Fuller, Smith & Turner
Annual Report 2023

Plain-text annual report

Annual Report and Accounts 2023 NOURISHING THE SOUL SINCE 1845 d m Always asking what’s next? We have a restless passion to continuously improve, experiment an alway more r p ou ake things better. We are s a sking how we can do our people, our customers, for ubs an otels. d h p.23p.23 p.19p.19 Doing things the right way We have a deep pride for and a genuine enjoyment of the business we’re i nd we apply care, quality d i ntegrity to everything we do. an n a What’s inside... Living our purpose, Living our purpose, Celebrating together Celebrating together At Fuller’s, we create experiences that nourish the soul, and throughout this report we will show how we do that through a c ommitment to excellence d a c lear long-term strategy. an p.21p.21 Being part of the Family We are a family business in the broadest sense, bringing that family ethos and feeling to how we work. One team, pulling together, in each pub and hotel, and also together across Fuller’s. Celebrating individuality We nurture the individuality, spirit and unique character of each person, pub, and bedroom, because that’s what makes us special. p.25p.25     Highlights Financial and Operational Summary • Revenues grew 33% to £336.6 million (FY2022: £253.8 million) as the busines ecovere rom the impact of Covid-related restrictions on trade s r d f • Like-for-like sales in the year grew by 17.5% compared to prior year, h C l L n g wit entra ondo rowing by 40.1% • Adjusted profit before tax increased by 76% to £12.7 million (FY2022: £7.2 million) • Net debt at £132.8 million (FY2022: £131.9 million) with cash generated by the business funding investment in the estate and returns to shareholders • Directors’ valuation of the total property portfolio in May 2022 at £995.6 million, approximately £400 million above our current book value – giving implied adjusted ne sset value per share of £14.07 t a • Total dividend of 14.68p declared, representing a 30% increase on last year • Board to keep further share buybacks under review in line with its capital allocation framework. Strategic Update • Clear long-term strategy, with all elements contributing to growing sales momentum d p an rofitability • Maintained investment in the existing estate, with £25 million invested in the period o e t nhance capital values and drive further growth • Maximising our pubs’ potential through proactive portfolio management to ensure all pubs are operated to deliver a great customer experience, while optimising our returns – Three new pubs opened during the year – The Rising Sun in the New Forest, The Willow in Bourton-on-the-Water, and The Queen’s Arms at Heathrow Terminal 2 – Four pubs transferred from Managed operations to Tenanted Inns in the year, with urther 23 identified, of which four transfers have already completed – Small number of pubs earmarked for disposal – Sale agreed on The Mad Hatter, Southwark, which will realise £20 million in value rofit on disposal of £17 million a f d a p an t i • Continued investment in our people to develop the leaders of the future and deliver bes n class service for our customers • Dawn Browne, People & Talent Director, promoted to Main Board from 3 July 2023 • Implementing a wide range of energy reduction initiatives as part of our Life is too d to w goo aste programme. Revenue and other income EBITDA1 Adjusted profit before tax2 Statutory profit before tax Basic earnings per share3 Adjusted earnings per share3 Dividend per share Net debt excluding lease liabilities4 All figures above are from continuing operations. FY2023 £m 336.6 51.8 12.7 10.3 12.98p 16.10p 14.68p 132.8 FY2022 £m 253.8 44.3 7.2 11.5 11.59p 9.79p 11.31p 131.9 1 Earnings before interest, tax, depreciation, amortisation, profit on disposal of property, plant and equipment, an eparately disclosed items. d s 2 Adjusted profit before tax is the profit before tax excluding separately disclosed items. 3 Per 40p ‘A’ or ‘C’ ordinary share. Adjusted EPS is calculated using earnings attributable to equity shareholders after tax excluding separately disclosed items. Basic EPS includes separately disclose tems. d i 4 Net debt excluding lease liabilities comprises cash and short-term deposits, bank overdraft, bank loans, debenture stock and preference shares. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 1 Strategic Report Highlights At a Glance Where we Operate Investment Proposition Chairman’s Statement Chief Executive’s Review Business Model Strategy Key Performance Indicators Financial Review Risk Management Principal Risks and Uncertainties Sustainability Report Task Force on Climate-related Financial Disclosures Stakeholder Engagement Section 172 Statement Non-Financial Information Statement Governance Chairman’s Introduction Board of Directors Corporate Governance Report Nominations Committee Report Audit and Risk Committee Report Directors’ Remuneration Report Directors’ Report Directors’ Responsibilities Statement Financial Statements Independent Auditor’s Report Group Income Statement Group Statement of Comprehensive Income Group Balance Sheet Company Balance Sheet Group Statement of Changes in Equity Company Statement of Changes in Equity Group Cash Flow Statement Company Cash Flow Statement Notes to the Financial Statements Additional Information Shareholder Information Glossary Five Years’ Progress 1 2 4 6 8 10 14 16 28 30 34 36 40 54 62 64 65 66 68 70 76 81 86 101 104 105 112 113 114 115 116 117 118 119 120 166 167 168 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104   At a Glance Who we are WE ARE THE PREMIUM PUBS AND HOTELS BUSINESS THAT IS FAMOUS FOR BEAUTIFUL AND inviting VENUES WITH DELICIOUS FRESH FOOD, A vibrant AND ANGE OF DRINKS, INTERESTIN beautiful BEDROOMS AND ENGAGING SERVICE FROM passionate PEOPLE G R S T Our purpose WE CREATE EXPERIENCE HAT nourish the soul Our mission WE’RE CRAFTING A FAMILY F D ISTINCTIVE PUBS O E  D H AN OTELS WHER PEOPLE feel they belong Cotswold Inns & Hotels Fuller’s acquired Cotswold Inns & Hotels in October 2019 – a c ollection of seven beautiful hotels, with a total of 201 he heart of the Cotswolds – one of the most , in t bedrooms l p beautifu f G arts o reat Britain. Specialising in traditional hospitality and incredibly popular for weddings, the hotels offer the chance to get away from the hustle and bustle of daily life in venues offering outstanding service, the heartiest of breakfasts, the most delicate of afternoon teas and a fantastic array of fresh food and excellent wines, beers and spirits. Our Sustainability Pillars OUR PEOPLE See pages 52 to 53 Our people are what makes Fuller’s special. That’s why we work hard to ensure we create an environment where they can be e s thei elf. ru r t OUR COMMUNITIES See pages 48 to 51 Communities have always been at the heart of Fuller’s – it’s what makes our pubs more than just bricks and mortar. 2 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Our values DOING THINGS THE RIGHT WAY See page 19 BEING PART OF THE FAMILY See page 21 CELEBRATING INDIVIDUALITY See page 25 ALWAYS ASKING WHAT’S NEXT? See page 23 e C e G Bel & The Dragon Fuller’s acquired Bel & The Dragon in June 2018. It now comprises seven stunning country inns, across the ounties. This year, we Hom added Th eorge & Dragon in Westerham to the brand. Bel & The Dragon offers outstanding hospitality, i buildings, wit world-class wines – including many sold by the glass – and high quality, fresh, seasonal dishes that are both visually stunning and delicious. haracterful ocus on n c h a f OUR PLANET See pages 42 to 45 We know that a healthy planet is essential for the future of humanity and small changes collectively make a big difference. We are on ou ourney to Net Zero. r j Managed Pubs and Tenanted Inns (%)* 33% 30% 23% 14% Fuller’s Managed within M25 Fuller’s Tenanted within M25 Fuller’s Managed outside M25 Fuller’s Tenanted outside M25 Revenue by Division (%)* 9% Managed Tenanted 91% Analysis of Managed revenue urban/suburban/rural (%)* 18% 40% * As at 1 April 2023 42% Urban Suburban Rural Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 3 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 Where we Operate OUR diverse portfolio ENCOMPASSES SOME 377 PUBS AND HOTELS ACROSS LONDON AND THE SOUTH OF ENGLAND Rural 39 The number of Managed Pubs & Hotels 402Number of bedrooms 1 1 Acquisition: The Willow Bourton-on-the-Water We love iconic locations – and they don’t come much more iconic than this amazing village, known as The Venice of the Cotswolds. A great addition that further builds our presence in this affluent area. 2 LONDON Suburban 87The number of Managed Pubs & Hotels 417 Number of bedrooms 4 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Urban 74 Number of Managed Pubs & Ho tels 205 Number of bedrooms 3 LONDON 2 ragon, Refurbishment: e & D The Georg Westerham Having transferred this historic building from our Tenanted Inns division, we completed a £ 2.6m investment and it is now standing proud in the centre of Westerham, as part o ur Bel & The Dragon estate. f o 3 e A Rising from the ashes: Th dmiralty, Trafalgar Square After a major fire in July 2022, we rebuilt The Admiralty – including making it fully electric. Read more on page 45. Our Pubs & Hotels MANAGED 186 BEL & THE DRAGON COTSWOLD INNS & HOTELS 7 7 TENANTED 177 Operational Highlights Average number of employees ear tabase Pints sold during the y Number of people on our da Number of covers ed out doors book 5,247 97.7k 4.1mRevPar in the year £88.94 20.3m 42%Number of burgers 860k 24.7% Rise in like-for-like accommoda Year on year growth tail sales in c sold during the y tion sales ock ear Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 5 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Investment Proposition OUR INVESTMENT PROPOSITION PUTS US IN A POSITION OF strength AND security WE HAVE A CLEAR STRATEGY We operate a family of characterful pubs and hotels in the South of England • Our estate encompasses some 377 pubs outh and hotels across London and th o ngland e S f E • We operate in the premium segment while offering excellent value for money. nourish the soul We source and create experiences that • Most of our pubs are deeply entrenched in their local communities with generations of goodwill behind them. We are a regular part of our customers’ lives, and we strive he right to welcome them to ear k a bac gain and again n t H O WE OPERATE IN A MARKET PPORTUNITIES WIT Demographic strengths • In our heartland of London and the h of E ngland, incomes are traditionally Sout more resilient. Hospitality spend in our regions is 13% greater than the UK average, and incomes are circa 14% higher. Our wide demographic also attracts mature customers, man greater disposable incomes. f whom have y o Customers are attracted by our premium offer • Every week we welcome thousands of people to our pubs and hotels, many being WE ARE FAMILY, INSIDE AND OUT Our multi-generation family business extends a sense of belonging to all our • For customers, we maintain the cherished stakeholders ethos of ‘the local’ • Our people are also family. We create meaningful career paths and invest in their development. This shows in our senior leadership where around 65% of our general managers joined us at entry level and have developed within the business • Our pubs are operated locally, with managers given the freedom to optimise the décor and the offer according to local s e characteristics. Thi xtends to creating engaging experiences, from open-air Shakespeare to stand-up comedy an pen mic nights. d o Our teams are customer-centric, focused on delivering outstanding quality and service • Memorable hospitality demands great people behind the bar and stars in the kitchen. Our focus on quality and servic elps turn our customers o p int owerful ambassadors. e h returning guests. Our customers look for a g reat experience and they appreciate the benefit of our premium offer. Leveraging digital opportunities • An increasing digital awareness among our customers allows us to get even closer to them, and provide a tailored experience which is smooth and seamless. We have developed our digital infrastructure to utilise robust user data and help enhance the effectiveness of our targeted marketing. W ave also enhanced our online presence, from booking tables, rooms o vents through to ordering and paying. e h r e • Much of our kitchen talent is also home-grown and at our Chefs’ Guild we set a clear pathway that can take kitchen assistants right up to executive chef level. We welcome over 100 apprentice chefs each year, giving them an inspirational start to careers in hospitality. t l d a c Great family businesses think an ong term • We are custodians of the Company, with n in e ven the clear goal of passing it o better health than we found it. This means managing our assets carefully, with the collective strength of our portfolio delivering increasing value. 6 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.     T P WE ACTIVELY MANAGE OUR ORTFOLIO ASSE The Company has a high quality portfolio • Freehold ownership represents 92% f o ur asset value. Following the latest o valuation, this represents an asset value o 995.6 million. f £ s e We deliver capital appreciation a a • As custodians of the portfolio, w arnings growth s w ell e p rotect aintenance h m k f e a or opportunities to nd grow income through and enhance its quality wit investment and loo enhance trad investment. Each year we expect to invest in the region of £20–30 millio the estate. mproving n i h a s w r £ o p ecently agreed a new four Our strong Balance Sheet provides ccess to capital u it e r • We hav yea als continue our M&A strategy, building on the successful Cotswold Inns & Hotels el & The Dragon transactions an 200 million bank facility. This rovides significant headroom to d B • We actively manage the property portfolio to optimise returns – as demonstrated by the recent transfers of Managed pubs to Tenanted operations • We continually gauge the performance ssets, considering fresh pub o propositions, or the option of disposals. f a WE HAVE A CLEAR AND CONSISTENT CAPITAL ALLOCATION FRAMEWORK TO ENHANCE LONG-TERM VALUE CREATION We invest in the long-term organic growth of the business • We invest annually to grow capital value, and to drive returns. A sustainable and progressive dividend • With a planned cover range of 2.5-3.0x, and growth in line with EPS growth to drive dividend yield. E IS T WE OWN OUR IMPACT BECAUSE D T LIF Our environment and our planet demand that we take meaningful actio • We aim to be Net Zero by 2030 O WASTE n t OO GOO o protect them (operational) and 2040 (supply chain) • We will continue to source 100% renewable energy • We will reduce energy consumption 5% and halve our gas usage. y 2 b M&A opportunities • With a disciplined approach to inorganic d a v investment an long-term returns. iew to increasing Leverage • With a target of up to circa 3x net debt/ EBITDA. If achieved, surplus cash ma eturned to shareholders. y be r • We donate 1% of our profits to good causes every year • We create good job opportunities for people with additional needs. Our governance is designed to build trust and ensure equal opportunities for everyone • A diverse place to work with no barriers to entry and with clear development paths • A place where everyone has a voice • A place free from modern slavery d d an iscrimination of any kind. We create spaces where communities are welcomed, supported and can come together • Each site encouraged to support at least one local group each year Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 7 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Chairman’s Statement “ WE COULD NOT DO WHAT WE DO WITHOUT THE commitment AND dedication OF OUR PEOPLE.” N A M R I A H C — R E N R U T L E A H C I M T he 2020s is fast becoming the decade that has seen an unprecedented use of the word unprecedented. A year ago eflected on the impact of the Omicron variant on our , I r business. Since then, the war in Ukraine has continued, food and energy inflation, together with the cost of living in general, has spiralled, we have seen strikes across a wide range of industries and we have had three Prime Ministers, four Chancellors of the Exchequer and fiscal statements that have taken the economy l m n a l i anner of directions. Against this backdrop, your Company has delivered a good performance, and in times of short-term upheaval, long-term businesses come into their own. The Executive Team, under th ou an an eadership and guidance of Simon Emeny, is implementing trategic plan to return to pre-pandemic levels of profitability eliver long-term growth for the Company, our shareholders ur team members. e l r s d d d o With our clear purpose to create experiences that nourish the soul, and five defined strategic pillars, our teams throughout the business understand the role they play in our success and have the skill, motivation and dedication to deliver it. Despite the twists and turns, the stops and starts, they have continuously bounced back to delight their customers and deliver an outstanding level of service. They are the heart and soul of Fuller’s, and I would like to thank each and every one of them for their loyalty and commitment. 