversals
Transfer to assets held for sale
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
Net book value at 31 March 2018
Land &
buildings
£m
Plant,
machinery &
vehicles
£m
Fixtures &
fittings
£m
528.4
12.5
20.6
(2.5)
–
(25.0)
534.0
36.0
42.2
(2.2)
(0.2)
(2.2)
43.0
4.1
–
(0.2)
–
(40.7)
6.2
0.3
–
–
–
–
160.7
17.3
–
(3.6)
(1.9)
(15.9)
156.6
15.4
2.1
(5.0)
–
(0.2)
Total
£m
732.1
33.9
20.6
(6.3)
(1.9)
(81.6)
696.8
51.7
44.3
(7.2)
(0.2)
(2.4)
607.6
6.5
168.9
783.0
40.4
3.6
0.4
(0.1)
(0.7)
–
(3.9)
39.7
3.8
(0.7)
8.5
(0.1)
51.2
556.4
494.3
488.0
26.7
0.5
1.9
(0.1)
–
–
(27.7)
1.3
0.5
–
–
–
1.8
4.7
4.9
16.3
100.9
14.4
1.0
(3.1)
1.9
(0.9)
(11.1)
103.1
13.6
(4.4)
0.1
(0.1)
112.3
56.6
53.5
59.8
168.0
18.5
3.3
(3.3)
1.2
(0.9)
(42.7)
144.1
17.9
(5.1)
8.6
(0.2)
165.3
617.7
552.7
564.1
121
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
11. Property, Plant & Equipment continued
Company
Cost
At 31 March 2018
Additions
Disposals
Derecognition of assets
Transfer to assets held for sale
At 30 March 2019
Additions
Acquisitions (note 19)1
Disposals
Transfer to investment property (note 12)
Transfer to assets held for sale
At 28 March 2020
Depreciation and impairment
At 31 March 2018
Provided during the year – continuing operations
Provided during the year – discontinued operations
Disposals
Impairment loss net of reversal
Derecognition of assets
Transfer to assets held for sale
At 30 March 2019
Provided during the year
Disposals
Impairment loss net of reversals
Transfer to assets held for sale
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
Net book value at 31 March 2018
Land &
buildings
£m
Plant,
machinery &
vehicles
£m
Fixtures &
fittings
£m
516.3
12.5
(2.5)
–
(20.8)
505.5
74.4
3.7
(2.1)
(0.2)
(2.2)
39.6
2.7
–
–
(37.4)
4.9
–
–
–
–
–
579.1
4.9
34.7
3.5
0.1
(0.1)
(1.8)
–
(3.8)
32.6
3.2
(0.7)
7.3
(0.1)
42.3
25.5
0.2
1.3
–
–
–
(24.4)
2.6
–
–
–
–
152.0
17.0
(3.5)
(1.9)
(15.7)
147.9
16.5
–
(4.9)
–
(0.2)
159.3
95.9
13.5
1.0
(3.1)
0.9
(0.9)
(11.0)
96.3
12.6
(4.3)
0.1
(0.1)
Total
£m
707.9
32.2
(6.0)
(1.9)
(73.9)
658.3
90.9
3.7
(7.0)
(0.2)
(2.4)
743.3
156.1
17.2
2.4
(3.2)
(0.9)
(0.9)
(39.2)
131.5
15.8
(5.0)
7.4
(0.2)
2.6
104.6
149.5
536.8
472.9
481.6
2.3
2.3
14.1
54.7
51.6
56.1
593.8
526.7
551.8
1 On 28 February 2020, the net assets of the Cotswold Inns & Hotels Limited were hived up to the Company at market value.
Interest Capitalised
The amount of interest capitalised to date is £169,000 (2019: £169,000). The amount of interest capitalised in the year was £nil (2019: £nil).
122
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
12. Investment Properties
Cost at 31 March 2018 and 30 March 2019
Transfer from property, plant and equipment (note 11)
At 28 March 2020
Depreciation and impairment at 31 March 2018 and 30 March 2019
Provided during the year
At 28 March 2020
Net book value at 28 March 2020
Net book value at 30 March 2019
Net book value at 31 March 2018
Fair value at 28 March 2020
Fair value at 30 March 2019
Fair value at 31 March 2018
Group and
Company
Freehold and
leasehold
properties
£m
5.5
0.2
5.7
0.9
–
0.9
4.8
4.6
4.6
20.1
15.4
14.4
The fair value of investment properties has been estimated by the Directors, based on the rental income earned on the properties during the year
and average yields earned on comparable properties from publicly available information, which is a Level 3 fair value valuation technique.
An independent valuation of the properties has not been performed.
An independent valuation of the properties has not been performed. The fair value of investment properties has been estimated by the Directors and
these have been derived using the inputs of the properties’ rental income as per the signed rental agreements and average gross residential and commercial
yields earned on comparable properties in comparable geographical locations, which is publicly available information obtained from a reputable UK
property specialist. The inputs used in this fair value calculation are a Level 3 valuation technique.
Investment Property Income
The properties are let on both landlord and tenant repairing leases. Amounts recognised in the profit for the financial year relating to rental income
from investment properties are as follows:
Group and Company
Rental income
Direct operating expenses
2020
£m
0.5
(0.3)
2019
£m
0.8
(0.1)
All direct operating expenses relate to properties that generate rental income.
13. Impairment
During the year, impairment losses of £18.9 million (2019: £3.0 million) and impairment reversals of £nil (2019: £1.8 million) were recognised within
separately disclosed items:
Group
Impairment losses net of reversals
Intangible assets
Property, plant and equipment
Right-of-use assets
2020
£m
3.7
8.6
6.6
18.9
2019
£m
–
1.2
–
1.2
123
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
13. Impairment continued
In addition to the impairments recognised on property, plant and equipment and right-of-use assets the Company also recognised impairment losses
of £4.0 million on the investment held in The Stable Pizza & Cider Limited due to continued poor trading.
Company
Impairment losses net of reversals
Property, plant and equipment
Right-of-use assets
Investment in The Stable Pizza & Cider Limited
2020
£m
7.4
4.1
4.0
15.5
2019
£m
(0.9)
–
–
(0.9)
Property, Plant and Equipment and Right-of-use Assets
The Group considers each trading outlet to be a cash-generating unit (“CGU”) and each CGU is reviewed annually for indicators of impairment.
In assessing whether an asset has been impaired, the carrying amount of the CGU is compared to its recoverable amount. The recoverable amount
is the higher of its fair value less costs to sell (“FVLCS”) and its value in use. In the absence of any information about the fair value of a CGU, the
recoverable amount is deemed to be its value in use.
For the purposes of estimating the value in use of CGUs, management has used a discounted cash flow approach. The calculations use cash flow
projections based on business plans covering a five-year period.
The 2020/21 forecast has been adjusted in light of the current circumstances surrounding coronavirus. It is assumed that the full estate will remain closed
for four months until the end of July 2020. After this point revenue will only return at 60% of the original amount budgeted for 2020/21 due to the
restrictions that social distancing will require. For 2021/22, it is assumed that trading will not return fully to pre-coronavirus conditions and 90% of
2020/21’s original budget has been used. It is assumed trading will return to pre coronavirus conditions in 2022/23 and the 2020/21 budget has been used.
Other key assumptions used by management in the value in use calculations were:
– The discount rate is based on the Group’s WACC which is used across all CGUs due to their similar characteristics. The pre-tax discount rate is 6.2%
– Long term growth rate of 2% was used for cash flows subsequent to the 2021/22 budget
The calculation of value in use is most sensitive to the assumptions in respect of achievement of budgeted cash flows, growth rate and discount rate.
The calculation of value in use is also dependent on the following assumptions: sales volume; gross margin in managed premises; barrelage and rent
projections in tenanted premises and wage cost in managed premises. Gross margins are based on historical performance levels. The key assumptions
above have their assigned values based on management knowledge and historical information.
Where the value in use is higher than the carrying amount of the CGU, no further assessment is required. For CGUs where the value in use is lower than
the carrying value (and at risk of impairment), a valuation of the property is performed to determine FVLCS. The property valuations are performed by
the Group’s inhouse property expert. The Group has also obtained valuations for a subset of these CGUs from a third party property valuation expert.
Impairments are recognised where the property valuation is also lower than the CGU’s carrying value for those determined to be at risk of
impairment. This is measured as the difference between the carrying value and the higher of FVLCS and its value in use. Where the property
valuation exceeds the carrying value, no impairment is required.
During the 52 weeks ended 28 March 2020, the Group recognised an impairment loss of £8.6 million (2019: £1.2 million) in respect of the write
down of a number of licensed properties where their asset values exceeded the higher of fair value less costs to sell or their value in use. Post IFRS
16 also includes impairment of right-of-use assets of £6.6 million in relation to five properties where asset values exceeded the higher of the fair
value less costs to sell or their value in use (30 March 2019: £nil). The impairment losses were driven principally by changes in the local competitive
environment in which the pubs are situated as well as the significant impact coronavirus will have on these pubs.
Sensitivity to Changes in Assumptions
The value in use calculations are sensitive to the assumptions used. The Directors consider a movement of 1% in the discount rate and 0.5% in the
growth rate to be reasonable with reference to current market yield curves and the current economic conditions. The impact is set out as follows:
Impact on impairment of assets at risk – increase/(decrease)
Increase discount rate by 1%
Decrease discount rate by 1%
Increase growth rate by 0.5%
Decrease growth rate by 0.5%
124
2020
£m
9.9
(15.9)
(6.3)
5.0
2019
£m
4.3
(2.4)
(1.2)
1.6
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The increase in discount rate and decrease in growth rate would lead to the CGUs represented by the value above being subject to further review by
the Group. The CGUs represented by the ‘impact on impairment of assets at risk’ would have their FVLCS determined in order to conclude on
whether an impairment is required.
A general decrease in property values across the portfolio would have a similar effect to that set out above i.e. any reduction in property values
would lead to assets being at risk of impairment. The carrying value of these CGUs would then be compared to their value in use to conclude
on whether an impairment is required. In the current year, a decrease of 5% in property values would have led to an additional impairment of
£1.3 million for the CGUs determined to be at risk of impairment following the comparison of their carrying values to their value in use.
Goodwill
Goodwill acquired through business combinations has been allocated for impairment testing on an estate and divisional cash-generating unit level.
This represents the lowest level within the Group at which goodwill is monitored for internal management purposes. An analysis of goodwill by
operating segment is included within note 10. Recoverable amount is based on a calculation of value in use based upon the revised 2020/21 budget
to incorporate the impact of coronavirus. Cash flows beyond the budget period are extrapolated in perpetuity on the assumption that the growth
rate does not exceed the average long-term growth rate for the relevant markets. The same assumptions to calculate the value in use are used for
goodwill as those for property, plant and equipment.
During the 52 weeks ended 28 March 2020, the Group recognised an impairment loss of £3.7 million in relation to previously acquired goodwill
recognised on acquisition of The Stable Pizza & Cider Limited. The impairment loss was principally driven by poor performance during the year
and the sale of the Company post year end, refer to note 34.
Sensitivity to Changes in Assumptions
Management have considered reasonable changes in key assumptions used in their calculations of value in use. They have concluded that such
changes would not result in an impairment to any additional cash-generating units at 28 March 2020.
Investment property
The Group considers each trading outlet to be a cash-generating unit (“CGU”) and each CGU is reviewed annually for indicators of impairment.
During the 52 weeks ended 28 March 2020, the Group did not impair any investment properties (2019: £nil). Refer to note 12.
14. Other Financial Assets & Liabilities
Group and Company
Interest rate cap
Total financial assets within current assets
Interest rate swaps
Total financial liabilities within non-current liabilities
Details of the interest rate swaps and caps are provided in note 28c (i).
15. Other Non-Current Assets
Group and Company
Loans to customers due after one year
16. Investments in Subsidiaries
Company
At 30 March 2019
Additions
Return of capital
Disposals
Impairments
At 28 March 2020
Group
2020
£m
–
–
(1.1)
(1.1)
Group
2019
£m
0.1
0.1
(1.4)
(1.4)
Company
2020
£m
Company
2019
£m
–
–
(1.1)
(1.1)
0.1
0.1
(1.4)
(1.4)
2020
£m
0.1
2019
£m
0.3
Cost
£m
Provision
£m
122.5
30.4
(13.3)
(13.0)
–
126.6
(0.2)
–
–
–
(4.0)
(4.2)
Net book
value
£m
122.3
30.4
(13.3)
(13.0)
(4.0)
122.4
125
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Notes to the Financial Statements
Continued
16. Investments in Subsidiaries continued
During the year, the Group purchased 100% of the shares in RSH 200 Limited for £30.4 million. RSH 200 Limited owns 100% of the shares
of Cotswold Inns & Hotels Limited additions, see note 19. In February 2020, the trade and assets were hived up to Fuller, Smith & Turner P.L.C.
The reduction of £13.3 million to the investment additions represents the net effect of a return of capital investment in the form of the underlying
net assets of the Cotswold Inns & Hotels.
The investment held in The Stable Pizza & Cider Limited was impaired by £4.0 million as a result of poor performance. Subsequent to the year end,
The Stable Pizza and Cider Limited and its subsidiary The Stable Bar & Restaurants Limited was sold.
Principal subsidiary undertakings
Holding
Proportion held
Nature of business
Griffin Catering Services Limited
£1 ordinary shares
100% (indirect)
Managed houses service company
The Stable Pizza & Cider Limited
£0.01 ordinary shares
£3.50 ‘B’ ordinary shares
100%
100%
Holding company
The Stable Bar & Restaurants Limited
£1 ordinary shares
100% (indirect)
Restaurant ownership and management
George Gale & Company Limited
£1 ordinary shares
FST Trustees Limited
25p ‘A’ ordinary shares
£10 preference shares
£1 ordinary shares
Fuller Smith & Turner Estates Limited
£1 ordinary shares
Ringwoods Limited
Griffin Inns Limited
Jacomb Guinness Limited
45 Woodfield Limited
Grand Canal Trading Limited
B&D Country Inns I Limited
B&D Country Inns II Limited
B&D (Cookham) Limited
B&D (Farnham) Limited
B&D (Kingsclere) Limited
B&D (Odiham) Limited
B&D (Reading) Limited
B&D (Win) Limited
RSH 200 Limited
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
£1 ordinary shares
100%
100%
100%
100%
100%
100%
100%
100%
Non-trading subsidiary
Non-trading subsidiary
Non-trading subsidiary
Non-trading subsidiary
Non-trading subsidiary
Non-trading subsidiary
100% (indirect)
Non-trading subsidiary
100% (indirect)
Non-trading subsidiary
100%
100%
Holding company
Holding company
100% (indirect)
Restaurant ownership and management
100% (indirect)
Restaurant ownership and management
100% (indirect)
Restaurant ownership and management
100% (indirect)
Restaurant ownership and management
100% (indirect)
Restaurant ownership and management
100% (indirect)
Restaurant ownership and management
100%
Holding company
Cotswold Inns and Hotels Limited
£1 ordinary shares
100% (indirect)
Hotel and restaurant ownership
The above companies are registered and operate in England and Wales. The registered office of all subsidiary companies is the same as Fuller, Smith
& Turner P.L.C. at Pier House, 86-93 Strand-on-the-Green, London, England, W4 3NN.
17. Non-controlling Interest
Set out below are the movements in the non-controlling interest for The Stable Pizza & Cider Limited and Nectar Imports Limited.
At 31 March 2018
Share of profit
Adjustments arising from change in non-controlling interest
At 30 March 2019 and 28 March 2020
£m
(3.9)
0.2
3.7
–
In the prior period, the adjustments arising from change in non-controlling interest relates to the settlement of The Stable Pizza & Cider Limited
and Nectar Imports Limited put and call options, originally recognised in non-controlling interest.
126
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. 18. Leases
This note provides information for leases where the Group is a lessee. For leases where the Group is a lessor, see note 31.
a) Amounts Recognised in the Balance Sheet
Group and Company
Right-of-use assets
Properties
Equipment
Vehicles
Lease liabilities
Current
Non-current
Group
2020
£m
Group1
31 March
2019
£m
Company
2020
£m
Company1
31 March
2019
£m
105.1
101.0
0.8
1.1
1.2
0.7
107.0
102.9
8.9
104.0
112.9
7.7
92.7
100.4
94.7
0.8
1.1
96.6
7.9
91.7
99.6
89.5
1.2
0.7
91.4
7.1
81.5
88.6
1
In the previous year, the Group accounted for operating leases under IAS 17, Leases. For adjustments recognised on adoption of IFRS 16 at 31 March 2019, refer to note 33.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Group
Net carrying value as at 31 March 2019
Additions
Lease amendments2
Business combinations
Depreciation
Impairment
Net carrying value as at 28 March 2020
Company
Net carrying value as at 31 March 2019
Additions
Lease amendments2
Depreciation
Impairment
Net carrying value as at 31 March 2020
Property
£m
101.0
2.8
14.7
3.0
(9.8)
(6.6)
105.1
Vehicles
£m
Equipment
£m
0.7
–
0.6
–
1.2
0.2
–
–
(0.2)
(0.6)
–
1.1
–
0.8
Property
£m
Vehicles
£m
Equipment
£m
89.5
2.8
15.5
(9.0)
(4.1)
94.7
0.7
–
0.6
1.2
0.2
–
(0.2)
(0.6)
–
1.1
–
0.8
Total
£m
102.9
3.0
15.3
3.0
(10.6)
(6.6)
107.0
Total
£m
91.4
3.0
16.1
(9.8)
(4.1)
96.6
2 Lease amendments include lease terminations, modifications, reassessments and extensions to existing lease agreements.
As at 28 March 2020, the Group was committed to leases with future cash outflows totalling £3.3 million which had not yet commenced
and as such are not accounted for as a liability. A liability and corresponding right-of-use asset will be recognised for these leases at the lease
commencement date.
A maturity analysis of gross lease liability payments is included within note 28.
127
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
18. Leases continued
b) Amounts Recognised in the Income Statement
Group
Depreciation charge of right-of-use assets
Properties
Equipment
Vehicles
Interest expense (included in finance cost)
Expense relating to short-term leases (included in operating costs)
Expense relating to leases of low value assets that are not shown above as short-term leases (included in operating costs)
Expense relating to variable lease payments not included in lease liabilities (included in operating costs)
Impairment of right-of-use assets
Income from sub-leasing right-of-use assets
52 weeks
ended
28 March
2020
£m
9.8
0.6
0.2
10.6
2.7
0.2
0.6
2.0
6.6
(0.5)
11.6
The Group’s total cash outflow in relation to leases is included within note 24.
c) The Group’s Leasing Activities and How These are Accounted for
The Group leases various properties, equipment and vehicles. Rental contracts are typically made for fixed periods and may have extension
options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not
be used as security for borrowing purposes.
Until the 2019 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under
operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.
From 31 March 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for
use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed
payments (including in-substance fixed payments), less any lease incentives receivable.
The lease payments are discounted the lessee’s incremental borrowing rate, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
– The amount of the initial measurement of lease liability
– Any lease payments made at or before the commencement date, less any lease incentives received
– Any initial direct costs
– Any previously recognised onerous lease provisions.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise vehicle leases and peppercorn leases.
Variable lease payments
Some property leases contain variable payment terms that are linked to sales generated from a pub. Variable payment terms are used for a variety
of reasons, including minimising the fixed costs base for newly established pubs. Variable lease payments that depend on sales are recognised in
profit or loss in the period in which the condition that triggers those payments occurs.
128
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. 19. Business Combinations
During the 52 weeks ended 28 March 2020, the Company acquired 100% of the shares of Cotswold Inns & Hotels, a business incorporated in the
UK and consisting of seven premium hotels and two bars. A further pub was bought and treated as a business combination as it was operating as a
business at the point the Company acquired it. Both these transactions have been accounted for by the purchase method of accounting.
2020
2019
Cotswold
Inns & Hotels
Pubs and
Restaurant
Bel & The
Dragon
Pubs and
Restaurant
Number of pubs/hotels/restaurants purchased
9
1
Fair value
Property, plant and equipment
Right-of-use asset
Current assets
Lease liabilities
Current liabilities
Deferred tax
Borrowings
Cash and cash equivalents
Net assets acquired
Goodwill
Consideration
Cash consideration paid
Cash deposit paid in prior year
Total consideration
Net outflow of cash
Cash consideration paid
Cash and cash equivalents acquired
Net cash outflow from investing activities
Repayment of third party loans on acquisition
Repayment of liability arising on acquisition
Net cash outflow from financing activities
Net cash outflow in respect of purchase of businesses
£m
40.6
3.0
1.2
(3.0)
(3.7)
(3.2)
(8.4)
1.3
27.8
2.6
30.4
30.4
–
30.4
30.4
(1.3)
29.1
8.4
–
8.4
37.5
£m
3.7
–
–
–
–
–
–
–
3.7
–
3.7
3.7
–
3.7
3.7
–
3.7
–
–
–
3.7
6
£m
20.6
–
0.8
–
(2.4)
(2.0)
(6.0)
0.3
11.3
1.8
13.1
13.1
–
13.1
13.1
(0.3)
12.8
6.0
0.1
6.1
18.9
4
£m
3.5
–
–
–
–
–
–
–
3.5
–
3.5
3.3
0.2
3.5
3.3
–
3.3
–
–
–
3.3
Costs associated with the acquisitions have been charged to separately disclosed items within operating costs in the Income Statement for the
52 weeks ended 28 March 2020. These comprise primarily stamp duty land tax, legal and other property fees (see note 5).
From the date of acquisition, Cotswold Inns & Hotels contributed £5.2 million of revenue and £0.5 million loss to profit before tax from
continuing operations of the Group. The impact of coronavirus was an estimated loss of £0.3 million. If the combination had taken place at the
start of the financial year, Cotswold Inns and Hotels would be expected to contribute £17.0 million of revenue and £2.3 million of profit before tax.
The consideration paid is the enterprise value of £40 million less any working capital adjustments.
129
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
20. Inventories
Group and Company
Stock at retail outlets
Group
2020
£m
4.0
Group
2019
£m
5.0
Company
2020
£m
Company
2019
£m
3.5
4.5
Amounts recognised in profit or loss
Inventories recognised as an expense during the year ended 28 March 2020 amounted to £66.4 million (2019: £65.9 million). These were
included in operating costs.
Inventories were written down by a total amount of £0.4 million at the year end largely due to the temporary closure of the pubs because of the
coronavirus pandemic.
21. Trade and Other Receivables
Group
Trade receivables
Other receivables
Prepayments and accrued income
Company
Trade receivables
Amounts due from subsidiary undertakings
Other receivables
Prepayments and accrued income
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
2.4
7.2
3.0
12.6
2.4
4.3
3.0
9.7
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
2.4
7.5
6.7
2.8
19.4
2.4
7.5
4.0
2.8
16.7
2019
£m
4.6
0.7
3.0
8.3
2019
£m
4.5
30.2
0.2
3.0
37.9
Company amounts owed from subsidiary undertakings of £7.5 million (2019: £30.2 million) have no fixed repayment date. Interest is payable
on the balance at the higher of either the Bank of England base rate plus 3% or 8%. Company amounts owed from subsidiary undertakings
are unsecured. Amounts due from the Stable Pizza & Cider Limited have been impaired as subsequent to year end this loan was waived.
The impairment was for a total of £24.7 million.
As at 28 March 2020, the Group has accrued £0.9 million, shown in other receivables, in relation to the Coronavirus Job Retention Scheme (“CJRS”).
The trade receivables balance above is shown net of the loss allowance. The Group and Company provides against trade receivables based on an
expected credit loss model, calculated from the probability of default for the remaining life of the asset. The expected credit losses relating to
amounts due from subsidiary undertakings are, in the view of the Directors, not material.
In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk
characteristics. They have been grouped based on the days past due and also accordingly to the geographical location of customers which is the
same for all.
The expected loss rates are based on the payment profile for sales over the past 24 months before the balance sheet date. The historical rates are
adjusted to reflect current and forward looking macroeconomic factors effecting the customers ability to settle the amount outstanding, the most
significant factor being the coronavirus pandemic.
130
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The movements on the loss allowance during the year are summarised below:
Group and Company
Opening balance
Transferred to asset held for sale
Increase in loss allowance recognised in profit and loss
Closing balance
2020
£m
0.4
–
0.5
0.9
2019
£m
1.4
(1.0)
–
0.4
The loss allowance for trade receivables is recorded in the accounts separately from the gross receivable. The contractual ageing of the trade
receivables balance is as follows:
Group and Company
Current
Overdue up to 30 days
Overdue between 30 and 60 days
Overdue more than 60 days
Trade receivables before loss allowance
Loss allowance
Trade receivables net of loss allowance
Group
2020
£m
0.9
1.2
0.1
1.1
3.3
(0.9)
2.4
Group
2019
£m
Company
2020
£m
Company
2019
£m
2.4
1.2
0.5
0.9
5.0
(0.4)
4.6
0.9
1.2
0.1
1.1
3.3
(0.9)
2.4
2.3
1.2
0.5
0.9
4.9
(0.4)
4.5
Included in other receivables are loans to customers of £0.1 million (2019: £0.2 million) due within one year and £0.1 million (2019: £0.4 million)
due in more than one year, net of a provision of £0.1 million (2019: £0.2 million).