8 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. u f o r e Underpinning our success is, and has always been, the strength o xcellent, predominately freehold estate. We have always maintained that operating both managed and tenanted models offers a wide range of benefits, particularly around portfolio management. And while I am always proud of all parts of the Fuller’s business, I was particularly delighted to see the Tenanted Inns team pick up the award for Best Tenanted Pub Company at this year’s Publican Awards. We are seeing rising numbers of international tourists and ever more workers returning to the City and this, combined with the actions we are taking as part of the strategy to continue to improve profitability, gives me confidence and optimism in the future. As part of our ongoing succession planning, I am delighted to announce that Dawn Browne has accepted our invitation to join the Board with effect from 3 July 2023. Dawn joined Fuller’s in 2011 and, following roles in the Learning & Development Team and a successful term as Head of Operations for the City, has been our People & Talent Director since 2019. As a people-centric business, and given her unique skillset, she has an important role to play on the Board. Her in-depth knowledge of our team members, alongside her operational experience, will provide invaluable insight. We also look forward to her support to help us to drive and prioritise diversity and inclusion, and to provide visibility on matters around culture and organisational change. I know her appointment will be extremely well received by the business. Increase in total dividend per share +30% +33% Increase in total Group revenue Dividend The Board is pleased to announce a final dividend of 10.0p (FY2022: 7.41p) per 40p ‘A’ and ‘C’ ordinary share and 1.0p (FY2022: 0.741p) per 4p ‘B’ ordinary share, representing a year-on-year increase of 35%. This will be paid on 27 July 2023 o s hareholders on the share register as at 23 June 2023. t e t ota Th ’ o d ‘ an C y s ordinar continue hare and 1.468p (FY2022: 1.131p) per 4p ‘B’ 0% year-on-year increase and epresent eturn to a progressive dividend policy. ividend of 14.68p (FY2022: 11.31p) per 40p ‘A’ rdinar har s o u e r r r s a 3 y s l d Michael Turner Chairman 14 June 2023 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 9 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 Chief Executive’s Review “ WE HAVE STARTED THE next chapter IN OUR HISTORY.” S I M O N E M E N Y — C H I E F E X E C U T I V E Overview We have made good progress in the last year, with continued investment in our people and properties, providing the perfect post-Covid springboard for the future. Looking forwards, that future looks very positive. We continue to build on our five strategic pillars, investing in the areas that have the greatest impact on our business and growing our profitability. We live by our values and our culture, and despite having had a lot to contend with over the last year – w nterruptions from tube and train strikes and high cost n i n energy, food and wages – our teams across the estate h i uccessfully delivering experiences that nourish the soul. it inflatio e s ar There is clearly more to come too, as international tourism numbers continue to rise, the rhythm of life grows louder across offices in our towns and cities, and cost pressures stabilise. Ongoing rail strikes are unhelpful – particularly in the Capital – but commuters are a resilient bunch and the impacts, while detrimental financially, are thankfully short-lived. Most importantly to Fuller’s is that we have a l ong-term vision, continuing to stick to the things we do best, d t his is validated by our customers’ continued loyalty. an y b e w Strategic Review We have forward momentum, a great team of people, we are alread uilding on the 33% rise in total sales last year and have started the new financial year with excellent like for like growth. W ill continue to achieve this through our long-term strategy – delighting our customers, inspiring our people, enhancing our estate, evolving ou usiness and owning our impact. These strategic pillars have not changed, and they provide a framework that allows us to grow our business in a sustainable manner. r b We are a proactive asset manager and have taken some significant portfolio management decisions to evolve our estate, ensuring it remains fit for the future. In order to improve and sustain returns in e l ong term, post year end we identified 23 of our Managed Pubs th o t ransfer across into our Tenanted Inns division – four of which t e m pportunity hav o cr t ystallise the value of The Mad Hatter in Southwark, which oved across already. We have also taken th e o 10 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Service with a smile It’s our amazing people that make th an ou eal difference in our businesses ou can see how we invest in eopl e r d y r p n page 16. e o Food for thought We will be taking on over 100 chef apprentices next year who will learn their trade through our Chefs’ Guild Like for like food sales +10% e h t y ave contracted to sell as part of a larger property redevelopment, w in a sale that will deliver Fuller’s £20 million in value on completion nex ear. These funds, combined with our ambition to continue to build our business, will allow us to grow both organically and through acquisition. Like all businesses, margins have been increasingly squeezed due o c t ost inflation, but we are addressing this through a programme of action focused on delivering sales-led growth while keeping a tight rein on costs. Delight our customers We are confident that a trip to the great British pub will always be n a ffordable luxury and part of our national psyche. But customers a have a choice, and they will choose to go to the pubs and hotels that deliver an outstanding customer experience at a price the consumer sees as good value. In recent years, we have put a lot of effort and emphasis on the entire customer journey – starting with the digital touchpoints that attract the customer, through the in-pub experience around choice, service delivery and reasons to visit, and finishing with the correct level of follow up and future contact. t c We are reaping the rewards of the digital transformation project tha ompleted in the previous financial year, and which allows for easy, low cost per customer communications to promote the great activities that take place in our pubs. One of the activities that we will be looking at for the coming year is to build our presence around a premium sport experience – which will increase frequency of visit, spend per head and help acquire new customers. h i We know that there is a demand for premium sports occasions – n terms of near-stadium packages such as at The Cabbage bot Patch and The Turk’s Head, both at Twickenham, and when watching live sport on the television. The pub is always seen as the next best place to being i he stadium for major sporting events and we will b grea n c i are one of the mai enus and atmosphere to build on these lucrative occasions, ollaboration with our drinks partners – particularly Asahi, who iving our customers amazing hospitality, bookable spaces, t m ponsors of this year’s Rugby World Cup. e g n s n t d r f a f m to f ork project to ensure we keep our food offer fresh, elevant. This process has included some extensive To stay ahead of the competition, we are also in the process o ar interesting an customer segmentation work, which will further help us to ensure that we target the right offer, in the right style of venue, to the right customer – driving sales and reducing the acquisition and retention costs of new and existing customers. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 11 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Chief Executive’s Review Continued Total revenue for Managed Pubs and Hotels £306.8m £30m Operating profit f om our tels Manag ed Pubs and Ho Inspire our people Hospitality is a people business and it is our amazing team members at the front line that can make the biggest impact on our customers. They will only deliver great service and an experience that nourishes the soul if they are well-trained, highly motivated, happy and engaged. n w e conducted our second Happiness Index survey. In addition, eceived a plethora of individual comments and suggestions – hich have been read, recorded and collated into common s a nd, in turn, shared and discussed by the Executive Team During the last year, we have worked hard to ensure we are listening o o ur teams across the business – so we were delighted that t response rates and levels of happiness and engagement rose whe e r w l of w al theme o f s uture actions can be taken. This is only one strand of our listening strategy and is supported by new forums for our General Managers, our Head Chefs and our support centre team and regular catch-up sessions with Helen Jones, our designated Non-Executive Director responsible for employee engagement. e u During the year, we also had our largest graduation event for all thos programmes – both front of house and through our Chefs’ Guild – c ndertaking development programmes, and our apprenticeship ontinue to deliver excellent results with 200 apprentices trained last year across six different programmes, making full use of our Apprenticeship Levy. There is more to come, with an anticipated 220 apprenticeships in the coming year, and I am delighted to see more he LEAP programme ur General Managers choosing to take o o n d degree level apprenticeship. This investment i evelopment, and n p i articular leadership, will secur ur future success. e o n t f o y t enet of our strategy. It allows us to holistically curate our pub Enhance our estate Operating both Managed and Tenanted pubs has always been a ke estate, so we can operate individual sites under the business model that works best for the pub and its customers, best for the Company, and delivers the best return for our shareholders. Over the years, we have always moved sites between the two businesses, but moves normally happen on an individual basis. Following 12 months of trading free of restrictions, and in light of th hanging economics of running a pub, we undertook a detailed e c 12 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 3 p review of the estate post year end – particularly around profitability within our managed framework – and, as a result, decided to move 2 hav th ur Tenanted Inns division. Four of these transfers lready happened, with the remainder due to take place in oming weeks. ubs int e a o o e c f t In line with our values, we put our people first, and the majority eam members in the impacted pubs could either remain in situ o with the new Tenant, apply to take on the Tenancy for themselves, o ove to another Fuller’s managed site. r m r i During the year we decided to exit a small number of leasehold sites, including The Ship at Borough and The Inn of Court at Holborn, and earmarked for disposal a handful of pubs which no longer satisfy ou offe representin £2.7 million. Thi nternal returns criteria. We have also decided to accept an r o f £20 million in value for The Mad Hatter in Southwark, ignificant premium above its net book value of s t ransaction is due to complete in summer 2024. g a s Supporting all of this activity is our continued commitment to maintaining high standards in our existing estate and developing sites for the future. This is reflected with three new openings during the year – The Rising Sun in the New Forest, The Willow in the idyllic Cotswolds village of Bourton-on-the-Water, and The Queen’s Arms at Heathrow Terminal 2. b o In addition, we continue to invest to enhance the core pub estate. e w ere delighted to reopen The Admiralty – the iconic and W y p onl u r a m afte a £ n Trafalgar Square – following a £3.3 million rebuild ajor fire last summer – and we recently completed 2.5 million investment at The Sanctuary House, near bbey, reopening in time to welcome customers r A Westminste in fo g C r K harles III’ oronation. s c Evolve our business While we have a long-term strategy – we never stop monitoring trends, societal changes, and the behaviour of existing and potential customers. Reacting to those changes is imperative in delivering continued growth and this has been reflected in the investments ade through our digital transformation project and that we w ake as we continually review and hone our food offering. wil e m l m In November, I was delighted to welcome Sam Bourke to the Executive Team as Marketing Director. Sam has a long history in the hospitality sector having previously worked for ETM, The Restaurant Group and Wasabi. Sam is already adding value across the business with her drive, enthusiasm, and clear focus on the key trading opportunities that will deliver strong sales for our pubs and hotels. As well as building on the opportunities provided through enhancing our premium sports packages, the marketing team is also reviewing our kids’ menus and ensuring our family proposition is best in class. In addition, we are looking to capitalise on trading opportunities during all parts of the day, for example with an elevated and indulgent brunch offer. The new Business Central finance system which was implemented n 2 i 021 is delivering high quality information that aids the decision- making process and with finance, marketing and operations working in perfect harmony, we can make successful decisions based on our knowledge of consumer trends, supported by hard data, excellent supplier relationships, and outstanding operational capability. Own our impact – because Life is too good to waste Sustainability and decisions around our people, the planet and our communities, are at the heart of everything we