22. Assets Classified as Held for Sale and Discontinued Operations
On 27 April 2019, the Group sold its entire beer business to Asahi Europe Ltd (“AEL”), a wholly owned subsidiary of Asahi Group Holdings Ltd
(“Asahi”), for an enterprise value of £250.0 million on a debt free basis including any cash left in the business.
The business sold comprised the entirety of Fuller’s beer, cider and soft drinks brewing and production, wine wholesaling, as well as the distribution
thereof, and also includes the Griffin Brewery, Cornish Orchards, Dark Star Brewing and Nectar Imports (referred to as the “Fuller’s Beer Business”).
Accordingly those divisions have been reported as discontinued operations in the Annual Report for the 52 weeks ended 28 March 2020.
131
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
22. Assets Classified as Held for Sale and Discontinued Operations continued
a) Financial Performance and Cash Flow
The financial performance and cash flow information presented reflects the operations for the one month ended 27 April 2019.
Revenue
Segment revenue
Inter-segment sales
Revenue from third parties
Segment result
Operating separately disclosed items
Operating profit
Net finance costs
Profit from operating activities – discontinued operations
Net gain/(loss) on sale of discontinued operation
Income tax on gain on sale of discontinued operation
Profit before tax – discontinued operations
Taxation
Analysed as:
Underlying trading
Separately disclosed items
Profit from discontinued operations
Attributable to:
Equity shareholders of the Parent Company
Non-controlling interest
Net cash inflow from operating activities
Net cash inflow/(outflow) from investing activities
Net increase/(decrease) in cash generated by the Fuller’s Beer Business
Other segment information
Additions to property, plant & equipment
Business combinations
Depreciation and amortisation
Earnings per share – discontinued operations
40p ‘A’ and ‘C’ ordinary share
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Diluted adjusted earning per share
4p ‘B’ ordinary share
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
Diluted adjusted earning per share
132
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
13.1
(4.1)
9.0
0.6
–
0.6
–
0.6
162.4
–
163.0
(0.1)
(0.1)
–
162.9
162.9
–
0.6
225.4
226.0
–
–
–
295.52
294.83
0.91
0.90
29.55
29.48
0.09
0.09
161.4
(55.0)
106.4
10.1
(1.6)
8.5
–
8.5
(5.4)
–
3.1
(1.4)
(2.0)
0.6
1.7
1.5
0.2
0.3
(4.2)
(3.9)
4.2
2.0
3.6
2.73
2.71
14.37
14.27
0.27
0.27
1.44
1.43
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. b) Details of the Sale of the Subsidiary
Provisional consideration received
Cash
Carrying amount of net assets sold
Goodwill
Gain on sale before income tax
Transaction costs
Gain net of transaction costs
Income tax expense on gain
Gain on sale after income tax
52 weeks
ended
28 March
2020
£m
230.5
(47.0)
(11.7)
171.8
(9.4)
162.4
–
162.4
The consideration received is the enterprise value of £250.0 million less working capital adjustments and provision.
c) Assets and Liabilities of Disposal Group Classified as Held for Sale
The following assets and liabilities were reclassified as held for sale in relation to the discontinued operation as at 30 March 2019:
Non-current assets
Intangible assets
Property, plant and equipment
Other financial assets
Total non-current assets
Current assets
Inventories
Cash and short-term deposits
Trade and other receivables
Total current assets
Assets Classified as Held for Sale
Current liabilities
Trade and other payables
Total current liabilities
Other non-current payables
Deferred tax liabilities
Non-current liabilities
Liabilities Classified as Held for Sale
Net assets – statutory
d) Movement in Total Assets Held for Sale
Assets held for sale at the start of the year
Assets transferred from property plant and equipment
Assets transferred from other receivables
Disposal of Fuller’s Beer Business
Assets held for sale at the end of the year
The Fuller’s
Beer
Business
Group
£m
The Fuller’s
Beer
Business
Company
£m
11.7
38.9
0.1
50.7
12.7
5.3
18.3
36.3
87.0
(28.0)
(28.0)
(0.2)
(1.8)
(2.0)
(30.0)
57.0
–
34.7
0.2
34.9
10.6
2.3
14.8
27.7
62.6
(23.2)
(23.2)
–
(0.3)
(0.3)
(23.5)
39.1
Group
Company
57.0
39.1
2.2
0.4
2.2
0.4
(57.0)
(39.1)
2.6
2.6
133
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
23. Trade and Other Payables
Due within one year:
Group
Trade payables
Other tax and social security
Other payables
Accruals
Contract liabilities
Due within one year:
Company
Trade payables
Amounts due to subsidiary undertakings
Other tax and social security
Other payables
Accruals
Contract liabilities
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
12.6
5.1
6.7
10.9
2.4
37.7
12.6
5.1
6.7
10.7
2.4
37.5
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
11.5
132.2
4.2
5.5
9.4
2.4
11.5
132.2
4.2
5.5
9.2
2.4
2019
£m
2.8
5.0
6.4
13.5
1.9
29.6
2019
£m
2.1
106.2
4.2
5.2
14.3
1.9
165.2
165.0
133.9
Company amounts due to subsidiary undertakings of £132.2 million (2019: £106.2 million) have no fixed repayment date. Interest is payable on the
balance at 3% above the Bank of England base rate. Company amounts due to subsidiary undertakings are unsecured.
Contract liabilities relate to deposits received from customers to secure bookings for events and accommodation. Post year end £0.6 million was
refunded to customers as a result of coronavirus. The remaining balance will unwind and be recognised as revenue in 2020/21.
24. Cash, Borrowings and Net Debt
Cash and Short-Term Deposits
Cash at bank and in hand
Group
2020
£m
20.3
Group
2019
£m
11.0
Company
2020
£m
Company
2019
£m
19.2
9.2
For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents comprise cash at bank and in hand, as above. Cash at bank
earns interest at floating rates.
Borrowings
Bank loans
Other loans
Debenture stock
Preference shares
Total borrowings
Analysed as:
Borrowings within current liabilities
Borrowings within non-current liabilities
Group
2020
£m
Group
2019
£m
Company
2020
£m
Company
2019
£m
171.7
228.5
171.7
228.5
–
25.9
1.6
0.2
25.9
1.6
–
25.9
1.6
–
25.9
1.6
199.2
256.2
199.2
256.0
171.7
27.5
199.2
50.0
206.2
256.2
171.7
27.5
199.2
50.0
206.0
256.0
All borrowings at both year ends are denominated in Sterling and where appropriate are stated net of issue costs. Further information on borrowings
is given in note 28.
134
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Bank Loans
Group and Company
£191.7 million of the Company’s existing main bank facilities were due to expire in August 2021. The remaining £33.3 million is due to expire
in August 2020. However, as a result of coronavirus and the temporary closure of the entire estate the Group assessed that they have breached
their covenant testing on 28 March 2020 and therefore the debt became a current liability at this date. Shortly after year end the March covenant
testing was revised to a more appropriate test based on liquidity and £145.6 million was reclassified to non-current liabilities.
At the date of signing, £53.0 million (2019: £31.0 million) of the total of £225.0 million (2019: £260.0 million) bank facility was undrawn.
The bank loans at 28 March 2020 are unsecured, and are repayable as shown in the table below. Interest is payable at LIBOR plus a margin, which
varies dependent on the ratio of net debt to EBITDA. The variable rate interest payments under the loans have been partially swapped for fixed
interest payments. Details of the swap arrangements are given in note 28.
The bank loans are repayable as follows:
On demand or within one year
Current liabilities
In the first to second years inclusive
In the third to fifth year inclusive
Less: bank loan arrangement fees
Non-current liabilities
Debenture Stock
Debenture stock repayable after five years:
Group and Company
10.70% 1st Mortgage Debenture Stock 2023
6.875% Debenture Stock 2028 (1st floating charge)
Less: discount on issue
Non-current liabilities
2020
£m
171.7
171.7
–
–
–
–
2019
£m
50.0
50.0
179.0
–
(0.5)
178.5
2020
£m
6.0
20.0
(0.1)
25.9
2019
£m
6.0
20.0
(0.1)
25.9
Preference Shares
The Company’s preference shares are classified as debt. The shares are not redeemable and are included in borrowings within non-current liabilities.
See note 26 for further details of the preference shares.
135
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
24. Cash, Borrowings and Net Debt continued
Analysis of Net Debt
Group
Cash and cash equivalents:
Cash and short-term deposits
Financial liabilities
Lease liabilities
Debt:
Bank loans2
Other loans
Debenture stock
Preference shares
Total borrowings
Net debt
Group
Cash and cash equivalents:
Cash and short-term deposits
Debt:
Bank loans2
Other loans
Debenture stock
Preference shares
Total borrowings
Net debt
Post IFRS 16
At
30 March
2019
£m
Transition to
IFRS 16
£m
Cash flows
£m
Non cash1
£m
At
28 March
2020
£m
11.0
11.0
–
–
–
–
(100.4)
(100.4)
(228.5)
(0.2)
(25.9)
(1.6)
(256.2)
–
–
–
–
–
(245.2)
(100.4)
9.3
9.3
11.2
11.2
57.0
–
–
–
57.0
77.5
–
–
20.3
20.3
(23.7)
(23.7)
(112.9)
(112.9)
(0.2)
0.2
–
–
–
(171.7)
–
(25.9)
(1.6)
(199.2)
(23.7)
(291.8)
Pre IFRS 16
At
30 March
2019
£m
Cash flows
£m
Non cash1
£m
At
28 March
2020
£m
11.0
11.0
9.3
9.3
–
–
20.3
20.3
(228.5)
57.0
(0.2)
(25.9)
(1.6)
(256.2)
(245.2)
–
–
–
57.0
66.3
(0.2)
0.2
–
–
–
–
(171.7)
–
(25.9)
(1.6)
(199.2)
(178.9)
1 Non-cash movements relate to the amortisation of arrangement fees, arrangement fees accrued, movements in lease liabilities and corporate disposals.
2 Bank loans net of arrangement fees.
136
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Group
Cash and cash equivalents:
Cash and short-term deposits
Debt:
Bank loans2
Other loans
Debenture stock
Preference shares
Total borrowings
Net debt
At
31 March
2018
£m
Cash flows
£m
Non-cash1
£m
At
30 March
2019
£m
11.7
11.7
(0.7)
(0.7)
–
–
11.0
11.0
(185.9)
(42.3)
(0.3)
(228.5)
(0.2)
(25.9)
(1.6)
(213.6)
(201.9)
–
–
–
–
–
–
(0.2)
(25.9)
(1.6)
(42.3)
(43.0)
(0.3)
(0.3)
(256.2)
(245.2)
1 Non-cash movements relate to the amortisation of arrangement fees.
2 Bank loans net of arrangement fees.
The Company net debt is as above excluding Other Loans of £nil (2019: £0.2 million), cash of £1.1 million (2019: £1.8 million) and lease liabilities
of £13.3 million (2019: £nil) which are held by subsidiary companies. Company net debt as at 28 March 2020 was £279.6 million post IFRS 16,
£180.0 million pre IFRS 16 (2019: £246.8 million).
25. Pensions
a) Retirement Benefit Plans – Group and Company
The Group operates one closed funded defined benefit pension scheme, the Fuller, Smith & Turner Pension Plan (the “Scheme”). The plan is
defined benefit in nature, with assets held in separate professionally managed, trustee-administered funds. The Scheme is HM Revenue & Customs
registered pension plan and subject to standard United Kingdom pension and tax law. On 1 January 2015 the plan was closed to new entrants.
The Group also operates three defined contribution stakeholder pension plans for its employees. The Fuller’s Stakeholder Pension Plan was set
up for new employees of the Parent Company after the closure of the Fuller, Smith & Turner Pension Plan to new entrants on 1 August 2005.
The Griffin Stakeholder Pension Plan operates for those employees of a Group subsidiary. The Gales 2001 scheme was set up following the
closure of the Gales defined benefit scheme in 2001.
The Group offers workplace pensions to all employees who are not members of the three defined contribution stakeholder pension plans.
The Group offers these pensions through the National Employment Savings Trust (“NEST”).
The Group also pays benefits, which are unfunded, to a number of former employees. The Directors consider these benefits to be defined benefit
in nature and the full defined benefit liability is recognised on the Balance Sheet.
Group and Company
Total amounts charged in respect of pensions in the year
Charged to Income Statement:
Defined benefit scheme – net finance charge – separately disclosed items
Guaranteed minimum pension (“GMP”) equalisation charge – separately disclosed items
Defined contribution schemes and NEST – total operating charge
(Credit)/Charge to equity:
Defined benefit schemes – net actuarial (gains)/losses
Total pension (credit)/charge
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
0.6
–
2.1
2.7
(5.9)
(3.2)
0.8
0.3
1.6
2.7
5.0
7.7
137
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
25. Pensions continued
b) Defined Contribution Stakeholder Pension Plans – Group and Company
The total cost charged to income in respect of the defined contribution stakeholder schemes is shown in the total operating charge above.
c) Defined Benefit Plans – Group and Company
The Scheme provides pensions and lump sums to members on retirement and to their dependants on death.
Trustees are appointed by both the Company and the Scheme’s membership and act in the interest of the Scheme and all relevant stakeholders,
including the members and the Company. The Trustees are also responsible for the investment of the Scheme’s assets.
The Company pays the costs as determined by regular actuarial valuations. The Trustees are required to use prudent assumptions to value the
liabilities and costs of the Scheme whereas the accounting assumptions must be best estimates.
Responsibility for making good any deficit on the Scheme lies with the Company and this introduces a number of risks for the Company. The major
risks are:
– interest and investment risk – The value of the Scheme’s assets are subject to volatility in equity prices. The Scheme has diversified its
investments to reduce the impact of volatility and variable interest return rates
– inflation risk – The defined benefit obligation is linked to inflation so higher rates would result in a higher defined benefit obligation
– longevity risk – An increase over the assumptions applied will increase the defined benefit obligation.
The Company and Trustees are aware of these risks and manage them through appropriate investment and funding strategies. The Trustees manage
governance and operational risks through a number of internal control policies.
The Scheme is subject to regular actuarial valuations, which are usually carried out every three years. Following the conclusion of the 2016 triennial
valuation, the Company agreed to increase the deficit funding payment from 1 January 2017 to £2 million per annum from £1.3 million per annum.
The 2019 triennial valuation is still ongoing.
The figures in the following disclosures were measured using the projected unit credit method.
The Scheme has not invested in any of the Group’s own financial instruments or in properties or other assets in use by the Group.
Key assumptions
The key assumptions used in the 2020 valuation of the Scheme are set out below:
Mortality assumptions
Current pensioners (at 65) – males
Current pensioners (at 65) – females
Future pensioners (at 65) – males
Future pensioners (at 65) – females
2020
Years
22.1
24.3
23.4
25.8
2019
Years
22.0
23.9
23.4
25.5
The Plan is now closed to future accrual. The average age of the members who were active at closure is 55 for males and 51 for females. The average
age of all non-pensioners is 55.
Key financial assumptions used in the valuation of the Scheme
Rate of increase in pensions in payment
Discount rate
Inflation assumption – RPI
Inflation assumption – CPI
2020
2.85%
2.40%
2.85%
1.95%
2019
3.30%
2.40%
3.35%
2.35%
138
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The present value of the Scheme liabilities is sensitive to the assumptions used, as follows:
Impact on Scheme liabilities – increase/(decrease)1
Increase discount rate by 0.1%
Increase inflation assumption by 0.1%2
Increase life expectancies by 1 year
2020
£m
(2.1)
1.8
5.7
2019
£m
(2.6)
2.0
7.4
1 The sensitivity analyses are based on a change in an assumption whilst holding all of the other assumptions constant. In practice this is unlikely to occur and changes in some
of the assumptions may be correlated. When calculating the sensitivity to change, the same actuarial method has been applied as when calculating the pension liability within
the Balance Sheet. Due to the Scheme closing to future accrual on 1 January 2015, there are no longer any active members in the Scheme. As the members who were
active at closure did not maintain a salary link on their past service benefits, the future salary increase assumptions no longer have an impact on the Scheme’s liabilities.
2 For members who were active at closure, their pensions now increase in deferment in line with CPI inflation.
Assets in the Scheme
Corporate bonds
Gilts
UK equities
Overseas equities
Alternatives
Cash
Annuities
Total market value of assets
Fair value of Scheme assets
Present value of Scheme liabilities
Deficit in the Scheme
28 March
2020
£m
30 March
2019
£m
26.9
24.0
17.0
20.9
30.5
0.9
3.6
123.8
2020
£m
123.8
27.4
–
21.3
22.3
36.5
0.8
3.6
111.9
2019
£m
111.9
(128.5)
(148.3)
(4.7)
(36.4)
Included within the total present value of Group and Company Scheme liabilities of £128.5 million (2019: £148.3 million) are liabilities of
£2.1 million (2019: £2.4 million) which are entirely unfunded.
139
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
25. Pensions continued
Balance at beginning of the year
Included in profit and loss
Current service cost
Net interest cost
Included in Other Comprehensive Income
Actuarial gains/(losses) relating to:
Return on Scheme’s assets (less amounts included in the net interest
expense)
Experience gains/(losses) arising on Scheme liabilities
Other
Employer special contribution
Employer contribution
Benefits paid
GMP Equalisation
Defined benefit obligation
Fair value of Scheme assets
Net defined deficit
2020
£m
2019
£m
(148.3)
(142.0)
2020
£m
111.9
2019
£m
2020
£m
2019
£m
109.5
(36.4)
(32.5)
–
(3.7)
(3.7)
–
(3.6)
(3.6)
–
3.1
3.1
–
2.8
2.8
–
(0.6)
(0.6)
–
(0.8)
(0.8)
–
19.1
19.1
–
–
4.4
–
4.4
–
(7.6)
(7.6)
–
–
5.2
(0.3)
4.9
(13.2)
–
(13.2)
24.0
2.4
(4.4)
–
22.0
2.6
–
2.6
–
2.2
(5.2)
–
(13.2)
19.1
5.9
24.0
2.4
–
–
(3.0)
26.4
2.6
(7.6)
(5.0)
–
2.2
–
(0.3)
1.9
Balance at end of the year
(128.5)
(148.3)
123.8
111.9
(4.7)
(36.4)
The weighted average duration of the Scheme’s liabilities at the end of the period is 17 years (2019: 18 years).
The total contributions to the Scheme in the next financial year are expected to be £2.0 million for the Group and the Company. These payments
are to be made as part of a deficit recovery plan in place until March 2021 as agreed between the Trustees and the Group. No further payments are
made as the Scheme is now closed to future accrual.
Following the sale of the Fuller’s Beer Business to Asahi Europe Ltd, which completed on 27 April 2019, the Group made a special contribution
of £24 million of net cash proceeds from the sale to the Scheme.
26. Preference Share Capital
Group and Company
Authorised, issued and fully paid share capital
Number authorised and in issue:
At 1 April 2018, 30 March 2019 and 28 March 2020
Monetary amount:
At 1 April 2018, 30 March 2019 and 28 March 2020
140
First 6%
cumulative
preference
share of
£1 each
Number
000s
Second 8%
cumulative
preference
share of
£1 each
Number
000s
Total
Number
000s
400
1,200
1,600
£m
0.4
£m
1.2
£m
1.6
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The first 6% cumulative preference shares of £1 each are entitled to first payment of a fixed cumulative dividend and on winding up to a return of paid
capital plus arrears of dividends. The second 8% cumulative preference shares of £1 each are entitled to second payment of a fixed cumulative dividend
and on winding up a return of capital paid up (plus a premium calculated by reference to an average quoted price on the London Stock Exchange for
the previous six months) plus arrears of dividends.
Preference shareholders may only vote in limited circumstances: principally on winding up, alteration of class rights or on unpaid preference
dividends. Preference shares cannot be redeemed by the holders, other than on winding up.
27. Provisions
Group and Company
Balance at beginning of the year
Arising during the year
Utilised
Transferred to right-of-use assets
Transferred to accruals
Unwinding of discount
Balance at end of the year
Analysed as:
Due within one year
Due in more than one year
Group and Company
Balance at beginning of the year
Arising during the year
Utilised
Unwinding of discount
Balance at end of the year
Analysed as:
Due within one year
Due in more than one year
Post IFRS 16
Legal claim
Onerous lease
2020
£m
–
4.2
(0.1)
–
–
–
4.1
2020
£m
4.1
–
4.1
2019
£m
–
–
–
–
–
–
–
2019
£m
–
–
–
2020
£m
2.6
–
–
(2.4)
(0.2)
–
–
2020
£m
–
–
–
Pre IFRS 16
Legal claim
Onerous lease
2020
£m
–
4.2
(0.1)
–
4.1
2020
£m
4.1
–
4.1
2019
£m
–
–
–
–
–
2019
£m
–
–
–
2020
£m
2.6
–
(0.7)
0.1
2.0
2020
£m
0.4
1.6
2.0
2019
£m
0.7
2.0
(0.2)
–
–
0.1
2.6
2019
£m
0.5
2.1
2.6
2019
£m
0.7
2.0
(0.2)
0.1
2.6
2019
£m
0.5
2.1
2.6
The onerous lease provision is recognised in respect of leasehold properties where the lease contracts are deemed to be onerous. Provision is made
for the discounted value of the lower of the unavoidable lease costs and the losses expected to be incurred by the Group.
On transition to IFRS 16, the Group has elected to apply a practical expedient which has resulted in a reduction of the right-of-use asset for the
properties on which an onerous lease provision was previously held. The onerous lease provisions of £2.4 million at 30 March 2019 have been offset
against the right-of-use asset at the date of initial application while the remaining provision of £0.2 million has been reclassified to accruals (refer to
note 33).
Further information has not been disclosed for the legal claim as it is an ongoing dispute.
141
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
28. Financial Instruments
Details of the Group’s treasury function are included in the Financial Review’s discussion of financial risks and treasury policies on page 31.
The accounting treatment of the Group’s financial instruments is detailed in note 1.
a) Capital Management – Group and Company
As described in note 1, the Group considers its capital to comprise the following:
Group
Ordinary share capital
Share premium
Capital redemption reserve
Hedging reserve
Retained earnings
Preference shares
Company
Ordinary share capital
Share premium
Capital redemption reserve
Hedging reserve
Retained earnings
Preference shares
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
420.8
328.4
1.6
1.6
445.5
452.2
359.9
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
2019
£m
22.8
4.8
3.1
(0.8)
2019
£m
22.8
4.8
3.1
(0.8)
22.8
4.2
3.7
(0.9)
22.8
4.2
3.7
(0.9)
374.8
303.3
1.6
1.6
22.8
4.2
3.7
(0.9)
414.1
1.6
22.8
4.2
3.7
(0.9)
370.1
1.6
In managing its capital, the primary objective is to ensure that the Group is able to continue to operate as a going concern and to maximise return
to shareholders through a combination of capital growth, distributions and the payment of preference dividends to its preference shareholders.
The Group seeks to maintain a ratio of debt and equity that balances risks and returns at an acceptable level and maintains sufficient funds to meet
working capital targets and investment requirements, and comply with lending covenants. The Group bought back £0.5 million of shares in the
52 weeks ended 28 March 2020 (2019: £3.2 million), none of which related to purchases made by or on behalf of employee share ownership trusts
(2019: £nil). As a minimum, the Board reviews the Group’s dividend policy twice yearly and reviews the treasury position every Board meeting.