do – and while doing things the right way has always been a Fuller’s value, it is now absolutely part of business as usual. We have a long-standing declared commitment to reach Net Zero by 2030 for our operational emissions and by 2040 for our supply chain. We have made good progress on our target to increase recycling and reuse, while driving down single use items, and we continue to send zero waste to landfill. In addition, we are currently rolling out a programme of sustainability champions to help us embed best practice across the estate. There are, of course, added benefits to our sustainability programme with reductions in energy usage of 14% for gas and 13% for electricity. New equipment in our pubs continually moves us away from gas and both The Queen’s Arms at Heathrow and The Admiralty are fully electric. Combined with the fact that all our electricity is from renewable sources, that means these two pubs are exclusively powered by zero carbon energy. t i l s n our diversity and inclusion programme, with al As well as our commitment to the environment, we continue to inves undertaking diversity and inclusion training. In a great example of creating a virtuous circle, we are recruiting more team members with intellectual disabilities through a programme supported by our corporate charity partner, Special Olympics Great Britain. It is joined up thinking that helps a company of our size punch far above its weight in this area. eaders enio r l . T he flexibility it facilitates to move pubs between the models attract, to benefit from Fuller’s operational expertise and vice versa constantly proves useful to all parties and as well as the obvious benefits of the 23 houses that are moving into the Tenanted division, we see the benefits of moving in the other direction through sites such as The George & Dragon in Westerham and The Plough at Eas heen. t S It has been particularly rewarding to see the success of those pubs on turnover linked agreements, where we have added additional marketing resource to help our Tenants build their business and access the benefits that come from also having a Managed estate. From Shakespeare and opera to panto, we can give our Tenanted pubs access to revenue building reasons to visit. t n o cost to our Tenants, this currently includes a Fuller’s induction Finally, it is training that is the key to running successful tenancies. A day, covering the basics and introductions to key support team members, social media and marketing courses delivered locally, bespoke training for turnover agreement pubs, personal licence courses, a business development day held by a third-party trainer, and full access to the suite of FLOW online training. We also run an excellent cellar course at the Fuller’s Brewery through our long-term supply agreement with Asahi. p 1 Current trading and outlook We are delighted that our sales momentum has continued into the new financial year and like for like sales for the first 10 weeks are u 3.9%. Our recent investments at The Willow, The Sanctuary House and The Admiralty are outperforming our expectations, an a Th e have exciting projects planned for this financial year e C ounting House in the City, The Forester in Ealing, and g S un near Bashley. d w t T h e R isin I am more optimistic about the future than I have been since before the pandemic. While the well-documented inflationary environment has been a challenge, there are positive signs on the horizon. In addition, we are ever hopeful of a resolution to the ongoing train strikes to allow us to further benefit from the increasing numbers o ffice workers and international tourists returning to the Capital. f o Fuller’s is, and has always been, about the long term. We have n e a xcellent vision and strategy that signposts the direction the Company is heading and what we will do to get there. We have a clear pathway to further growth based on enhancing profitability from our underlying business, proactively managing our property portfolio to ensure we are getting the best returns, and continuing o s t that guide us in how to get there, and we have an amazing team of people who will deliver all of the above. Finally, we have a predominately freehold estate, epitomised by iconic sites in outstanding locations. eek out appropriate acquisitions. We hav trong set of values e a s t T Tenanted Inns One of the highlights of the year was seeing our excellent Tenanted Team, under the leadership of Iain Rippon, pick up the award for Bes enanted and Leased Pub Company (up to 500 sites) at this year’s Publican Awards. It was great recognition for the excellent work Iain and the team have done supporting our Tenants, especially in the current inflationary cost environment. I am excited by the opportunities ahead, optimistic about the future, and confident in our ability to deliver excellent service to our customers, careers for our people and returns for our shareholders. We have always seen the benefit of operating both managed and tenanted models. The latter allows pubs to remain within the Fuller’s estate but with lower capex, lower costs and shared risk and reward, enabling the innovative, entrepreneurial Tenants, which our pubs Simon Emeny Chief Executive 14 June 2023 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 13 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Business Model Our resources How we create value d a CUSTOMER OFFER We are famous for delicious, fresh, seasonal foo nd an extensive range of beers, wines, spirits and soft drinks, as well as over 1,000 boutique bedrooms. We have a clear vision to deliver memorable experiences that ensure our customers leave happier than when they arrived. r c PEOPLE Our people make the real difference to our business. Whether dealing with consumers o olleagues, they deliver outstanding service from bar to boardroom. Our purpose is to create experiences that nourish the soul – and we striv e t rol and strategy. o ensure that everyone knows the key hey play in delivering that purpose, vision e t ICONIC PROPERTIES Our predominantly freehold estate is mainly located in the South and South East of England. t i I s a great balance, with rural, suburban and urban sites. It includes some truly iconic sites such as The Still & West in Old Portsmouth and The Churchill Arms in Notting Hill. DIGITAL TECHNOLOGY This encompasses a myriad of digital touch points for the consumer in both pubs and hotels that, o a t chieve optimal efficiency and a frictionless journey, all need to be seamlessly interlinked. n a I technologies and systems further enhance our customer knowledge and understanding and create efficiencies in our internal processes. ddition, continued development of our digital FINANCIAL STRENGTH Our strong Balance Sheet and prudent approac e a e w r w d t hrough acquisition. an o cash management ensure that ell placed to grow both organically h t MANAGED ESTATE TENANTED INNS REINVESTMENT AND REFURBISHMENT Keeping our fantastic, iconic properties in firs and you can find out more on page 17. lass condition is a key tenet for Fuller’s, t c Life is too good to waste d o ur planet, Life is too good t Focused on our people, our communities, an aste is our commitment to sustainability and underpins everything we do. o w Our people are too good to waste Find out more on pages 52 to 53 14 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. SUPPLIER COLLABORATION We work closely with our suppliers in the spirit of mutual collaboration and often have bespoke products on our bars and menus that are available only at Fuller’s. REVENUES Revenues come from four main sources – primarily through operations in our Managed Pubs and Hotels and our Tenanted Inns, but also through some unlicensed property rental and through rebates from suppliers. Our purpose We create experiences that nourish the soul The value we share CUSTOMERS Our customers reward our efforts with their e a trad nd their loyalty. They are ultimately the reason for everything we do and you can see more details about our commitment to delighting our customers on page 16. Happy customers make for happy team members and vice vers s the ultimate virtuous circle. a – it i art of the Fuller’s family and that they PEOPLE Our team members tell us that they enjoy g p bein appreciate our investment in their wellbeing. We provide best-in-class training and development programmes and genuine opportunities to develop through internal career progression. Our policies ensure that we have a respectful and inclusive working environment and a consistent approach to supporting our people. COMMUNITIES We strive to play a key role in the communities and neighbourhoods in which we operate with support for local events and groups. We support a n harities, including Special Olympics GB at a corporate level and, where possible, offer matched funding for our team members where they are undertaking fundraising activities. umber o f c W e h a v e a h i g h ly c a s h g e n e ra t i v e b u s i n e ss a n d a c a re f u l a p p r o a c h t o o u r f i n a n c i a l m a n a g e m e n t. Our communities are too good to waste Find out more on pages 48 to 51 Our planet is too good to waste Find out more on pages 42 to 45 SUPPLIERS Having true partnerships with suppliers makes a r eal difference – to both parties. We always look to the long term and making commitments such s f a orward buying helps both parties to plan for the future with confidence and certainty. It also allows us to work collaboratively to come up with interesting, bespoke drinks and dishes to tantalise our customers tastebuds, that are available only at Fuller’s. 5%, confirming our commitment to returning SHAREHOLDERS This year, we have increased our final dividend y 3 b to our progressive dividend policy. In addition, shareholders with over 1,000 ‘A’ or ‘C’ ordinary shares, or more than 10,000 ‘B’ ordinary shares benefit from our Inndulgence Card scheme, giving discounts in Fuller’s Managed Pubs and Hotels. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 15 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Strategy at a Glance WE’RE CRAFTING A distinctive S A ND HOTELS WHERE FAMILY OF PUB PEOPLE FEEL THEY belong 3 2 4 1 5 1 DELIGHT OUR CUSTOMERS 2 INSPIRE OUR PEOPLE Attract new customers and increase visit frequency • Refresh brand communications • Extend our appeal to a broader e f Create a workplace where everyon eels they belong • Launch and deliver inclusion actio • Train and develop our peopl e in i n p lan nclusive ervice customer base leadership Surprise and delight with distinctive • Every venue will be an service individual experience • Every team member trained i • An inspirational service coach n s t e a ver y s ite • Reward and recognition for grea • Measure through Net Promoter Score ervice t s • Deliver experience-led events requency and spend o d riv e f t • Drive a culture to maximise sales m e fro vent spaces. 2024 priorities • Delivery of strong like for like sale • Development and execution of s g rowth exceptional events and experiences fo ur customers. r o (“NPS”). b a nd hotel Tailor the experience in every pu • Empower our leaders to deliver h q uality, flexible offering s l ocal customer needs ig t f tha a h it • Indulgent, great British pub classics with a modern twist, using seasonal ingredients on the menu • Broad selection of beers, wines and spirits, plus artisan drinks ranges, served knowledgeable team members by • Beautiful bedrooms, individually styled with the highest quality standards • Delivering sector-leading like for like sales growth. Create a smoother r j custome • Optimise customers’ digital ourney journe y f r s o eamless interaction • Continually evolve our bookings process to integrate and improv • Improve digital methods of e f unctionality communication and marketing throug ulti-channel approach h a m o m • Measure by increase in traffic ites and associated t conversion to sales. o s icr h e • Create an inclusive culture throug vents • Create a network of 150 mental health first aiders across the business. Appreciate and value our colleagues • Develop our listening culture using a range of tools including The Happiness Index survey, Fuller’s Forum, My Voice, and Employee Resource Groups e t • Fully embed our transparent pay structur encourage o attract, retain and development • Evolve our distinctive benefits package. Support and encourage career development • Focus on internal promotions, y at g eneral manager level • Provide at least 100 apprentices with particularl r o caree pportunities every year • Develop our chefs through the hefs’ Guild. Fuller’ s C Attract the best talent • Grow our True to You employer brand • Utilise Brilliant Recruitment, our new recruitment system and practices • Recruit for personality and train fo r s kill. 2024 priorities • Further enhance our leadership capabilities with all General Managers participating in our leadership development programme • Implement actions arising from r H ou appiness Index survey. See pages 18 to 19 for this strategic pillar in action See pages 20 to 21 for this strategic pillar in action 16 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.         3 ENHANCE OUR ESTATE Care for our estate • Continue to look after the fabric f o r e u o state • Utilise skills within the team and our poo f designers to enhance our offer l o Evolve through transformational investment • Maximise the potential of our estate by evolving our pubs through investment • Optimise our portfolio through active • Continue to uphold the highest standards asset management in the industry • Ensure the estate and capital value rotected for future generations. e p ar • Constantly assess optimal operating model for each site • Work with and invest alongside our Tenants to drive returns. Invest in growing the estate • Invest in markets where we alread • Add scale to our core premium pub and y e xcel hotel estate • Complement the existing business ig h i ncome, premium demographic n h i areas, with predominately freehold assets, and in-filling geographical gaps. See pages 22 to 23 for this strategic pillar in action 4 EVOLVE OUR BUSINESS Innovate to excite future consumers • Evolve and innovate our proposition to adapt to changes in consumer behaviour. Enhance our supplier partnerships • Build genuine long-term partnerships • Source authentic food and drink products, focusing around the seasons Grow our profitability • Ensure our strategy is executed s t acros e f lik he business to achieve our or like sales growth ambition • Grow EBITDA margins by growing sales, effective labour management and scheduling, and agile product anagement portfoli • Mitigate central costs by improving fficiency of processes o m e e th • Leverage the full benefits of r i ou o m t nvestment in systems aximis fficiency. e e • Continue our positive relationship h A wit sahi • Leverage the appeal of our customer base and geographic position of ou bes state to retain and attract the uppliers. r e t s 2024 priorities • As the market evolves, stay ahead f m f d o o arket trends through the use ata insights • Evolution of differentiated day-part offering. 2024 priorities • Targeted capital investment of £20-25 million to deliver returns an nhance the value of our estate d e • Effectively transition the planned 23 Managed Pubs and Hotels to Tenante return members and nns to deliver enhanced hile looking after our team customers. d I s w 5 OWN OUR IMPACT Take action to protect and respec ur planet • Our planet is too good to waste. t o Create spaces for communities o c onnect and feel welcome t • Our communities are too good t o w aste. Care for our people and foster a s ense of belonging • Our people are too good to waste. 