401.5
406.2
334.8
142
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. b) Categories of Financial Assets and Liabilities
The Group’s financial assets and liabilities as recognised at the Balance Sheet date may also be categorised as follows:
Group
Non-current assets
Financial assets at amortised cost:
Loans and other receivables
Total non-current assets
Current assets
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
0.1
0.1
0.1
0.1
2019
£m
0.3
0.3
Derivative financial instruments used for hedging
–
–
0.1
Financial assets at amortised cost:
Trade and other receivables
Cash and short-term deposits
Total current assets
Total financial assets
Current liabilities
Financial liabilities at amortised cost:
Trade and other payables
Lease liabilities
Loans
Total carried at amortised cost
Total current liabilities
Non-current liabilities
Derivative financial instruments used for hedging
Financial liabilities at amortised cost:
Other payables
Lease liabilities
Loans and debenture stock
Preference shares
Total carried at amortised cost
Total non-current liabilities
Total financial liabilities
2.4
20.3
22.7
22.8
30.0
8.9
171.7
206.5
206.5
2.4
20.3
22.7
22.8
30.2
–
171.7
197.8
197.8
4.6
11.0
15.7
16.0
18.7
–
50.0
68.7
68.7
1.1
1.1
1.4
–
104.0
25.9
1.6
131.5
132.6
343.2
1.6
–
25.9
1.6
29.1
30.2
232.1
2.1
–
204.6
1.6
208.3
209.7
278.4
143
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
28. Financial Instruments continued
Company
Non-current assets
Financial assets at amortised cost:
Loans and other receivables
Total non-current assets
Current assets
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
0.1
0.1
0.1
0.1
2019
£m
0.3
0.3
Derivative financial instruments used for hedging
–
–
0.1
Financial assets at amortised cost:
Trade and other receivables
Cash and short-term deposits
Total current assets
Total financial assets
Current liabilities
Financial liabilities at amortised cost:
Trade and other payables
Lease liabilities
Loans
Total carried at amortised cost
Total current liabilities
Non-current liabilities
Derivative financial instruments used for hedging
Financial liabilities at amortised cost:
Other payables
Lease liabilities
Loans and debenture stock
Preference shares
Total carried at amortised cost
Total non-current liabilities
Total financial liabilities
9.9
19.2
29.1
29.2
159.6
7.9
171.7
339.2
339.2
9.9
19.2
29.1
29.2
34.7
9.2
44.0
44.3
159.8
123.1
–
171.7
331.5
331.5
–
50.0
173.1
173.1
1.1
1.1
1.4
–
91.7
25.9
1.6
119.2
120.3
1.6
–
25.9
1.6
29.1
30.2
459.5
361.7
2.1
–
204.4
1.6
208.1
209.5
382.6
There is no set-off of financial assets and liabilities as shown above.
c) Financial Risks – Group and Company
The main risks associated with the Group’s financial assets and liabilities are set out below, as are the Group’s policies for their management.
Derivative instruments are used to change the economic characteristics of financial instruments in accordance with Group policy.
i. Interest rate risk
The Group manages its cost of borrowings using a mixture of fixed rates, variable rates and interest rate caps. Fixed rates do not expose the
Group to cash flow interest rate risk, but do not enjoy a reduction in borrowing costs in markets where rates are falling. Interest rate caps limit
the maximum rate payable but require payment of a lump sum premium. The fair value risk inherent in fixed rate borrowings means that the Group
is exposed to unplanned costs if debt is paid off earlier than anticipated. Floating rate borrowings, although not exposed to changes in fair value,
expose the Group to cash flow risk following rises in interest rates and cost.
The debentures totalling £25.9 million (2019: £25.9 million) are at fixed rates. The bank loans totalling £171.7 million (2019: £228.5 million), net of
arrangement fees, are at floating rates. At the year end, after taking account of interest rate swaps, 23% (2019: 44%) of the Group’s bank loans and
34% (2019: 50%) of gross borrowings were at fixed or capped rates.
144
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Interest rate swaps
The Group has entered into interest rate swap agreements, where the Group pays a fixed rate and receives one month or three month LIBOR,
in order to hedge the risk of variation in interest cash flows on its borrowings. At the Balance Sheet date £40 million of the Group and Company’s
borrowings (2019: £60 million) were hedged by interest rate swaps at a blended fixed rate of 2.42% (2019: 1.89%). Of the swaps active at
28 March 2020, £20 million expire in 2020 and £20 million expire in 2022.
Interest rate caps
The Group has previously entered into interest rate cap agreements in order to hedge the risk of variation in interest cash flows on its borrowings.
At the Balance Sheet date £nil (2019: £40 million) of the Group and Company’s borrowings were hedged by interest caps.
The interest rate swaps are expected to impact the Income Statement in line with the liquidity risk table shown in section (iv) below. The interest
rate swap cash flow hedges were assessed as being highly effective. Net unrealised gain of £0.2 million (2019: £0.3 million) has been recorded in
other comprehensive income.
Sensitivity – Group and Company
The Group borrows in Sterling at market rates. Three month Sterling LIBOR rate during the 52 weeks ended 28 March 2020 ranged between
0.60% and 0.84%. The Directors consider 1.00% to be a reasonable possible increase in rates and 0.50% to be a reasonable possible decrease
in rates, with reference to market yield curves and the current economic conditions.
The annualised effect of these changes to interest rates on the floating rate debt at the Balance Sheet date, all other variables being constant, are
as follows:
Impact on post-tax profit and net equity – increase/(decrease)
Decrease interest rate by 0.5%
Increase interest rate by 1.0%
1 The Company has substantial interest bearing payables due to subsidiary companies (note 23).
Group
2020
£m
0.5
(1.1)
2019
£m
0.8
(1.4)
Company1
2020
£m
1.1
(2.1)
2019
£m
1.2
(2.5)
ii. Credit risk
The risk of financial loss due to a counterparty’s failure to honour its obligations arises principally in relation to transactions where the Group
provides goods and services on deferred payment terms, deposits surplus cash and enters into derivative contracts.
Group policies are aimed at minimising losses and deferred terms are only granted to customers who demonstrate an appropriate payment history
and satisfy credit worthiness procedures. Individual customers are subject to credit limits to control debt exposure. Credit insurance is taken out
where appropriate for wholesale customers and goods may also be sold on a cash with order basis.
Cash deposits with financial institutions for short periods and derivative transactions are only permitted with financial institutions approved by the
Board. There are no significant concentrations of credit risk within the Group. The maximum credit risk exposure relating to financial assets is
represented by their carrying value as at the Balance Sheet date.
Trade and other receivables
The Group records impairment losses on its trade receivables separately from gross receivables. Further detail is included in note 21.
iii. Liquidity risk
The Group minimises liquidity risk by managing cash generation, applying trade receivables collection targets, monitoring daily cash receipts and
payments and setting rolling cash forecasts. Investments have cash payback periods applied as part of a tightly controlled investment appraisal
process. The Group’s rating with credit agencies is excellent.
The Group has a mixture of long and short-term borrowings and overdraft facilities, 11% (2019: 8%) of the Group’s borrowings are repayable after
more than five years, 76% (2019: 72%) within the first to fifth years and 13% (2019: 20%) within one year.
145
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
28. Financial Instruments continued
The tables below summarise the maturity profile of the Group’s financial liabilities at 28 March 2020 based on undiscounted contractual cash flows,
including interest payable. Floating rate interest is estimated using the prevailing interest rate at the Balance Sheet date.
Group at 28 March 2020
Interest bearing loans and borrowings1
Preference shares2
Trade and other payables
Lease Liabilities
Post IFRS 16
On
demand
£m
Less than
3 months
£m
–
–
12.6
–
1.2
–
13.3
3.0
3 to 12
months
£m
29.9
0.1
4.1
9.1
1 to 5
years
£m
More than
5 years
£m
Total
£m
160.1
24.3
215.5
0.5
–
41.7
3.4
–
94.7
4.0
30.0
148.5
1 Bank loans are included after taking account of the following cash flows in relation to the interest rate swap held in respect of these borrowings:
Interest rate swaps
–
0.2
0.3
0.4
–
0.9
Group at 28 March 2020
Interest bearing loans and borrowings1
Preference shares2
Trade and other payables
Pre IFRS 16
On
demand
£m
Less than
3 months
£m
–
–
12.6
1.2
–
13.1
3 to 12
months
£m
29.9
0.1
4.5
1 to 5
years
£m
More than
5 years
£m
Total
£m
160.1
24.3
215.5
0.5
1.6
3.4
–
4.0
31.8
1 Bank loans are included after taking account of the following cash flows in relation to the interest rate swap held in respect of these borrowings:
Interest rate swaps
–
0.2
0.3
0.4
–
0.9
2 The preference shares have no contractual repayment date. For the purposes of the table above interest payments have been shown for 20 years from the Balance Sheet
date but no further.
Group at 30 March 2019
Interest bearing loans and borrowings1
Preference shares2
Trade and other payables
On
demand
£m
Less than
3 months
£m
–
–
5.0
1.5
–
13.3
3 to 12
months
£m
54.6
0.1
0.4
1 to 5
years
£m
More than
5 years
£m
Total
£m
197.3
25.5
278.9
0.5
2.1
3.2
–
3.8
20.8
1 Bank loans are included after taking account of the following cash flows in relation to the interest rate swap and cap held in respect of these borrowings:
Interest rate swaps and cap
–
0.2
0.5
0.6
–
1.3
2 The preference shares have no contractual repayment date. For the purposes of the table above interest payments have been shown for 20 years from the Balance Sheet
date but no further.
146
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The Company figures are as for the Group, except as follows:
Company at 28 March 2020
Amounts due to subsidiary undertakings3
Trade and other payables
Lease Liabilities
Company at 28 March 2020
Amounts due to subsidiary undertakings3
Trade and other payables
Company at 30 March 2019
Amounts due to subsidiary undertakings3
Trade and other payables
Post IFRS 16
On
demand
£m
132.2
11.5
–
Less than
3 months
£m
3 to 12
months
£m
1 to 5
years
£m
More than
5 years
£m
–
11.8
2.7
–
4.1
8.1
–
–
–
–
36.3
85.0
Pre IFRS 16
On
demand
£m
132.2
11.5
Less than
3 months
£m
–
11.6
3 to 12
months
£m
–
4.5
106.2
2.1
–
14.4
–
0.4
1 to 5
years
£m
–
1.6
–
2.1
More than
5 years
£m
–
–
–
–
Total
£m
132.2
27.4
132.1
Total
£m
132.2
29.2
106.2
19.0
3 Amounts due to subsidiary undertakings have no fixed repayment date. Interest is payable on the balance at 3% above the Bank of England base rate.
Security – Group and Company
The 10.7% debentures 2023 are secured on property, plant and equipment with a net book value of £11.0 million (2019: £13.0 million). The 6.875%
debentures 2028 are secured by a floating charge over the assets of the Company.
Covenants – Group and Company
The Group and Company are subject to a number of covenants in relation to their borrowing facilities which, if contravened, would result in its
loans becoming immediately repayable. These covenants, inter alia, specify maximum net debt to earnings before interest, tax, depreciation and
amortisation, and minimum earnings before interest, tax, depreciation and amortisation to interest.
When it came apparent that as a result of coronavirus the Company’s pubs and hotels would need to temporarily close, Fuller’s began conversations
with their lenders and formally agreed appropriate amendments to its banking agreements with its lenders post year end. Primarily concentrating
on implementing relevant criteria for the Company’s quarterly covenant tests through to and including the September 2020 test, the revised
covenants focus on liquidity headroom metrics, which are more appropriate under the current coronavirus conditions. As these were not formalised
at year end, the Group assessed the covenants to be breached and hence at the Balance Sheet date reclassified all debt to current.
147
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
28. Financial Instruments continued
d) Fair Value
Group
Financial assets
Cash
Trade and other receivables due within one year in scope of IFRS 9
Loans and other receivables due in more than one year in scope of IFRS 9
Interest rate cap
Financial liabilities
Trade and other payables in scope of IFRS 9
Lease liabilities
Fixed rate borrowings
Floating rate borrowings
Preference shares
Interest rate swaps
Group
Financial assets
Cash
Trade and other receivables due within one year in scope of IFRS 9
Loans and other receivables due in more than one year in scope of IFRS 9
Interest rate cap
Financial liabilities
Trade and other payables in scope of IFRS 9
Fixed rate borrowings
Floating rate borrowings
Preference shares
Interest rate swaps
The Company figures are as for the Group above, except as follows:
Company
Financial assets
Cash
Trade and other receivables due within one year in scope of IFRS 9
Financial liabilities
Trade and other payables in scope of IFRS 9
Lease liabilities
148
Book value
2020
£m
20.3
2.4
0.1
–
2019
£m
11.0
4.6
0.3
0.1
Post IFRS 16
Fair value
2020
£m
20.3
2.4
0.1
–
2019
£m
11.0
4.6
0.3
0.1
(30.0)
(20.8)
(30.0)
(20.8)
(112.9)
(25.9)
–
(112.9)
–
(25.9)
(33.4)
(25.9)
(171.7 )
(228.7)
(171.7)
(228.7)
(1.6)
(1.1)
(1.6)
(1.4)
(2.0)
(1.1)
(2.0)
(1.4)
Pre IFRS 16
Book value
Fair value
2020
£m
20.3
2.4
0.1
–
2019
£m
11.0
4.6
0.3
0.1
2020
£m
20.3
2.4
0.1
–
2019
£m
11.0
4.6
0.3
0.1
(31.8)
(25.9)
(20.8)
(25.9)
(31.8)
(33.4)
(20.8)
(25.9)
(171.7)
(228.7)
(171.7)
(228.7)
(1.6)
(1.1)
(1.6)
(1.4)
(2.0)
(1.1)
(2.0)
(1.4)
Post IFRS 16
Book value
2020
£m
19.2
9.9
2019
£m
9.2
34.7
Fair value
2020
£m
19.2
9.9
2019
£m
9.2
30.7
(159.6)
(125.2)
(159.6)
(125.2)
(99.6)
–
(99.6)
–
Fair
value
Level
1
3
3
2
3
3
3
3
3
2
Fair
value
Level
1
3
3
2
3
3
3
3
2
Fair
value
Level
1
3
3
3
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Company
Financial assets
Cash
Trade and other receivables due within one year in scope of IFRS 9
Financial liabilities
Pre IFRS 16
Book value
Fair value
2020
£m
19.2
9.9
2019
£m
2020
£m
2019
£m
9.2
34.7
19.2
9.9
9.2
34.7
Trade and other payables in scope of IFRS 9
(161.4)
(125.2)
(161.4)
(125.2)
Fair
value
Level
1
3
3
Level 1 fair values are valuation techniques where inputs are quoted prices in active markets for identical assets or liabilities that the entity can access
at measure data.
Level 2 fair values are valuation techniques where all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly, but are not derived directly from quoted prices in active markets. The Group bases its valuations on information provided by financial
institutions, which use a variety of estimation techniques based on market conditions, such as interest rate expectations, existing at each Balance
Sheet date.
Level 3 fair values are valuation techniques for which all inputs that have a significant effect on the recorded fair value are not observable.
Derivative fair values are obtained from quoted market prices in active markets. The fair values of borrowings have been calculated by discounting
the expected future cash flows at prevailing interest rates. The fair values of preference shares have been calculated using the market interest rates.
The fair values of cash, trade and other receivables, loans and other receivables and trade and other payables are equivalent to their carrying value.
29. Share Capital and Reserves
a) Share Capital
Authorised, issued and fully paid
Number in issue
At 31 March 2018
Share conversions
At 30 March 2019
Issue of Share Capital
Reclassification to Deferred shares
Cancellation of Deferred shares
Share conversions
At 28 March 2020
Proportion of total equity shares at 28 March 2020
Monetary amount
At 30 March 2019
Issue of Share Capital
Reclassification to Deferred shares
Cancellation of Deferred shares
Share conversions
At 28 March 2020
‘A’ ordinary
shares of
40p each
Number
000s
‘C’ ordinary
shares of
40p each
Number
000s
‘B’ ordinary
shares of
4p each
Number
000s
‘D’ ordinary
shares of
0.1p each
Number
000s
Deferred
shares of
0.1p each
Number
000s
33,572
14,509
89,052
6
(6)
–
33,578
14,503
89,052
–
–
–
42
–
–
–
(42)
–
–
–
–
33,620
14,461
89,052
24.5%
10.6%
64.9%
£m
13.4
–
–
–
–
£m
5.8
–
–
–
–
£m
3.6
–
–
–
–
13.4
5.8
3.6
Total
Number
000s
137,133
–
137,133
552,318
–
–
–
552,318
–
–
–
–
(552,318)
552,318
–
– (552,318)
(552,318)
–
–
–
£m
–
0.6
(0.6)
–
–
–
–
–
–
£m
–
–
0.6
(0.6)
–
–
–
137,133
100%
£m
22.8
0.6
–
(0.6)
–
22.8
Share capital represents the nominal value proceeds received on the issue of the Company’s equity share capital, comprising 40p and 4p ordinary
shares. The Company’s preference shares are classified as non-current liabilities in accordance with IFRS (see note 26).
The ordinary shareholders are entitled to be paid a dividend out of any surplus profits and to participate in surplus assets on winding up in proportion
to the nominal value of each class of share (‘B’ shares have one-tenth of the nominal value of ‘A’ and ‘C’ shares).
149
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
29. Share Capital and Reserves continued
All equity shares in the Company carry one vote per share, save that shares held in treasury have their voting rights suspended. The ‘A’ and ‘C’
shares have a 40p nominal value and the ‘B’ shares have a 4p nominal value so that a ‘B’ share dividend will be paid at 10% of the rate applying to ‘A’
and ‘C’ shares. The ‘A’ shares are listed on the London Stock Exchange. The ‘C’ shares carry a right for the holder to convert them to ‘A’ shares by
written notice in the 30 day period following the half year and preliminary announcements. The ‘B’ shares are not listed and have no conversion
rights. In most circumstances the value of a ‘B’ share is deemed to be 10% of the value of the listed ‘A’ shares. The Trustee holding shares for
participants of the LTIP currently waives dividends for shares held during the initial three year period. Dividends are not paid on shares held
in treasury.
The Articles include provisions relating to the Company’s ‘B’ and ‘C’ shares which provide that shareholders who wish to transfer their shares may
only do so if the transfer is to another ‘B’ or ‘C’ shareholder, or if the transfer is to certain of that shareholder’s family members or their executors or
administrators or, where shares are held by Trustees, to new Trustees, or to the Trustees of any employee share scheme, or if the Company is unable
to identify another shareholder of that class willing to purchase the shares within the specified period, to any person.
The ‘D’ shares with nominal value of 0.1p were issued to the ordinary shareholders in the following proportions; ten ‘D’ Shares for each ‘A’ ordinary
share and ‘C’ ordinary share in issue and one ‘D’ Share for each ‘B’ ordinary share in issue. The ‘D’ shares were reclassified as a deferred share and
subsequently cancelled upon payment of single of single ‘D’ share dividend (note 9).
b) Own Shares
Own shares relate to shares held by independently managed employee share ownership trusts (“ESOTs”) together with the Company’s holding
of treasury shares. Shares are purchased by the ESOTs in order to satisfy potential awards under the Long-Term Incentive Plan (“LTIP”) and Share
Incentive Scheme (“SIP”). Treasury shares are used, inter alia, to satisfy options under the Company’s share option schemes. The LTIP ESOT has
waived its rights to dividends on the shares it holds. Treasury shares have voting and dividend rights suspended. All own shares held, as below, are
excluded from earnings and net assets per share calculations.
Treasury shares
LTIP ESOT
SIP ESOT
Total
Total
‘A’ ordinary
40p shares
000s
‘B’ ordinary
4p shares
000s
‘A’ ordinary
40p shares
000s
‘B’ ordinary
4p shares
000s
‘C’ ordinary
40p Shares
000s
‘A’ ordinary
40p shares
000s
‘A’ ordinary
40p shares
000s
‘B’ ordinary
4p shares
000s
‘C’ ordinary
40p shares
000s
Number
At 31 March 2018
Shares purchased
Shares transferred
Shares released
At 30 March 2019
Shares purchased
Shares transferred
Shares released
1,507
4,558
314
(123)
(131)
–
–
–
1,567
4,558
49
(41)
(294)
–
–
–
At 28 March 2020
1,281
4,558
Monetary amount
At 31 March 2018
Shares purchased
Shares transferred
Shares released
At 30 March 2019
Shares purchased
Shares transferred
Shares released
£m
14.3
3.1
(1.2)
(1.3)
14.9
0.4
(0.5)
(2.8)
£m
4.6
–
–
–
4.6
–
–
–
At 28 March 2020
12.0
4.6
–
–
62
(62)
–
–
–
–
–
£m
–
–
0.6
(0.6)
–
–
–
–
–
271
121
–
(157)
235
91
–
–
326
£m
0.2
0.1
–
(0.1)
0.2
0.1
–
–
7
–
–
(1.0)
6
–
–
–
6
£m
0.1
–
–
–
0.1
–
–
–
0.3
0.1
5
–
64
(62)
7
–
41
1,512
314
3
4,829
121
–
(255)
(157)
1,574
4,793
49
–
(43)
(337)
5
1,286
4,884
£m
–
–
0.6
(0.6)
–
–
0.5
(0.4)
0.1
£m
14.3
3.1
–
(2.5)
14.9
0.4
–
(3.2)
12.1
7
–
–
(1)
6
–
–
–
6
£m
0.1
–
–
–
0.1
–
–
–
Own shares
000s
6,348
435
3
(413)
6,373
140
–
(337)
6,176
£m
19.2
3.2
–
(2.6)
19.8
0.5
–
(3.2)
17.1
91
–
–
£m
4.8
0.1
–
(0.1)
4.8
0.1
–
–
4.9
0.1
8.3
3.0
–
0.2
–
–
8.3
3.2
–
11.5
Market value at
28 March 2020
150
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. c) Other Capital Reserves
Share premium account
The balance in the share premium account represents the proceeds received above the nominal value on the issue of the Company’s equity share
capital. Share Premium decreased by £0.6 million in order to issue ‘D’ Shares with the nominal value of 0.1 pence each to ordinary Shareholders.
The ‘D’ shares were reclassified as a deferred share and subsequently cancelled upon payment of single ‘D’ share dividend (note 9).
Capital redemption reserve
The capital redemption reserve balance arises from the buy-back of the Company’s own equity share capital. The ‘D’ shares with the nominal value
of 0.1 pence issued to ordinary shareholders in proportion to the shareholding were reclassified as deferred shares and subsequently cancelled upon
payment of single ‘D’ share dividend (note 9), resulting in an increase of capital redemption reserve by £0.6 million (note 28).
Hedging reserve
The hedging reserve contains the effective portion of the cash flow hedge relationships incurred at the Balance Sheet date, net of tax.
30. Share Options and Share Schemes
The key points of each of the Group’s share schemes for grants up to 28 March 2020 are summarised below. All schemes are equity-settled.
All disclosure relates to both Group and Company. For the purposes of option and LTIP schemes, “Adjusted EPS” will normally be consistent
with the post-tax earnings per share excluding separately disclosed items as presented in the financial statements. However, the Remuneration
Committee is authorised to make appropriate adjustments to Adjusted EPS as applied to these schemes.
Savings Related Share Option Scheme (“SAYE”)
This scheme grants options over shares at a discount of 20% on the average market price over the three days immediately prior to the date of offer.
Employees must save a regular amount each month. Savings are made over three or five years, at the participant’s choice. The right to buy shares at the
discounted price lasts for six months after the end of the savings contract. There are no performance conditions, other than continued employment.
Senior Executive Share Option Scheme
This is an unapproved Executive Share Option Scheme. No new grants have been made under this scheme since 2013 and all remaining options
were exercised during the year ended 28 March 2020.
Executive Share Option Scheme
This is an approved Executive Share Option Scheme. The options vest if growth in Adjusted EPS exceeds the growth in RPI by 9% or more, over
the three year performance period of the option. The options must then be exercised within seven years after the end of the performance period.
LTIP
This plan awards free shares. Vesting is conditional on growth in Adjusted EPS exceeding growth in RPI by 9% or more over the three year initial
performance period of the award. Vesting levels are on a sliding scale from 40% up to 100%, if growth in Adjusted EPS exceeds growth in RPI by
24% or more. An independent firm of advisors verifies the vesting level each year. The initial vesting period is three years. After this time the shares
may be passed to the plan participants, as long as vesting conditions are met.
SIP
This plan awards free shares. An equal number of shares are awarded to each eligible employee. The maximum value of the shares allowable under
the scheme is £3,000 per year, per person with at least five months’ service as at 15 May each year. The basis of the award was changed with effect
from the 2018 award so that all eligible employees receive the same number of shares. There is no requirement for performance targets (although
there may be tax consequences if sold within five years of the award).
Share-based payment expense recognised in the year
The expense recognised for share-based payments in respect of employee services received during the 52 weeks ended 28 March 2020 is
£0.5 million (2019: £1.0 million). The whole of that expense arises from equity settled share-based payment transactions.
Market value
The market value of the shares at 28 March 2020 was £6.50 (2019: £11.75).
Movements in the year
The following tables illustrate the number and weighted average exercise prices (“WAEP”) of, and movements in, each category of share instrument
during the year.
Volatility
The expected volatility is based on the historical volatility over the expected life of the rights.