2024 priorities • Programme of work to support commitment to Net Zero by 2030 • Investment in diversity and inclusion programmes. See pages 24 to 25 for this strategic pillar in action See pages 26 to 27 for this strategic pillar in action Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 17 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104     Strategy in Action 1 Delight OUR CUSTOMERS nourish the soul – making W e live to create experiences that memories and delighting our customers. We do this through fresh and delicious seasonal dishes, an amazing array of premium and interesting drinks, and beautiful, individually crafted bedrooms. But what makes the real difference is the welcome you receive when you walk through the door – when that is extra special, our teams know your soul is well and truly nourished. Tailor the experience in every pub and hotel Today’s consumer expects the personal touch – whether that’s in the digital comms we send or the burger we cook. 18 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Surprise and delight with distinctive service Is there anything better than spending time wit a g mile on your face? That’s the difference reat pub, with great people, can make. It’s e t n y han food and drink – it’s leaving happier ou arrived. mor tha h a s Link to Values: Doing things the right way o t We love it when our team members he right thing and to reward them, d we make a point of recognising those tiny noticeable things (“TNT”) that ladder up to make all the difference n d i elighting our customers. From driving stranded customers to Peppa Pig World, to sending a terminally ill customer up i pitfire, those TNT moments are rewarded with vouchers, recognition and team nights out. n a S Attract new customers and increase visit frequency Including delightin owners everywhere with our dog friendly pubs. og g d Q&A Fred Turner, Retail Director Create a smoother customer journey We have over one million opted in customers on r d atabase – and we tailor our communications ou o m t atch the things we know they like to do. In addition, our pubs have the ability to communicate directly with their own customers about the brilliant events that are going on in our pubs. Outside of the obvious financial metrics, how do you know your customers are delighted? Hospitality is a people business – and it’s one of the few sectors where a smile on a customer’s face really is the best gauge of how well you are doing. Our team members live for good feedback and that’s why we use Net Promoter Scores as one of our bonus measures. It’s also the reason we introduced the TNT programme, which gives us a quick and meaningful way to thank our team members for going the extra mile. It’s our people that set us apart from the competition and they are at their best when they are delighting our customers. e t How will you deliver on this strategic pillar? Building on the points above, we have launched an internal initiative around B he Difference. By embracing the Be the Difference philosophy and focusing on delivering TNTs, we demonstrate our commitment to providing exceptional experiences for every customer. We understand that it’s the small touches and the genuine interactions that truly leave a lasting impression. Ou above and beyond, we can foster customer loyalty, positive word-of-mouth, and an enduring reputation as a hospitality provider that truly cares. If we get that right, we will easily deliver on this strategic objective again and again. eople are the driving force behind our success, and by consistently going r p Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 19 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Strategy in Action Continued 2 Inspire OUR PEOPLE O ur people are absolutely at the heart of what we do. Together, w are the people who create the experiences nourish the soul. We aim to create that a w orkplace where everyone feels they belong and where training, development and career progression are available, and encouraged, for all. We thrive off each other too – it’s what gives us energy, what makes us special, and what helps us build a fun, exciting and sustainable business. ake the difference and they e m Create a workplace where everyone feels they belong This year has seen our work around diversity and inclusion take big steps in the right direction and there’s a lot ome. mor e to c Appreciate and value our colleagues Together we are the difference, and that’s why we make sure our colleagues can recognise and reward the achievements of their peers with our TNT initiative. “ There’s no script, it’s all abou — Alex, Head Chef eing yourself.” t b 20 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Support and encourage career development Many of our team members have never had a graduation. But we make sure we hold one for everyone who undertakes Fuller’s apprenticeship or a development course. Attract the best talent Recruitment has called for some new thinking in recent times, which is why we ar ow actively targeting people over 50 through our partnership with Rest Less. e n Link to Values: Celebrating Individuality Being Part of the Family d i e l nclusion – this is about how we At Fuller’s, being True to You is very important to us. We believe everyone should feel able to be themselves, and we do this by celebrating individuality. But this isn’t just about diversity an express ourselves at work too and w ove encouraging creativity and innovation in the workplace. One of r o ou f t amily – and for us, diversity h o d i an nclusion is the point on a Venn diagram where these two values meet. At Fuller’s, we want to celebrate all individuals and we want everyone o f t ther key values is being part e f eel part of the family. Q&A Dawn Browne, People & Talent Director g r year? What have been your key areas of focus over the last financial We have had a major focus on recruitment over the last year, and it is ewards. We relaunched our recruitment website and partnered reapin h r wit ecruitment specialists Harri, which has combined to improve the overall process and has led to more engaged candidates. Alongside this has been our continued focus on development, which we know improves key metrics like retention rates and happiness. We love to recognise successful development too, and it was amazing to have 300 graduates at Troxy in East London last November for a brilliant graduation ceremony. What are you most excited about looking forwards? I love watching people develop and progress – I find it incredibly rewarding and I am really proud of the opportunities we offer. This year, we will support 220 apprentices undertaking a number of different programmes from entry to degree level, work with our partners Rest Less to recruit more people over 50 and the charity Only a Pavement Away, to provide careers to those who are homeless or in danger of being homeless. I am particularly proud of the work we are doing with Special Olympics GB, to provide sustainable employment o p t eople with intellectual disabilities. I want Fuller’s to be a place where everyone can have can a fulfilling career, whatever that looks like for them. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 21 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104    Strategy in Action Continued 3 Enhance OUR ESTATE W e are very fortunate to have suc n amazing line-up of iconic pubs in some of England’s best-known and most beautiful locations. From The Red Lion on Whitehall to The eart of the White Buck at Burley in th New Forest and out to our stunning sites n t i he Cotswolds, our pubs stand proud. This predominately freehold estate provides th ou ompany is built – and we pride ourselves on the love, care and attention w olid foundation on which ive to these properties. e h e g h a e s r C Reopening the Admiralty e w Following a large fire in July last year, w ere delighted to get the Fire Brigade back – this time to reopen The Admiralty following a £3.3 million refurbishment. Investing in the outdoors too We have continued with our winterisation projects, increasing the amount of outdoor covers that can be pre-booked throughout the year. 22 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. A new pub in the heart of the Cotswolds Invest ing in bea ut iful bedrooms The Sanctuary House by Westminster Abbey really was fit for a king when it reopened after a £2.5 million bedroom scheme, in time for the Coronation. Link to Values: Doing things the right way Always asking what’s next? e c arry out and always want to ensure We take great pride in the schemes w we respect the historical integrity and enhance the ambience when we carry out an investment. We are always looking to improve too – as can be seen at The Admiralty, where we took the opportunity of making the pub fully electric. A great example of looking forward and doing things the right way. “ Taking opportunities o e nhance the fabric t f o o ur wonderful estate is always one of my priorities.” key — Peter Turner, Property Director Crea t ing unique a nd mem ora ble experiences in ma gica l spa ces Weddings are becoming increasingly important, and ave beautiful spaces fit w ny nature of celebration. fo e h r a Q&A Peter Turner, Property Director t o n a Where have you been investing this year? We have added some really great sites to our Managed Pubs and Hotels business during the year – including The Rising Sun near Bashley, in the f the New Forest, The Willow at Bourton-on-the-Water, which is hear know s the Venice of the Cotswolds, and The Queen’s Arms, which is landside at Heathrow Terminal 2 and a fantastic sister site to the very successful London’s Pride. We’ve also transferred two pubs from Tenante Georg Drago anaged operations, The Plough at East Sheen and The esterham. The latter is now part of our Bel & The rand, has 13 stunning bedrooms and a terrace with amazing views. e & D n b ragon i d to M n W What are your priorities for the coming year? We are in the middle of transferring a number of pubs from our Managed o T enanted business, which will be completed in the near future. We are t o t aking advantage of an amazing opportunity to sell The Mad Hatter als t of a w s p a ider property development in the area. The latter will realise around £20 million in value – far above the net book value of the property. n a I ddition, we will continue to invest in our core estate – including the addition of a furthe a m ix bedrooms at The Counting House on Cornhill and ajor bedroom refurbishment at The Chamberlain, to capitalise on the r s ar continued post-Covid revival of London. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 23 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104   Grow our profit a bility By enhancing our wine lists, we have given our customers a wider and more interesting range to choose from and improved our profit margin. Strategy in Action Continued 4 f h o e hile we have nearly 180 years o istory behind us, we are always looking to the future Evolve OUR BUSINESS W t nsure we remain relevant to our current and potential customers. We are constantly innovating our proposition to stay ahead of nd respond to, changes in consumer behaviour. Evolution is not just about change though – it’s also about ensuring our strategy helps us to continually grow sales and profitability. We are focused o constantly strengthening our supplier relationships and leveraging the appeal o in a sustainable manner. rowing our customer base and basket, ur amazing pubs to successfully grow n g f o , a Enha nce our supplier pa rt nerships Our long-term supply agreement with Asahi puts us in a great position for th ugby World Cup in the autumn, where Asahi is a key sponsor. e R 24 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Improved use of the da t a a va ila ble We are still realising further benefits from the digital transformation project, smoothing the customer journey and helping increase pre-booked sales. Link to Values: Celebrating Individuality Always asking what’s next? y e We evolve our business at site level b nabling our pubs to personalise their offer with a range of events and activities from comedy and panto to opera and Jane Austen. Combined wit for the next big trends to make sure w re always ahead of the game. his is a laser focus on the future e a h t Innova te t o excite fut ure consumers We are looking at our food offer from farm to fork and you can already see the improvements in our spring/ summer menu – with more to come. Q&A Sam Bourke, Marketing Director r p riorities? As the newest member of the Executive Team, where do you see you I’m really excited by the opportunities available and I have already identified three key areas where I think we can quickly make an impact – premium sports occasions, brunch and the lucrative family market. We’ve got great plans for each, and I’m looking forward to reporting on our progress in the future. If yo customers enjoy watching sport in our pubs, there is a greater percentage who would like to do so more often with the right offer in place. My team is working collaboratively across the business to build a first class sports environment fo ur customers where our customers wish to enjoy it. And with the Rugby World Cup this autumn, it’s the perfect time to get this offer right. ust take the first of these, research shows that although a number of our r o u j Is there a lot more that can be done in the digital space? Definitely. The digital transformation that was completed before I joined is already delivering results. We can now easily split our data by segment – providing the right offer, for the right customer, at the right time, and it has given us much better sales lead management with pre-booked sales already u further harness its power to drive party, corporate and special occasion bookings, where I think there is a big opportunity across our fantastic pubs and hotels estate. 