151
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
30. Share Options and Share Schemes continued
a) SAYE
Outstanding at the beginning of the year
Granted
Lapsed
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised in the year
Weighted average contractual life remaining for share options outstanding at the year end
Weighted average share price for options granted in the year
Weighted average fair value of options granted during the year
Range of exercise prices for options outstanding at the year end
– from
– to
Outstanding share options granted to employees under the SAYE scheme are as follows:
Exercisable at
September 2019
September 2019
September 2020
September 2020
September 2021
September 2021
September 2022
September 2023
b) Share Option Schemes
Outstanding at the beginning of the year
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised in the year
Weighted average contractual life remaining for share options outstanding at the year end
Range of exercise prices for options outstanding at the year end
– from
– to
152
2019
WAEP
£8.09
£7.70
£7.96
£8.47
£7.89
2020
Number
000s
485
–
(129)
(189)
167
–
£10.13
2.2 years
n/a
n/a
£7.70
£8.70
2020
WAEP
£7.89
n/a
£7.90
£7.80
£7.98
2019
Number
000s
539
143
(75)
(122)
485
–
£9.60
1.7 years
£9.73
£1.65
£7.50
£8.70
Number of
‘A’ ordinary
shares under
option
2020
000s
Number of
‘A’ ordinary
shares under
option
2019
000s
Exercise
price 40p
shares
£
117
16
40
89
64
107
24
23
480
2019
WAEP
£7.16
£4.05
£7.00
£7.00
7.74
7.47
8.70
8.12
7.74
7.70
8.12
7.70
–
–
26
6
35
10
40
50
167
Senior Executive share option scheme
2020
Number
000s
75
(75)
–
–
£9.67
n/a
n/a
n/a
2020
WAEP
£7.00
£7.00
n/a
n/a
2019
Number
000s
77
(2)
75
75
£9.90
2.59 years
£4.80
£9.10
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Outstanding at the beginning of the year
Granted
Lapsed
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted average share price for options exercised in the year
Weighted average contractual life remaining for share options outstanding at the year end
Weighted average share price for options granted in the year
Weighted average fair value of options granted during the year
Range of exercise prices for options outstanding at the year end
– from
– to
Executive share option scheme
2020
Number
000s
188
34
(42)
(21)
159
47
2020
WAEP
£9.50
£9.61
£10.24
£8.84
£9.69
£9.43
£10.05
6.93 years
£9.70
£0.84
£5.78
£10.90
2019
WAEP
£9.28
£9.46
£10.35
£6.72
£9.50
£9.45
2019
Number
000s
167
47
(11)
(15)
188
104
£9.31
6.94 years
£9.72
£0.94
£4.80
£10.90
Outstanding options which are capable of being exercised between three and ten years from date of issue and their exercise prices are shown in the
table below:
Exercisable in/between
2012 and 2019
2013 and 2020
2013 and 2020
2014 and 2021
2015 and 2022
2016 and 2023
2017 and 2024
2018 and 2025
2019 and 2026
2020 and 2027
2021 and 2028
2022 and 2029
Senior Executive Scheme
Executive Approved Scheme
Number of
‘A’ ordinary
shares under
option
2020
000s
Number of
‘A’ ordinary
shares under
option
2019
000s
Number of
‘A’ ordinary
shares under
option
2020
000s
Number of
‘A’ ordinary
shares under
option
2019
000s
Exercise
price 40p
shares
£
Exercise
price 40p
shares
£
4.80
5.78
6.30
7.09
7.05
9.10
–
–
–
–
–
–
–
–
–
–
–
–
–
4.80
5.78
–
7.09
7.05
9.10
9.65
10.90
10.23
10.34
9.46
9.61
9
12
1
15
22
16
–
–
–
–
–
–
75
–
1
–
2
5
10
17
13
–
38
42
31
1
1
–
2
10
19
27
23
22
36
47
–
159
188
153
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
30. Share Options and Share Schemes continued
c) LTIP
Shares
Outstanding at the beginning of the year
Granted
Adjustment for ‘D’ shares impact
Lapsed
Vested
Outstanding at the end of the year
2020
‘A’ shares
Number
000s
2020
‘B’ shares
Number
000s
2019
‘A’ shares
Number
000s
2019
‘B’ shares
Number
000s
360
115
18
901
288
45
(205)
(513)
–
288
–
721
394
165
–
(136)
(63)
360
984
413
–
(339)
(157)
901
Weighted average share price for shares vested in the year
n/a
n/a
£9.50
£0.95
For shares outstanding at the year end, the weighted average contractual life remaining is
1.60 years 1.60 years
1.37 years
1.37 years
Weighted average share price for shares granted in the year
Weighted average fair value of shares granted during the year
£9.70
£8.95
£0.97
£0.90
£9.72
£8.96
£0.97
£0.90
All LTIPs have a vesting price of £nil. LTIP shares do not receive dividends until vested.
d) SIP
Outstanding at the beginning of the year
Granted
Lapsed
Released
Outstanding at the end of the year
Weighted average share price for shares released in the year
For shares outstanding at the year end, the weighted average contractual life remaining is
Weighted average share price for shares granted during the year
Weighted average fair value of shares granted during the year
2020
Number
000s
2019
Number
000s
254
43
(1)
(146)
150
261
62
(2)
(67)
254
£9.61
£9.30
2.61 years 2.64 years
£10.34
£10.34
£9.72
£9.72
Outstanding SIP shares represent shares allocated and held by the SIP Trustees on behalf of employees, which remain in the trust for between
three and five years. All SIPs have a vesting price of £nil. SIP shares receive dividends once allocated.
e) Fair Value of Grants
i Equity-settled options and LTIPs
The fair value of equity-settled share options granted is estimated as at the date of grant, taking into account the terms and conditions upon
which the awards were granted. The following table lists the inputs to the model used for the 52 weeks ended 28 March 2020 and 52 weeks ended
30 March 2019, except for exercise price and the weighted average share price for grants in the year, which are disclosed in sections a) to d) above.
Fair value inputs
Dividend yield (%)
Expected share price volatility (%)
Risk-free interest rate (%)
LTIP scheme
SAYE
Executive option scheme
2020
1.8%
n/a
0.4%
2019
2.0%
n/a
0.9%
2020
n/a
n/a
2019
2.0%
15.3 to 15.4%
n/a 0.88 to 1.08%
2020
1.8%
15.8%
0.4%
2019
2.0%
15.6%
0.9%
Expected life of option/award (years)
3 years
3 years
n/a
3 to 5 years
4 years
4 years
Model used
Black Scholes Black Scholes
n/a Black Scholes Black Scholes Black Scholes
154
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. ii SIP free shares awarded
The fair value of free shares awarded under the SIP is the share price at the date of allocation. The total value of SIPs awarded is a fixed rate based
on the Group’s performance in the preceding financial year. The number of shares awarded is therefore dependent on the share price at the date
of the award.
31. Guarantees and Commitments
a) Operating Lease Commitments
Operating leases where the Group is the lessor
The Group earns rental income from two sources. Licensed property included within property, plant and equipment is rented under agreements
where lessees must also purchase goods from the Group. Additionally there are a smaller number of agreements in respect of investment properties
where there is no requirement for the lessee to purchase goods.
Investment properties are let to third parties on leases that have remaining terms of between one and fifteen years.
At 28 March 2020 future minimum rentals receivable are as follows:
Group
Within one year
Between one year and five years
After five years
Company
Within one year
Between one year and five years
After five years
Investment properties
Property, plant & equipment
2020
£m
0.8
1.0
0.5
2.3
0.8
1.0
0.5
2.3
2019
£m
0.6
1.0
0.2
1.8
0.6
1.0
0.2
1.8
2020
£m
3.1
4.8
3.3
11.2
2.6
4.7
4.8
12.1
2019
£m
6.8
5.6
6.8
19.2
6.5
5.5
8.8
20.8
The Group and Company’s commercial leases on property are principally for licensed outlets. The terms of the leases are normally for either three,
four or five years. The agreements allow for annual inflationary increases and full rental reviews occur on renewal of the lease.
At 28 March 2020 future minimum rentals receivable under non-cancellable sub-leases included in the figures above were £5.4 million (2019: £5.3 million).
b) Other Commitments
Group and Company
Capital commitments – authorised, contracted but not provided for
2020
£m
1.3
2019
£m
1.1
32. Related Party Transactions
Group and Company
During the current and prior years the Company provided various administrative services to the Fuller, Smith & Turner Pension Plan free of charge.
In addition, the Company settled costs totalling £497,000 (2019: £417,000) relating to the provision of actuarial, consulting and administrative
services by third parties to the Fuller, Smith & Turner Pension Plan.
Compensation of key management personnel (including Directors)
Short-term employee benefits
Termination benefits
Post-employment benefits
Share-based payments
52 weeks
ended
28 March
2020
£m
52 weeks
ended
30 March
2019
£m
4.3
1.1
0.4
0.2
6.0
4.8
–
0.2
0.8
5.8
155
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Notes to the Financial Statements
Continued
32. Related Party Transactions continued
Company Only
During the year the Company entered into the following related party transactions:
52 weeks ended 28 March 2020
Subsidiaries
52 weeks ended 30 March 2019
Subsidiaries
Sales to
related
parties
£m
Purchases
from related
parties
£m
Interest due
from related
parties
£m
Interest due
to related
parties
£m
Amounts due
to related
parties
£m
Amounts due
from related
parties
£m
–
66.3
1.7
4.4
(132.2)
7.5
Sales to
related
parties
£m
Purchases
from related
parties
£m
Interest due
from related
parties
£m
Interest due
to related
parties
£m
Amounts due
to related
parties
£m
Amounts due
from related
parties
£m
1.5
60.4
1.6
3.9
(106.2)
30.2
Interest is payable on the majority of the amounts due to subsidiaries at 3% above the Bank of England base rate. All amounts outstanding are
unsecured and repayable on demand.
The Company received rental income from subsidiaries of £0.3 million during the year (2019: £0.4 million). The Company also incurred rental
expenses from subsidiaries of £0.1 million (2019: £nil).
In addition, the Company has recharged an amount of £1.4 million (2019: £0.6 million) to its subsidiaries and incurred £0.1 million (2019: £nil) of
recharges from its subsidiaries during the year.
Subsidiaries of parent companies established within the European Economic Area are exempt from an audit if a guarantee is provided by the parent for
the subsidiary liabilities and the shareholders are in unanimous agreement. The Group will be exempting the following companies from an audit in 2020
for the period ending 28 March 2020 under Section 479A of the Companies Act 2006, all of which are fully consolidated in these financial statements:
Company Number
01577632
02934979
00026330
04279254
04271734
09047045
08231786
07292333
08029280
07320065
08377459
07309587
07320245
08392963
08975762
12035987
03309179
Company
Griffin Catering Services Limited
Jacomb Guinness Limited
George Gale & Company Limited
45 Woodfield Limited
Grand Canal Trading Limited
The Stable Pizza & Cider Limited
The Stable Bar & Restaurants Limited
B&D Country Inns I Limited
B&D Country Inns II Limited
B&D (Cookham) Limited
B&D (Odiham) Limited
B&D (Reading) Limited
B&D (Win) Limited
B&D (Farnham) Limited
B&D (Kingsclere) Limited
RSH 200 Limited
Cotswold Inns and Hotels Limited
156
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. The Group will be exempting the following companies from the preparation and delivering of accounts to Companies House under Section 394A
of the Companies Act 2006, all of which are fully consolidated in these financial statements:
Company
Griffin Inns Limited
Ringwoods Limited
F.S.T. Trustee Limited
Fuller, Smith & Turner Estates Limited
Company Number
00495934
00178536
03163480
01831674
33. Change in Accounting Policies
This note explains the impact of the adoption of IFRS 16, Leases, on the Group’s financial statements, and it discloses the new accounting policies
that have been applied from 31 March 2019.
The Group has adopted IFRS 16 using the modified retrospective approach from 31 March 2019 but it has not restated comparatives for the 2019
reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the
new leasing rules are therefore recognised in the opening Balance Sheet on 31 March 2019.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as operating leases under the
principles of IAS 17, Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s
incremental borrowing rate as of 31 March 2019. The incremental borrowing rate applied to the lease liabilities on 31 March 2019 was 2.1-2.9%
depending on the remaining length of the lease.
a) Adjustments Recognised on Adoption of IFRS 16
Operating lease commitments disclosed at 30 March 2019
(Less): Lease commitments removed due to disposal of Fuller’s Beer Business
(Less): Short-term leases recognised on a straight-line basis as expense
(Less): Low-value leases recognised on a straight-line basis as expense
Sub-total gross IFRS 16 liabilities recognised at 30 March 2019
Discounted using the lessee’s incremental borrowing rate at the date of initial application
Lease liability recognised as at 31 March 2019
Current lease liabilities
Non-current lease liabilities
109.7
(0.4)
(0.1)
(1.2)
108.0
100.4
7.7
92.7
100.4
The associated right-of-use assets for property leases were measured at the amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised in the Balance Sheet as at 30 March 2019. Onerous lease provisions of
£2.4 million at 30 March 2019 have been offset against the right-of-use asset at the date of initial application while £8.3 million of previously
recognised lease premiums have been reclassed to right-of-use assets.
157
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Notes to the Financial Statements
Continued
33. Change in Accounting Policies continued
The recognised right-of-use assets relate to the following types of asset:
Properties
Equipment
Vehicles
b) Adjustments Recognised in the Balance Sheet on 31 March 2019
The change in accounting policy affected the following items in the Balance Sheet on 31 March 2019:
– Right-of-use assets – increase by £102.9 million
– Other receivables – increase by £3.4 million
– Lease liabilities – increase by £100.4 million
– Intangible assets – reduction by £8.3 million
– Provisions – reduction by £2.4 million.
There is no impact on retained earnings at 31 March 2019.
28 March
2020
£m
31 March
2019
£m
105.1
101.0
0.8
1.1
1.2
0.7
107.0
102.9
c) Practical Expedients Applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
– The use of a single discount rate to a portfolio of leases with reasonably similar characteristics
– Reliance on previous assessments of whether leases are onerous
– The accounting for operating leases, with a remaining lease term of less than 12 months as at 31 March 2019, as short-term leases.
d) Lessor Accounting
The Group did not need to make any adjustments to the accounting for assets held as lessor under operating leases as a result of the adoption
of IFRS 16.
34. Post Balance Sheet Events
In response to the coronavirus pandemic and the temporary closure of the entire estate at the end of March, management have taken a number
of steps to mitigate the financial impact of the pandemic. The Group has strengthened the Balance Sheet by accessing the Bank of England Covid
Corporate Financing Facility (“CCFF”) programme which have issued £100 million of commercial paper with access to a further £50 million.
The CCFF provides short-term unsecured debt and is repayable in May 2021. Management have also agreed with their lenders that the existing
quarterly covenant tests (through to and including September 2020) are revised to be based primarily on liquidity headroom metrics, deemed to
be a more appropriate measure while some of the Group’s pubs and hotels remain closed. The above measures are on top of the existing and ongoing
cost reducing initiatives, which include minimising the Group’s outgoings across the business and accessing some of the Governments support
packages (such as Coronavirus Job Retention Scheme) in order to safeguard employment.
On 15 March 2020, the Group made the decision to cancel Tenants’ rent due to the closure of all pubs. In April and May 2020, this resulted in
a total of £1.2 million loss of earnings.
The Stable Pizza & Cider Limited and its subsidiary The Stable Bar & Restaurants Limited was disposed of on 7 June 2020. The Group disposed of
non-current assets of £12.1 million, current assets of £0.4 million, current liabilities of £2.1 million and non-current liabilities of £10 million.
The consideration received was equal to the Group’s net assets.
158
Financial StatementsAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
Directors and Advisors
as at 30 July 2020
Directors
Michael Turner, FCA, Chairman*
Simon Emeny, Chief Executive
Adam Councell, ACMA
Fred Turner, ACA
Sir James Fuller, Bt*
Juliette Stacey, ACA*
Helen Jones*
Richard Fuller*
Robin Rowland, OBE*
* Non-Executive.
President
Anthony Fuller, CBE
Chairman from 1982-2007,
Anthony Fuller retired from the Board in 2010
after a long career with Fuller’s and continues
as President.
Secretary and Registered Office
Séverine Béquin
Pier House
86-93 Strand-on-the-Green
London W4 3NN
Tel: 020 8996 2000
Registered Number 241882
Auditors
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
Stockbrokers
Numis Securities Limited
10 Paternoster Square
London EC4M 7LT
Registrars
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
Tel: 0870 889 4096
Please note you can now advise
Computershare of changes to your
address or set up a dividend mandate online
at www.computershare.com/investor/uk
Shareholder Information
ShareGift
The Orr Mackintosh Foundation operates
a charity share donation scheme for
shareholders with small parcels of shares
whose value makes it uneconomic to sell them.
If you have a small number of shares and would
like to donate them to charity, details of the
scheme can be found on the ShareGift website
www.sharegift.org, or by contacting the
Company Secretariat on 020 8996 2105.
Shareholder Privileges
Individual shareholders with at least 500 ‘A’
or ‘C’ ordinary shares or 5,000 ‘B’ ordinary
shares are eligible to receive a shareholder
‘Inndulgence’ card entitling them to a 15%
discount on food and drinks in Fuller’s
Managed Pubs and Hotels and on the best
flexible rate or standard flexible B&B rate in
Fuller’s hotels There is currently no discount
available with the shareholder ‘Inndulgence’
card at any of the Cotswold Inns & Hotels
sites. Information is available from the
Company Secretariat on 020 8996 2105
or at company.secretariat@fullers.co.uk.
Redesignation of ‘C’ Shares
‘C’ ordinary shares can be redesignated as
‘A’ ordinary shares within 30 days of the
preliminary and half year announcements
by sending in your certificates and a written
instruction to redesignate prior to or during
the period to the Company’s Registrars:
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
159
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSADDITIONAL INFORMATIONAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. Glossary
Adjusted earnings per share (“EPS”) – this is earnings per share, adjusted for separately disclosed items. The Directors believe that this measure
provides useful information for shareholders as to the performance of the Group.
Adjusted profits – this is profit before tax and before separately disclosed items.
CCFF – This is an HM Treasury and Bank of England lending facility.
CJRS – This is a claim for 80% of employees’ wages plus any employer National Insurance and pension contributions for staff on furlough through
the government Coronavirus Job Retention Scheme.
Operating profit – this is profit before finance costs and tax and profit on disposal of properties.
Drinks, food and accommodation like for like sales growth – this is measured on the same basis as “Managed Pubs and Hotels invested like for like
sales growth”.
EBITDA – this is the earnings before interest, tax, depreciation, profit on disposal of plant and equipment and amortisation, adjusted for separately
disclosed items.
LTIP – Long-Term Incentive Plan.
Managed Pubs and Hotels invested like for like sales growth – this is the sales growth calculated to exclude those pubs which have not been trading
throughout the two years for the corresponding period in both years. The principal exclusions from this measure are: pubs purchased or sold in the
last 12 months; sites which are closed; and pubs which are transferred to tenancy. The calculation excludes The Stable sites.
Market capitalisation – only the Company’s 40p ‘A’ ordinary shares are listed. The Company calculates its market capitalisation as the total of all
classes of ordinary shares; i.e. listed 40p ‘A’ ordinary shares, unlisted 4p ‘B’ ordinary shares and unlisted 40p ‘C’ ordinary shares plus all potentially
awardable share options and LTIP awards less any shares held in treasury. For the purposes of the calculation of market capitalisation, a 4p ‘B’
ordinary share is treated as having 10% of the market value of a quoted 40p ‘A’ ordinary share and a 40p ‘C’ ordinary share is treated as having
an equivalent value to a 40p ‘A’ ordinary share.
Net debt – this comprises cash, bank loans, other loans, debenture stock and preference shares.
SIP – Share Incentive Plan.
Tenanted like for like profit growth – this is the profits growth of Tenanted Inns calculated to exclude from both years those pubs which have not
been trading throughout the two years. The principal exclusions from this measure are: pubs purchased or sold; pubs which have closed; and pubs
transferred to or from our Managed business. Bad debt expense is included but head office costs are excluded.
The disposal of the Fuller’s Beer Business – the sale of the entire issued share capital of The Fuller’s Beer Company (which was incorporated to
acquire certain of the assets and liabilities of the Fuller’s Beer Business).
The Fuller’s Beer Business or the “Beer Business” – the entirety of Fuller’s beer, cider and soft drinks brewing and production business, wine
wholesaling business, as well as the distribution thereof, and also includes the Griffin Brewery, Cornish Orchards, The Dark Star Brewing Company
and Nectar Imports Limited.
Total annual dividend – the total annual dividend for a financial year comprises interim dividends paid during the financial year and the final dividend
proposed for approval by shareholders at the Annual General Meeting after the completion of the financial year.
TSA – Transitional Service Agreement with Asahi subsequent to sale of the Fuller’s Beer Business.
160
Additional InformationAnnual Report and Accounts 2020 Fuller, Smith & Turner P.L.C. O
V
E
R
V
I
E
W
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
D
D
I
T
I
O
N
A
L
I
N
F
O
R
M
A
T
I
O
N
Five Years’ Progress
Group Income Statement
Revenue and other income
Operating profit before separately disclosed items
Finance costs before separately disclosed items
Adjusted profit before income tax
Separately disclosed items and discontinued operations
Profit before income tax
Taxation
Profit after income tax
Non-controlling interest
Profit attributable to equity shareholders of the Parent Company
EBITDA1
1 Continuing operations only.
Assets employed
Non-current assets
Inventories
Other current assets
Assets classified as held for sale
Cash and cash equivalents
Current borrowings
Other current liabilities
Non-current borrowings
Other non-current liabilities
Net assets
Per 40p ‘A’ ordinary share
Adjusted earnings
Basic earnings
Dividends (interim and proposed final)2
Net assets
Net debt (£ million)
Gross capital expenditure (£ million)
Average number of employees
Consultancy, design and production
2 2020 includes ‘D’ share dividend.
www.luminous.co.uk
Post IFRS 16
2020
£m
Pre IFRS 16
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
333.0
333.0
324.7
403.6
392.0
350.5
25.9
(7.9)
18.0
148.2
166.2
(4.3)
161.9
–
161.9
54.4
25.0
(5.3)
19.7
154.8
174.5
(5.9)
168.6
–
168.6
44.0
40.0
(6.9)
33.1
(7.0)
26.1
(6.6)
19.5
(0.2)
19.3
59.5
49.2
(6.0)
43.2
0.4
43.6
(8.8)
34.8
1.0
35.8
70.9
757.9
658.1
595.3
623.2
4.0
18.8
2.6
20.3
803.6
(171.7)
(50.7)
4.0
14.2
2.6
20.3
699.2
(171.7)
(42.0)
581.2
485.5
5.0
8.4
87.0
11.0
706.7
(50.0)
(62.9)
593.8
13.5
22.9
2.1
11.7
673.4
(30.0)
(71.8)
571.6
49.5
(6.6)
42.9
(3.0)
39.9
(7.4)
32.5
0.2
32.7
70.5
612.1
14.0
21.6
5.9
15.3
668.9
(20.0)
(73.7)
575.2
46.9
(6.0)
40.9
(1.7)
39.2
(6.2)
33.0
(0.2)
32.8
65.0
586.9
12.4
21.0
0.5
6.2
627.0
(20.0)
(65.6)
541.4
(27.5)
(27.5)
(206.2)
(183.6)
(201.4)
(184.7)
(126.9)
(24.5)
(49.1)
(53.1)
(64.1)
(55.8)
426.8
433.5
338.5
334.9
309.7
300.9
Post IFRS 16
2020
Pre IFRS 16
2020
2019
2018
2017
2016
22.31p
24.85p
62.78p
62.90p
61.39p
58.35p
293.70p 305.86p
35.12p
64.89p
59.21p
59.25p
132.80p 132.80p
20.15p
19.55p
18.80p
17.90p
£7.74
£7.86
£6.16
£6.07
£5.61
£5.45
(291.8)
(178.9)
(245.2)
(201.9)
(206.1)
(198.5)
84.5
5,166
84.5
58.6
5,166
5,399
40.6
4,913
55.8
4,722
80.7
4,479
Design and production
www.luminous.co.uk
Front cover: Fiona Sparks, General Manager
at The Bell & Crown, Strand-on-the-Green.
Back cover: Hare & Hounds, one of the seven
Cotswold Inns & Hotels purchased in October 2019.
Annual Report and Accounts 2020 Fuller, Smith & Turner P.L.C.
161
A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
A
C
C
O
U
N
T
S
2
0
2
0
F
U
L
L
E
R
,
S
M
I
T
H
&
T
U
R
N
E
R
P
.
L
.
C
.
Fuller, Smith & Turner P.L.C.
Registered Office
Pier House
86-93 Strand-on-the-Green
London
W4 3NN
Registered number 241882
Telephone: +44 (0)20 8996 2000
E-mail: fullers@fullers.co.uk
www.fullers.co.uk