0% on pre-Covid levels. I’m now looking forward to seeing how we can p 2 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 25 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Strategy in Action Continued 5 OWN OUR impact O ur Life is too good to waste strategy launched in January 2020 and has developed each year. It underpins overs three distinct areas – our people, the other four areas of strategy and is fairly and squarely part of business as usual. t c I our communities and our planet – with each area having its own committee, led b ember of the Executive Team. From a h olistic approach to our main charity y a m partner, Special Olympics GB, which combines raising funds with improving employment prospects for people with an intellectual disability (“ID”), to substantial improvements in reducing our carbon footprint, we are taking ownership of ou our th mpact and making life better for us, customers, our neighbourhoods and nvironment. e e r i Take action to protect and respect our planet We continue to reduce energy use and are on course for Net Zero by 2030 (operations) and 2040 (supply chain). Putting sustainability front and centre Our partnership with Green Goblet reusable plastic glasses has removed a vast quantity ingle use plastic. o f s 26 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Care for our people and foster a sense of belonging Diversity and inclusion training has been completed by the Board, m a Executive Tea Managers, and will be rolled out throughout the Company. #BeingPartOfTheFamily. nd Senior   “ Unemployment among people with intellectual disabilities stands at 94%, so it’s amazing to have a corporate partner that raises money sustainable and develops employment opportunities” — Colin Dyer, CEO, Special Olympics GB Link to Values: Doing things the right way Always asking what’s next? Protecting the planet is non-negotiable, so when we are looking to the future, we always have one eye on making sure we consider the impact on our people, our communities and our planet. That’s why we add charging points for electric cars when we do an investment scheme with a car park and why more and more of our pubs will become fully electric – helping us get to Net Zero. Take action to protect and respect our planet We are trialling a premium draught tonic solution in some sites, which has resulted in the removal of 35,000 glass bottles from our supply chain. Q&A Oliver Rosevear, Sustainability Director What are you most of proud of achieving during the year? I’m really proud of the progress we have made in reducing our energy usage and the changes we have made in our kitchens. We have seen electricity consumption fall by 13% and gas fall by 14%. We have also opened two fully electric pubs – The Admiralty on Trafalgar Square and The Queen’s Arms at Heathrow. A lectricity all comes from renewable sources, this means o p these tw excites me. ubs are exclusively powered by net zero carbon energy. That really s o r e u r m What are your key priorities for the coming year? We are on the cusp of really unlocking our plans to recruit more team members with an intellectual disability. At The Cabbage Patch, General Manager Stuart Green is leading the way and has already provided work or work experience fo ore than 100 young adults with IDs – and we are now ready to roll out similar schemes across further pubs. We are working with Special Olympics, and its athlete leaders, to raise awareness of the opportunities available and to help our teams understand how they can best support someone with an ID. This i antastic example of ESG truly embedding itself in the business. We raise ver £450,000 for Special Olympics GB last year, providing even more sporting opportunities for people with IDs. By bringing them into sustainable employment, we create a truly virtuous circle. That is what ESG should be al s a f d o bout. l a Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 27 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Key Performance Indicators WE USE FINANCIAL INDICATORS TO MONITOR OUR progress DELIVERING IN AGAINST OUR STRATEGY O C REATE T long-term sustainable VALUE FOR ALL STAKEHOLDERS. n t Non-financial performance metrics are used withi engagement and satisfaction scores, custome he business, including employee nd environmental targets. S a r N P REVENUE AND OTHER INCOME £336.6m 2022 2023 2021 73.2 ADJUSTED PROFIT BEFORE INCOME TAX 2023 £12.7m 2022 2021 (48.7) ADJUSTED EARNINGS PER SHARE (“EPS”) 2023 16.10p 2022 2021 (72.09) NET DEBT EXCLUDING LEASE LIABILITIES 2023 £132.8m 2022 132.8 131.9 336.6 253.8 12.7 7.2 16.10 9.79 Definition Why is it important for Fuller’s? Performance in FY2023 Revenue and other income comprises sales Revenue and other income drives the overall Revenue and other income increased by of goods and services, accommodation business, resulting in cash generation, 33% compared with FY2022, with a 34% income and rental income. We have two which allows for investment in our estate, increase in Managed Pubs and Hotels main revenue segments: Managed Pubs our people, rewards to our stakeholders revenue and an increase o % in f 19 d H an otels and Tenanted Inns. and acquisitions. Adjusted profit before tax is profit before The Directors believe that this measurement Adjusted profit increased by 76% xcluding separately disclosed items of profitability allows stakeholders to analyse compare o FY2022. The increase Why is it important for Fuller’s? Performance in FY2023 Definition x e ta a s s hown in the Income Statement. trends and performance without being impacted by separately disclosed items. Tenanted Inns revenue. This increase riven by the improved ability to trade Y2023, compared to the prior year s d n F i i when trading was still restricted because of the pandemic. d t y to t s l abilit n L i e p th wa argely due t he improved o t rade in FY2023, particularly ondon as people returned to offices and international tourism recovered. In rior year trading was restricted for part o he year because of the pandemic. f t Adjusted profit in the current year was impacted by the inflationary environment with costs such as utilities, food and staff costs increasing significantly in the year. Definition Why is it important for Fuller’s? Performance in FY2023 Adjusted earnings per share is profit after This measure shows how much money Adjusted earnings per share increased tax excluding separately disclosed items roup is generating for its shareholders. 4% compared to FY2022 in line with y 6 b attributable to equity holders of the Group akes into consideration changes in profit growth in adjusted profit before tax. e G th t t I divided by the weighted average number and loss and the effects of new shares rdinary shares in issue during the year issued but excludes the impact of separately f o o and using a 40p ordinary share. disclosed items. It is an important variable n d i etermining our share price. Definition Why is it important for Fuller’s? Performance in FY2023 Net debt comprises cash and short-term This measure helps shareholders to deposits, bank overdraft, bank loans, determine the level of debt and the Net debt (excluding leases) was at £132.8 million (FY2022: £131.9 million). debenture stock and preference shares. overal inancial stability of the Group. Thi s only a marginal increase from last l f t d Ne ebt is pre IFRS 16 and therefore does not include lease liabilities. s i s t e G year a h roup has delivered on its capital allocation framework through investment in the estate and returns to shareholders through both dividends d s an hare buybacks. 28 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 2021 218.1       REVENUE AND OTHER INCOME £336.6m ADJUSTED PROFIT BEFORE INCOME TAX £12.7m ADJUSTED EARNINGS PER SHARE (“EPS”) 16.10p NET DEBT EXCLUDING LEASE LIABILITIES £132.8m Definition Revenue and other income comprises sales of goods and services, accommodation income and rental income. We have two main revenue segments: Managed Pubs an otels and Tenanted Inns. d H Why is it important for Fuller’s? Revenue and other income drives the overall business, resulting in cash generation, which allows for investment in our estate, our people, rewards to our stakeholders and acquisitions. Definition Adjusted profit before tax is profit before x e xcluding separately disclosed items ta s s hown in the Income Statement. a Why is it important for Fuller’s? The Directors believe that this measurement of profitability allows stakeholders to analyse trends and performance without being impacted by separately disclosed items. Performance in FY2023 Revenue and other income increased by 33% compared with FY2022, with a 34% increase in Managed Pubs and Hotels revenue and an increase o Tenanted Inns revenue. This increase s d i riven by the improved ability to trade n F Y2023, compared to the prior year i when trading was still restricted because of the pandemic. % in f 19 o t d t argely due t y to t o FY2022. The increase Performance in FY2023 Adjusted profit increased by 76% compare s l wa abilit n L i ondon as people returned to offices and international tourism recovered. In rior year trading was restricted for th f t part o rade in FY2023, particularly he year because of the pandemic. he improved e p Definition Adjusted earnings per share is profit after tax excluding separately disclosed items attributable to equity holders of the Group divided by the weighted average number o and using a 40p ordinary share. rdinary shares in issue during the year f o e G roup is generating for its shareholders. akes into consideration changes in profit Why is it important for Fuller’s? This measure shows how much money th t t I and loss and the effects of new shares issued but excludes the impact of separately disclosed items. It is an important variable n d i etermining our share price. Adjusted profit in the current year was impacted by the inflationary environment with costs such as utilities, food and staff costs increasing significantly in the year. Performance in FY2023 Adjusted earnings per share increased b 4% compared to FY2022 in line with growth in adjusted profit before tax. y 6 Definition Net debt comprises cash and short-term deposits, bank overdraft, bank loans, debenture stock and preference shares. Ne not include lease liabilities. ebt is pre IFRS 16 and therefore does t d Why is it important for Fuller’s? This measure helps shareholders to determine the level of debt and the overal inancial stability of the Group. l f s i s only a marginal increase from last s t Performance in FY2023 Net debt (excluding leases) was at £132.8 million (FY2022: £131.9 million). Thi year a roup has delivered on its capital allocation framework through investment in the estate and returns to an shareholders through both dividends d s hare buybacks. e G h Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 29 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104    Financial Review “ DESPITE A CHALLENGING TRADING ENVIRONMENT WE HAVE DELIVERED SALES GROWTH OF 33% AND INCREASED ADJUSTED PROFIT E T BEFOR AX BY 76%.” R O T C E R I D E C N A N I F — H T I M S L I E N d C Group Revenue increased by 33% to £336.6 million (FY2022: £253.8 million). Both financial years had periods when trade was disrupted, with train and tube strikes in the current financial year an ovid restrictions in the prior year. The train and tube strikes were particularly detrimental in Central London, where a significant proportion of our estate is situated, with commuters choosing to work from home. We estimate that the strike action has reduced sales by in excess of £5 million in the financial year. e p e w rior year. We have had to manage significant foo ar in Ukraine caused our energy costs to increase substantially. The trading environment during the year was very challenging. Th Even with hedging arrangements in place, and reduced usage, our total energy costs increased to £14.2 million, compared to £7.6 million nd drink in th inflation, and growing wage costs as a result of labour shortages at the start of the year, as well as the increase in National Living Wage. This national inflationary environment has also led to the Bank of England raising interest rates 10% from the prior year. Despite this background, the Group has delivered an adjusted profit of £12.7 million, up by 76% on the prior year (FY2022: £7.2 million). ith our finance costs rising by nearly d a , w 30 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. r t s £ During the year, the significant tax revenues the Group generates fo he Government rose by 70%. For the 53 weeks ended 1 April 2023, the total tax contribution of the Group to the UK Exchequer 80.0 million (FY2022: £47.2 million) in taxes borne and taxes wa collected on behalf of colleagues, customers and suppliers. This significant increase is predominately in VAT payments due to the increase in sales, along with the increase in output VAT rate from a b o t lended 8.75% in FY2022 on food and accommodation sales back he normalised rate of 20% in FY2023. t Total tax collected (£m) 80 60 40 20 0 -20 14.7 15.9 11.0 7.2 0.9 -2.5 37.0 19.0 14.4 8.6 1.0 FY2022 FY2023 VAT PAYE and Employees’ NI Business rates Employer’s NI Corporation tax Other taxes and Apprenticeship Levy e p The financial year to 1 April 2023 comprised 53 weeks of trading, whereas th o Group adjusted profit. rior year represented 52 weeks. The additional week rade contributed £5.7 million of Group revenues and £0.3 million f t In our Managed Pubs and Hotels business, like for like sales have grown by 17.5% compared to the prior year, with total sales increasing by 34%. Like for like sales in our Central London sites have risen by 40.1%, demonstrating both workers and tourists are returning to London an ontinue to do so. d c Adjusted EBITDA for the Managed Pubs and Hotel business was £53.4 million which represents an increase of 11% on the prior year (FY2022: £48.0 million). However, adjusted EBITDA margin declined from 21.0% to 17.4%, reflecting the impact of increased energy and labour costs. Additionally, in the prior year, the UK Government was providing some support due to the pandemic. VAT rates for food and accommodation were at 5% and then 12.5%, but increased back to 20% in the current year. We also received some support grants in rior year, which were not repeated in the current year. th e p Tenanted Inns revenue grew by 19% from £25.0 million to £29.8 million. Adjusted EBITDA margin improved from 51.6% to 52.0%. The low cost base of the Tenanted business means that it is a highly profitable part of the Group and continues to trade strongly despite the economi ackdrop. c b e n w u ew facilities bear interest at a margin dependent on the leverage During the year, the Group refinanced its banking facilities with ne nsecured facilities of £200 million, comprising a revolving credit facility of £110 million and a term loan of £90 million. These facilities have been agreed for a tenure of four years through to May 2026. Th covenant plus a base rate of SONIA. In the year, interest rates have increased sharply with SONIA increasing from 60bps to unde 20bps. In order to mitigate the risk of high SONIA rates, on 2 September 2022, the Group entered into a zero-premium cap and collar over £60 million of the term facility. This instrument is in place for a three-year period to hedge some of the variability in interest rates. The Group sold a floor of 310bps and bought a cap of 500bps, which gives some protection should SONIA exceed 500bps. just r 4 Finance costs Total net finance costs (before separately disclosed items) have increased by £1.1 million to £12.4 million. The increase is due to the rising Bank of England base rate partially offset by the improved margins secured on the new bank facilities as part of the refinancing n M i ay 2022. This means that the average cost of borrowing was 7.0% in the current financial year compared to 4.2% in the prior year. Separately disclosed items The net position on separately disclosed items of £2.4 million expenses (FY2022: £4.3 million credit) comprises £11.8 million of profits on the disposal of nine predominately unlicensed properties, impairments 0.5 million incurred as a o result of corporate reorganisation, offset by a £0.8 million credit in rovision. respect of a historical VA 14.3 million on 22 properties, costs o T p f £ f £ Tax The underlying effective tax rate was 22.8% (FY2022: 16.7%) as some movements are at the current corporation tax rate of 19% and other are at the future tax rate of 25%. Separately disclosed items have an effective tax rate of 20.8% (FY2022: 74.4%) resulting in an overall tax rate of 23.3% (FY2022: 38.3%). Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 31 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104    Financial Review Continued Pension The net defined benefit pension scheme accounting surplus has increased by £0.3 million to £14.6 million (FY2022: £14.3 million surplus) as a result of both a decrease in present value of pension obligations as the discount rate increased from 3.0% to 4.75%, an quantum of decline in the fair value of scheme assets. I ompany agreed the 2022 triennial valuation was concluded, and th to continue to pay contributions into th n line with the existing recovery plan. Under this plan, deficit reduction contributions started at £2.2 million per annum i reduction contributions have increased to £2.4 million. 022. As of January 2023, the deficit imilar pril 2023, d a s n A e C e P n J y 2 n i la ul Shareholders’ return The proposed final dividend of 10.00p per ‘A’ and ‘C’ ordinary share (FY2022: 7.41p), together with the interim dividend of 4.68p per share already paid makes a total of 14.68p per share, which is an increase of 30% and marks a return to a progressive dividend policy. The middle- market quotation of the Company’s ordinary shares at the end of the financial year was 465p. The highest price during the year was 650p, while the lowest was 444p. The Company’s market capitalisation at 1 April 2023 was £282.6 million (FY2022: £383.9 million). Capital allocation framework The Group’s capital allocation framework aims to enhance shareholder value whilst targeting leverage at no more than 3x t d ne ebt/EBITDA. The table below summarises the framework n w hich the Group will do this. i Policy Targets and Philosophy Outlook Invest in long- term organic growth Returns-based approach to capital investment d p Sustainable an dividend rogressive Normalised dividend cover range of 2.5-3x Invest in additional growth opportunities Targeting leverage of 3x net debt/EBITDA Disciplined approach to assessing investment opportunities Strong Balance Sheet maintained – target leverage at n ore than 3x net debt/EBITDA o m f £ Annual investment 10-15 million on o maintenance capex and £10-15 million on trade enhancing capex Progressive dividend growth in line with EPS growth to drive dividend yield for investors e m IRR used to measure th erits of one-off investments in assets o r M &A Recent refinancing provides certainty o unding f f If within our leverage target, then surplus cash may enable additional shareholder returns including share buybacks Cash flow and net debt Net debt (excluding leases) was at £132.8 million (FY2022: £131.9 million). This is only a marginal increase from last year s t roup has delivered on its capital allocation framework a through investment in the estate and returns to shareholders. A t – f £30.7 million was invested in the estate in the year ota e G l o h e W including three new acquisitions, The Queen’s Arms at Heathrow, The Rising Sun, near Bashley in the heart of the New Forest, and illow in Bourton-on-the-Water. The improvement in EBITDA Th has meant that net debt/EBITDA is now at 3x, which is in line with ou apital allocation framework. r c Cash flow EBITDA Interest Tax Working capital and share transactions Pension contributions Cash available for discretionary spend Capital expenditure Separately disclosed items Property disposals and lease surrenders Dividends Share buyback Cash flow Non cash movement Net debt movement Source of finance Bank debt Other debts Cash Net debt before lease liabilities Lease liabilities Total net debt FY2023 £m 51.8 (8.7) – (2.9) (2.3) 37.9 (30.7) (0.5) 13.9 (7.5) (4.7) 8.4 (1.7) 6.7 119.4 27.5 (14.1) 132.8 73.1 205.9 Sources of finance During the year, the Group refinanced its banking facilities with new unsecured banking facilities of £200 million, comprising a revolving credit facility of £110 million and a term loan of £90 million. These facilities have been agreed for a tenure of four years through to Ma 026. The new facilities bear interest at a margin dependent n t o he leverage covenant plus a base rate of SONIA. y 2 The Group’s financing is a mix of bank debt, debentures, cumulative preference shares, overdraft, cash and short-term deposits as disclosed in notes 22, 24 and 26 to the financial statements. 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. 32 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.       d t 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, an o minimise the adverse effects of fluctuations in the financial markets on the value of the Group’s financial assets and liabilities, o eported profitability, and on the cash flows of the Group. Transactions of a speculative nature are prohibited. The Group’s treasury activities are governed by policies approved and monitored b he Board. n r y t Going concern statement The Group’s business activities, together with the factors likely o a ffect its future development, performance and position are set t t i n the Strategic Report on pages 1 to 65. The financial position ou f t o he Company, its cash flows, net debt and borrowing facilities, and the maturity of those facilities are set out above on pages 147 to 159. In addition, there are further details in the financial statements on the Group’s financial risk management, objectives and policies in note 25. The Directors have outlined the assessment approach for going concern in the accounting policy disclosure in note 1 to the financial statements. Following that review, the Directors have concluded that it is appropriate for the Group to adopt th oing concern basis in preparing its financial statements. e g 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. The Directors have chosen to assess this over three financial years through to March 2026 as this aligns with the Group’s strategic planning, which was reviewed and approved as part of the refinancing process. This three year plan is supported by the forecasts that are presented and approved by the Board. It takes into consideration the Group’s current position and the potential impact of the principal risk documented on pages 36 to 39 in the Strategic Report. The most significant risks impacting the forecasts are the recovery of the UK economy and cost inflation, specifically food, utilities and wage costs. These factors will also have an impact on consumer behaviour and consequentially sales volumes. Management have prepared, and the Board has considered two ke cenarios: y s A “base case” is the Board approved Budget for FY2024 which forms part of the three year plan to FY2026. The base case assumes there s c ontinued impact from cost inflation specifically food, utilities i d l an and FY2026. Under this scenario, the Group would have sufficient resources and headroom on its covenants through the duration of th abour in FY2024 but these start to ease as we move into FY2025 iability period. e v A “downside case” which assumes that sales volume reduce by 10% and costs across food, staff and interest continue to rise at a much higher rate. Again, the model assumes that these cost pressures alleviate during FY2025 and FY2026. The model also assumes that train strikes are more frequent than experienced in FY2023 but are resolved in the longer term. In this ‘downside case’, management would implement mitigating actions such as overhead cost reduction and reduction of capital expenditure and other property spend o o nly essential. Under this scenario, the Group would still have t sufficient resources and headroom on its covenants through the duration of the period. he At 1 April 2023, the Group’s Balance Sheet comprises of 92% o estate value being freehold properties and available headroom on facilities of £79.5 million and £14.1 million of cash and resulting net debt of £132.8 million. f t During the year, the Group has secured a new facility of £200 million, split between a RCF of £110 million and a term loan of £90 million, for a tenure of four years to May 2026. Under the new agreement, the minimum liquidity covenant of £10 million tested monthly remained until November 2022. From December 2022 (and tested quarterly thereafter), the covenant suite consists of net debt to EBITDA (leverage) and EBITDA to net finance charges. See further details n n i ote 24 to the financial statements. Taking account of the Company’s current position, principal risks facing the business and the sensitivity analysis discussed above, s w a ell as the potential mitigating actions that the company could take, the Board expects that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period of assessment. Further details on the forecast process and assumptions can be found in note 1 to the financial statements. Neil Smith Finance Director 14 June 2023 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 33 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Risk Management anaging risks effectively is key to ensuring that we achieve our strategic objectives in the long term and continue to deliver the high standards our customers, our people and our shareholders expect. Risk arises both as a natural consequence of doing business and in the pursuit of our strategy. M Our risk management approach is governed through a robust framework and we follow a consistent process for the identification and review of risk. The Board reviews these risks in the knowledge that currently unknown, non-existent or immaterial risks could turn out to be significant in the future, and ensures that a robust assessment has been performed. Risk Management Governance Framework The risk management process is operated by the Executive Team, supported by the Head of Risk, and is overseen by the Audit and Risk Committee and the Board, which is further supported by the external audit process. Governance Role Output Board • Oversees the risk management and internal • Final approval controls processes • Defines the Group’s risk appetite and assesses e p th l r rincipa isks Audit and Risk Committee Executive Team • Provides guidance and direction and supports the Board n t i he management of risk • Reviews the effectiveness of the risk management nd internal controls process strateg y a • Responsible for day to day operational implementation f t e r h o isk management strategy • Provides advice and guidance to the business areas • Considers emerging risks • Accountable to the Audit and Risk Committee and Board • Recommendations he Board o t t • Group risk register • Principal risk reviews • Audit and Board reports Business Risk Management • Implements and maintains risk management procedures • Maintains risk registers including identification of risk, mitigating controls and actions • Division and Department risk registers Task Force on Climate-related Financial Disclosures Working Group • Oversees climate specific risks and integrates mitigation • TCFD report and controls and actions into the wider risk strategy climate-related risk mitigation approach Role of the Board The Board is responsible for effective risk management and oversees a governance model that incorporates an integrated assurance model. It also formally articulates th and tolerance for risk. verarching appetite roup’ e G s o Through our risk governance structures, frameworks, processes and reporting mechanisms, Directors are provided with the information and insight needed to make a robust assessment of the Group’s most material risks and to understand how they are being mitigated and managed in line with the Board’s stated risk appetite and tolerance. The Board is responsible for monitoring the Group’s culture to ensure it encourages openness and transparency across the business, which directly supports effective risk management. 34 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Risk Appetite The Group’s approach is to take a long-term view of its business and to assess all risks accordingly, while ensuring we take opportunities ollows: to deliver economic reward in line with the Group’s strategy, a s f • Risks should be managed consistently and in line with the Group’s strategy, financial objectives and guiding principles • Opportunities should only be pursued where the scope for appropriate reward is supported by an informed assessment of risk • Risks should be actively managed and monitored through the appropriate allocation of management and other resources. Risk Management Process The Executive Team follows a clear, simple and robust process to identify the Group’s most significant risks, incorporating both top-down and bottom-up assessments: • Both the Managed and Tenanted businesses as well as the support centre functions prepare their material risks in registers which are reviewed on a half yearly basis by the Executive Team • This also includes a review of the climate-related risks considered over short, medium and long-term horizons. The detail of our climate-related risks are disclosed in our TCFD reporting on page 4 to 61 s 5 • We use a risk categorisation framework to analyse the k r ris egisters • The risks identified through this mechanism that are considered most significant, in terms of their materiality to the Group, are recorded in the Group risk register • Emerging risks are discussed regularly by the Executive Team d e an scalated to the Audit and Risk Committee as required n s • In addition, the Audit and Risk Committee conducts a deep dive o pecific risk areas based on the judgement of the Committee, looking at: changes in risk likelihood; changes in the materiality f i mpact; any changes to the mitigation; and controls that are o n p lace i • Every principal risk is assessed to see whether it could have aterial strategic or commercial impact, either on its own a m r as p o art of a multiple risk scenario • The Executive Team ensures principal risks are managed e B appropriately, monitored and reported internally an xternally • At each half year, the Executive Team considers and challenges whether risks are being managed to the tolerance approved by th financial, operational and compliance controls and mitigations have been implemented, their effectiveness, and how close the current net risk rating is to our risk tolerance oard, using principal risk reports to monitor how far material • The outcomes of half yearly reviews considered by the Executive Team are reported to the Audit and Risk Committee and the Board, with particular focus on risks that are outside tolerance, and actions ar greed e a • Principal risk reviews also support the Audit and Risk Committee d e and Board in monitoring an Group’s internal contro l f ramework. d r eviewing the effectiveness of the Risk Assessment We rate risks by considering their potential financial and non- financial impacts and the likelihood that they will happen, using a consistent rating grid to compare and prioritise risks. The risk rating takes into account the controls and mitigations in place to reduce ikelihood and/or impact of the risk, its implementation status th an ffectiveness. Risk ratings are regularly reviewed to consider whether the external or internal context, strategy, business objectives or resources available to manage the risk have changed. e l d e The suitability of the controls and mitigations are reviewed through robust reporting and monitoring which creates a feedback loop enabling a continuous improvement process to be in place regardin d a an Management teams. ccountability of risks and controls across the Executive and isk management. This includes reviewing ownership g r e b Assessment of Emerging Risks As well as assessing ongoing risks, we continue to consider how th usiness could be affected by emerging risks. Our Executive Team and department heads horizon-scan to monitor any potential disruptions that could dramatically change our industry and/or ou usiness, from both a risk and opportunity perspective, to understand the changing landscape and take appropriate actions. t i s often possible to predict the potential impacts of emerging I risks ut it is more challenging to predict their likelihood, timing d v an elocity. r b , b Changes to Risk Scores Versus Prior Year n 5 M Coronavirus We have seen an improving risk outlook on the impact of Covid-19. The UK has fully opened up and international tourism is recovering. O ay 2023, the WHO agreed that the disease no longer fits the definition of a Public Health Emergency of International Concern. W ave therefore reduced the likelihood of a pandemic impacting our business but remain alert to the potential risks. We continue to monitor global health issues and their potential impact as part of our horizon scanning and emerging risk process. e h Recruitment and Retention Our vacancy levels are at the lowest they have been post-pandemic and whilst recruitment and retention remains a significant challenge across the industry, the mitigating actions we have taken have meant that the risk to the business has lessened over the last year. Supply Chain While we continue to face a degree of uncertainty due to the ongoing situation in Ukraine, we see the supply chain situation easing in the future. The combination of returning to business as usual post-Covid, better access to data, and support from key suppliers has resulted in improved forecasting and management of stock. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 35 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 Principal Risks and Uncertainties The following heatmap sets out the impact and likelihood scores for our principal risks and further detail of these risks and emerging risks is set out in the table below. The 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 26 to the financial statements. 1 5 3 2 10 4 6 7 8 Risks 1 Economic Uncertainty 2 Consumer Demand Shifts 3 Information Technology/Cyber Security 4 Financing 5 Cost Inflation 6 Supply Chain 9 7 Recruitment & Retention 8 Health & Safety 9 Future Pandemic 10 Sustainability & Environment IMPACT Annual impact to profit before tax D O O H I L E K I L Risk Key New Decrease Increase No change Principal risks 1. Economic Uncertainty Owner Description Control and Risk Mitigation M O V E M E N T We closely monitor our cash flow to ensure we maintain an appropriate level of liquidity, continue to keep a diversified estat nd review the composition. e a Our core customer group is typically at higher income levels, whic on ou elps mitigate some of the effects of inflationary pressures usiness. h h r b We are able to adjust our variable cost base to reduce the impact o trike action on our overall profitability. f s Chief Executive The inflationary environment, cost iving increases and the threat o ecession could have an impact o emand. o f l f r n d In addition, the impact of strike action – p articularly transport strikes – has a significant impact on our city centre sites. 36 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 2. Consumer Demand Shifts M O V E M E N T Owner Description Control and Risk Mitigation Marketing Director s a The Group’s success is attributable o i t bility to anticipate and react to t consumer demand. Management monitor and research consumer trends, gather consumer feedback through Net Promoter Score surveys, online an customer complaints. ocial media reviews, and d s orking from home, the demand In recent years, we have seen changes including but not limited o w t shift in city venues vs rural, and food delivery services. There s a c ontinued trend towards i ifestyle choices healthy an t d h c whic noted above, this is als by economic uncertainty. emand. As ould impac mpacted d l o i We analyse retail pricing and market share data to ensure we ar bu till premium. t s e c ompetitive The balance of our estate across both city and rural locations allow manage demand shifts. s u s to Our digital transformation now enables us to increase frequenc fro xisting customers, and to targe ew customers. m e t n y a n d s pend 3. Information Technology/Cyber Security M O V E M E N T Owner Description Control and Risk Mitigation Finance Director n i The Group is increasingly reliant o ts information systems to operate, and trading would be affected by any significant or prolonged failures and/o In addition, the sophistication of cyber attacks continues t r d o i ata loss. ncrease. e e Our IT function has a range of facilities and controls in place to ensure that, in th a f vent of an issue, normal operation would be restored quickly. These include ormal IT Recovery Plan, online replication of systems and backup datacentres, d e an xternal support for hardware and software. We continue to introduce more preventive measures to reflect the increased risk. These include external reviews of our IT controls and a range of assessment and training for all team members who have access to our network. 4. Financing M O V E M E N T Owner Description Control and Risk Mitigation Finance Director e a r Interest rates may increase, adversely impacting profit, and/or there could b isk of breaching financial covenants. There is a risk that we are unable to find suitable financing when required. Our current financing facility runs until May 2026 and we maintain good relationships with our current lenders. The predominately freehold nature of ou usiness means we have the ability to offer more certainty than many in our sector when raising finance, and alternative financing approaches are available. r b We closely monitor our cash flow and control of investments to ensure we maintain appropriate levels of debt cover. We have an interest rate cap and colla n place to mitigate some of the impact of rising rates. r i Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 37 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104   Principal Risks and Uncertainties Continued 5. Cost Inflation M O V E M E N T Owner Description Control and Risk Mitigation Finance Director s a cross all areas, including d d rink, utilities and staff een accelerated There is a risk of rising input cost food an costs. This ha e c y t b h environment and the war in Ukraine. urrent global economic s b , a t Staff costs could be impacted by further changes to the National Living Wage ightening of labour supply, and the demand for higher wages due to the cos increases and inflation. iving t of l d l e i We regularly monitor prices using relevant commodity databases, review ooking inflation and all key contracts are competitively tendered. forwar e h av ncreased the frequency of our margin monitoring internally, and our W l p rice monitoring compared with our competitors. This allows us to act retai y i f there are significant changes in input costs. quickl Our property management platform allows us to control propert y c osts. Our preference is to have long-term agreements in place and we have recently agreed deals across the majority of our drinks suppliers. W ave a Long-Term Supply Agreement (“LTSA”) in place with Asahi Europe & International Ltd r t fo o b t upply of beer, cider and other beverages to 2029, which caps the increase e s h elow CPI. e h The majority of our energy use is covered by fixed-term prices. Fo year, we are fully hedged for both gas and electricity. r t he 2024 financial We aim to mitigate the risk of staff cost increases through operational efficiency and continued optimisation of staffing levels. 6. Supply Chain M O V E M E N T Owner Description Control and Risk Mitigation Finance Director y c hain may damage customer There is a risk that failure in our suppl satisfaction and could impact the profitability of the Group. Any large scale issue with out of stock items could have an impact on trade in our businesses. We have also identified a potential long term risk to our supply chain s a r esult of climate change. a r a The LTSA in place with Asahi Europe & International Ltd for the supply of beer, nd other beverages ensures that products will meet certain brand cide 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 which enable strong relationships, and we work with smaller suppliers to ensure that they grow healthy sustainable businesses outside of their agreement with Fuller’s. We have a reputation of honesty, trust and fairness, and our long-term collaborative approach has meant our suppliers continue to fulfil our needs. Given the ongoing difficulties in supply, these relationships, coupled with our ability to replace and adapt our customer offering, help us to mitigate supply chain challenges. We seek o u nderstand more about products at risk as a result of climate change and look t o i dentify ways to mitigate this risk over time. t 7. Recruitment & Retention M O V E M E N T Owner Description Control and Risk Mitigation People & T alent Director The recruitment and retention of high calibre employees is fundamental o o t experience for our customers, an ur ability to deliver a distinctive upport our growth agenda. d to s The challenging recruitment market for hospitality is likely to continue for roles held by support centre employees, who may vie caree s a les f t o ospitality as han other parts ithi ttractiv e e conomy currently. n h e t w a r w h We invest heavily in our people, offering them real career paths. We are able to differentiate ourselves from the competition and ensure that we remain an employer of choice in a challenging market. The opportunity t apprentice, complete our Chefs’ Guild Scholarship, and progress to either Head Chef or General Manager is very appealing. We continue to develop our apprenticeship and development programmes, have a competitive pay and reward structure, an uccessful inhouse recruitmen oin at a junior level, e.g. as an n a s u unction. d r o j t f 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 our pubs and hotels focused business. 38 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   8. Health & Safety M O V E M E N T Owner Description Control and Risk Mitigation Retail Director The health and safety of our employees and customers, and eneral public when on our th estate, i ey priority for us. s a k e g the There is a risk that we do not adhere to highest health d s afety standards, further an increased by the large number perate. o ites w e o f s There is a risk of a customer suffering from our staff failing o d t an eliver our allergens policies rocedures. d p We have a comprehensive training programme in place for our employees covering all aspects of health and safety. r i y o All sites complete a risk assessment and are required to undertake detailed weekly and monthly compliance checks which are then subject to review b n-house health and safety team. The allergen procedures we have implemented to manage the risks ar control ontinuously reviewed to ensure emain appropriate. e c s r u We continue to utilise the services of expert third party health and safety consultants to undertake annual audits covering food, fire and general healt n i i afety risks on all our sites and to perform detailed investigations nstances where an incident does occur. h a n d s 9. Future Pandemic M O V E M E N T Owner Description Control and Risk Mitigation Chief Executive c i e e The Covid-19 outbreak had a mpact on our industry, seismi t o mos bviously through the closure of all our pubs and hotels followed nforced social distancing by th e is a r r and othe k of s ris r e eithe s o viru strain, an n r i impacts the business. estrictions. Ther ubsequent pandemics, ntirely new strains of a r evolutions of the current overnment strategy esponse to this that negatively d a g f l iquidity, continue to keep a diversified estate an We closely monitor our cash flow to ensure we maintain an appropriate level o eview the composition in the light of recent events, negotiating more flexibility into leases going forward, keeping strong ties wit and maintainin operational nd enhancing our flexibility in our customer offering and overnment, building on our pandemic response plan, procedures. h g g a d r We have successfully emerged from Covid-19, which gives us confidence that we could do so again. 10. Sustainability & Environment M O V E M E N T Owner Description Control and Risk Mitigation Chief Executive Climate change risk could impact our supply chain. Uncertainties over how these risks will evolve could reduce revenues and profit. This could als reputation among investors and othe mpact trust and customers, r s takeholders. o i r S The Group is contributing to the Net Zero Carbon Roadmap to Net Zero by 2030 fo and supplier engagement to mitigate carbon emissions. cope 1 and 2 and 2040 for Scope 3. We are already working on energy usage Our TCFD reporting helps us to identify and assess key risks and opportunities and the impacts of climate change to our business. We intend to further analyse the potential climate-related risks to our business and seek to mitigate these over time. We have implemented our Life is too good to waste programme which is across ou eople, communities and planet. r p Our Sustainability Director has identified a programme of changes and initiatives n o i ur pubs, hotels and support centre to help us grow in a sustainable way. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 39 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104         Sustainability Report WE ARE COMMITTED TO ALWAYS DOING THINGS THE right way FOR OUR PEOPLE, OUR COMMUNITIES, AND THE PLANET. 2023 Highlights OUR PLANET See pages 42 to 45 OUR COMMUNITIES See pages 48 to 51 OUR PEOPLE See pages 52 to 53 Happiness Index response rate Reduction in gas usage Raised for Made in Hackney Reduction in electricity usage 14% 13% 100% Litres of waste cooking oil collected 94% 285k 57% £10k Special Olympics GB athletes supported 100 6.5k Miles walked for Special Olympics GB 963 2,000 Unemployment rate among those with IDs 7.6 Waste diverted from landfil My Voice comments Average happiness score Mental Health Champions 40 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. LIFE IS TOO GOOD TO WASTE e b Fuller’s approach to becoming a more sustainabl We protect and respect the things that matter and, when we work together – the Fuller’s family, our customers, and our suppliers – t o limit to what we can achieve. Taking small steps together we intend to make a big difference because we know that ood to waste. here’ fe is t o usiness s n o g Li OUR planet OUR co m m u n i t i e s LIFE IS too good TO WASTE OUR pe o p l e OUR PLANET OUR COMMUNITIES OUR PEOPLE u f o r b Fuller’s knows that a healthy planet is essential to the future o usiness, people and communities. We know that small changes can collectively make a big difference. We are committed t aking better choices – behind the bar, in the kitchen, and n o i ur support centre. o m p t e h r c Communities have always been at eart of Fuller’s and through th ou harity links and community initiatives, we want to continue o h hem thrive. Our pubs and t hotels have never just been bricks an hey’re places where communities meet and connect. They are places everyone can feel welcome. orta r – t d m el We all have a role to play in supporting our communities and reigniting a true sense of community spirit. Our people are what makes Fuller’s special. That’s why we’re focused on looking after them – ensuring they have a sense of belonging and a belief that t t we truly care abou s o s w a heir wellbeing, pportunities t row. ell a o g We’re committed to creating inclusive workplaces so our people feel confident o b ring their whole selves to work. t We’re thinking ahead – offering genuine work opportunities will make sure people can build something incredible now and for their future. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 41 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Sustainability Report Continued T E N A L P R U O e a R n 2021, Fuller’s joined 27 other hospitality businesses to creat e a w nnounced we would achieve Net Zero by 2040 – with a oadmap for Hospitality to Net Zero. As a collective, commitment to achieve Net Zero for operational emissions by 2030. I With this in mind, we set out our own roadmap to achieve this ambitious goal. During FY2022, we mapped out our carbon footprint across our operations and supply chain. In our baseline year, FY2020, 26% o uller’s carbon footprint related to Scope 1 and 2 operational emissions with the other 74% arising in our supply chain and Tenante state. d e f F y a In October 2021, we committed to procuring 100% renewable energ r H Pie s c Thi cross our Managed estate and our support centre, e – s ourced from wind, solar and hydroelectricity. ous hange cut our carbon emissions in half overnight. a t y c irc h e In March 2022, the focus on reducing energy became ever more essential as energy prices surged – increasing energy costs b hig nerg refrigeratio o s t reas of the business, including kitchen extract, nd the lighting and heating of our pubs, we aimed wo times those of the previous year. By targeting onsumption of electricity and gas. ignificantly reduce ou y a n a r c As a business we recognise the importance of aligning our response o t t he climate crisis with the latest climate science. We have therefore aligned our emission reduction targets with the Science Based Targets initiative (“SBTi”). These targets – which will cover ou and 3 emission we are currently awaiting approval. ave been submitted for validation with SBTi and cope 1, 2 s – h r S s m r I All our managed sites have been fitted with smart electricity and eters, allowing us to monitor and act on high energy usage. ga Ou T team developed a pub managers’ online tool to help the team understand how and when they were using energy and to identify opportunities to save energy throughout the day and night. Alongside this, we also launched a series of training and engagement guides fo eneral Managers, Head Chefs and their teams – to share the opportunities to save energy through behavioural change. We also worked with team members to create videos showing how small changes could make a big difference. Finally, we set a bonused reduction target with our General Managers and Senior Management team o e t nsure they remained focused on the task in hand. r G To support our teams on their journey, we engaged with Hospitality Energy Saving consultants to carry out energy audits – to optimise energy usage in sites and help teams understand how they can reduce energy. The results of these visits were shared with the General Managers, Operations Managers, and Surveyors to ensure action was taken. In the second half of the year, we began follow u th energy oaching calls with our General Managers to take them through esults of the audit and review how their efforts to reduce were progressing. p c e r 42 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   lso needed to ensure we invested in our estate to help our team etter control energy usage. Over the past few years, Fuller’s had While behavioural change has helped to reduce energy usage, e a w o b t already transitioned to LED lights both internally and externally in spaces such as car parks. However, we continue to review where better lighting controls and motion sensors can be implemented s p a art of planned refurbishments of our pubs and hotels. imi r s s u t g a sage across the winter, we carried ou ervices – resetting controls to the correct tim Heating accounts for over 50% of the gas used in our sites. o l T boile d t an o o t fro emperature. We also added an organic additive, EndoTherm, ur heating systems to improve the efficiency of heat transfer m r roactive e p eriods adiators. t p n o % of a We recognised that cellar cooling can be responsible for over 20 n average pub’s energy usage. We worked with our cellar services team to identify controls which can reduce energy usage. ur remote beer coolers, we have added smart timers which O switch off the refrigeration overnight. This can save up to 25% of electricity overnight without impacting the beer quality. This same technology has also been embedded into our post mix coolers by our beverages partner Britvic. We have also changed the temperature controls on our cellar cooling unit to achieve the right temperature where the beer is stored rather than the ambient temperature of th reducing energy usage by 20%. We are also using these works s an o pportunity to ensure all our cellar equipment is running a s o t i ptimum. a ellar. This again keeps the beer at the right temperature while e c t y a Our pubs typically generate hot water using standard gas fired boilers. We now have five sites where the hot water is generated n air source heat pump system – which takes waste heat from b our cellar cooling condenser and uses it to create hot water. This nly reduces gas demand but utilises heat which typically no d h woul e c w ave gone to waste. We are looking at other sites where an implement this technology over time. t o e s Kitchens also require a significant amount of gas and electricity to power equipment. We’ve been working with our chefs to consider how and when they switch on equipment to save energy. We have also been trialling new electrical kitchen equipment to reduce our requirement for gas and ultimately reduce carbon emissions. We hav everal sites where we have swapped from gas to induction hobs. We find the new induction hobs only require power for a tenth o he time that a typical gas hob would be required – as they only switch on when in contact with a pan. We believe transition to induction cooking is not only environmentally beneficial but financially too, as well as reducing the heat in the kitchen for ou hefs. r c f t Our support centre, Pier House, now hosts 104 solar panels on the roof – these will generate around 10% of the power requirements fo he building. r t As a result of all these initiatives, we have reduced energy usage o d ate by 13% for electricity and 14% for gas. This has resulted in t a 9 48-tonne reduction in carbon emissions. We expect to see further savings as the projects continue to roll out over the coming months. e A dmiralty reopened in April 2023 following a refit due to a fire. In order to achieve Net Zero in our operations by 2030, we need to transition away from high carbon fuels such as mains gas, oil and liquefied petroleum gas (“LPG”). Our approach is to develop energy efficient, electrically powered pubs where possible to dramatically reduce our reliance on these fuels. In August 2022, we opened our first all electric pub – The Queen’s Arms in Heathrow Terminal 2. Th As part of the refurbishment, the pub is now fully electric – with a c ommitment to only procure 100% renewable electricity, it is powered by a zero carbon energy source. The Willow in Bourton-on- the-Water, our newest pub located in the Cotswolds, is also kitted out with energy saving equipment throughout – all lighting, heating an ooling, and the majority of the kitchen equipment, are all powered by renewable energy sources. These sites are helping us to define how we electrify more of our pubs and hotels moving forward. d c Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 43 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Sustainability Report Continued Streamlined Energy and Carbon Reporting This report details our Greenhouse Gas (“GHG”) emissions and energy use for FY2023 under the Streamlined Energy and Carbon Reporting (“SERC”) requirements. Methodology: We have collated data relating to our Scope 1, Scope 2, and partial Scope 3 emissions and energy use for activities over which we have financial control. All of our emissions and energy use relate to UK activities. Our GHG emissions were calculated in line with HM Government Environmental Reporting and the GHG Protocol methodology. The table below summarises emissions and energy use for FY2023: Scope 1 Energy Consumption kWh Scope 2 Energy Consumption kWh Scope 3 Energy Consumption kWh Total Energy Consumption kWh Scope 1 emissions tCO2e Scope 2 emissions tCO2e Scope 3 emissions tCO2e Gross Scope 1, 2 and 3 emissions tCO2e Net Scope 1, 2 and 3 emissions tCO2e1 Turnover £m Gross Intensity Ratio: tCO2e / turnover £m Net Intensity Ratio: tCO2e / turnover £m1 FY2023 FY2022 2 FY2021 FY2020 39,121,389 43,047,445 23,590,317 32,767,748 30,438,473 18,503,251 1,025,618 827,609 202,476 – – – 72,914,756 74,313,526 42,296,044 83,555,406 7,669 6,337 253 14,259 7,922 336.6 42.4 23.5 8,119 6,463 928 15,511 11,911 253.8 61.1 46.9 4,419 4,314 48 8,781 8,781 73.2 120.0 120.0 8,436 8,902 – 17,338 17,338 342.0 50.7 50.7 1 From October 2021, we have purchased 100% renewable electricity and therefore associated emissions can be deducted from the gross total to give net Scope 1, 2 and 3 emissions as stated above. 2 FY2022 figures have been restated following the availability of additional data. Year on year comparison is distorted due to the impact of Covid-19 on trading in FY2021 and FY2022, resulting in reduced energy consumption. The largest single element is gas consumption, which is predominately used for heating and kitchen equipment. When compared to electricity, gas will often have higher emissions, but will be significantly lower in cost. Scope 2 consumption has increased slightly compared to FY2022 due to electrification and the addition of new sites. Scope 1 emissions have reduced when compared to FY2022 due to lower gas and LPG consumption. Scope 3 emissions from employee-owned vehicles has reduced significantly when compared to FY2022. There is a significant reduction in both gross and net intensity metrics, due to the increased turnover reported, the reduction in Scope 1 and Scope 3 emissions and the full reporting period being covered by renewable electricity supply for the first time. r t eams and guests. We have 7KW fast electric vehicle (“EV”) Sustainable travel As part of our commitment to the planet and our people, we recognise the need to encourage more sustainable travel for ou chargers installed in 15 locations within the Fuller’s estate and ooking to expand this network over the next 12 months. ar e a We’v ew EV charge points at Pier House. s g Thi r E thei ives our teams and guests more opportunities to charge V vehicles when they visit our support centre. nstalled 1 0 n o i e l ls We also look at ways to support our teams in moving to more sustainable forms of travel. We have recently launched an EV acrifice scheme with Octopus Energy to create better salar acces ave a or employees to electric cars. In addition, w ork discount scheme and a partnership with Lime cycl ffers our London-based team members 50% off when whic e a L y r the y s s f e to w h o ime e-bike or e-scooter. e h id 44 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Reduce, Reuse, Recycle We are committed to reducing the amount of material resource se to operate our business and follow the principle of w eusing, and recycling wherever possible. reducing e u , r Reduce We recognise that reducing the volume of waste created in the first place is the most sustainable way to operate. Over the past year, w ave tested and implemented a number of initiatives. e h We have been working with our beverage partner Britvic to trial a n ew premium tonic dispenser in four of our London pubs. The dispense unit supplies a number of styles of tonic from the London Essence range. Introducing this unit has helped to significantly reduce the number of glass tonic bottles used in these sites. During the four site trial, we were able to reduce the number of glass tonic bottles by 35,000 – avoiding 6.7 tonnes of glass waste and reducing delivery road miles by 27,000km. We are looking to implement this solution into a number of sites in the coming year.   t s e S In September 2022, we introduced a reusable cup scheme with even olutions experts, Green Goblet. The scheme was launched in partnership with two of our key drinks suppliers, Asahi and Sipsmith. The cups are being used in our pubs during major events such as th ix Nations, the Boat Race and football match days. We will also utilise them in our gardens during the summer. The reusable cups will replace single use plastic cups which have historically been use or large outdoor events where glassware isn’t suitable for operational and health and safety reasons. Using the Green Goblet cups will sav aste during these events. We trialled the reusable cups in some of our popular rugby pubs, near Twickenham Stadium, during the Autumn Internationals in November 2022. By doing so, we saved over 65,000 single use plastic cups from being used – across just fiv ubs. Green Goblet will also ensure the cups are professionally washed and dried after each event – saving time, energy and water for the pubs. It is a simple solution to eliminating one form of single us ens of thousands of single use plastic cups going t lastics. o w e p e p d f e t e p lastics in England, rolling out the Green Goblet After the Government’s recent announcement on the imminent banning of single us cups means we’re ahead of the curve. This solution also demonstrates Fuller’s commitment to being an environmentally responsible organisation in toward ircular economy to reduce our impact on the planet. reducing waste, encouraging reuse, and pushing s a c Reuse In order to keep our pubs and hotels in great condition, we are continuously carrying out refurbishments of our existing estate s w a ell as acquiring new sites such as The Willow in Bourton-on- the-Water. We keep many unwanted items taken from our pubs and use them in new propertie recycling. Where relevant, we will remove, refurbish and repair existing items for use in future projects. ather than sending them off for s r ignificantly increase access to recycling fo Recycle In March 2022, Fuller’s moved its waste management to Veolia, o s t The majority of our sites now have access to mixed, glass and food recycling – which has seen our recycling rate increase from 35% o 5 t ur pubs and hotels. 7%. r o The Admiralty In the kitchen, electric induction hobs, powered by a renewable energy source, have been installed to reduce the amount of energy used. This also reduces the heat in the kitchen for our chefs and reduces the amount of extraction required. We also have highly efficient electric fryers and grills in place to allow better control o nergy by our chefs. The induction hobs, and salamander grills that have also been installed, draw energy when i a p se rather than being on all the time. We have installed ower monitoring and management system that reduces n u f e y t energy use b withou t a ffectin rade. urning high demand equipment on and off g t The pub has heat recovery technology – where heat produced y t e c h b ellar cooling is captured and converted into hot water r t he site. The heating, air conditioning and ventilation systems fo utilise industry leading equipment – boasting high energy efficiency, al controlled. Plus, al LED – with timer clocks to manage use. oned throughout the pub and thermostatically he lighting in The Admiralty is low energy l z l t Veolia’s team is working closely with our sites to encourage better segregation of waste and looking at innovative ways to recycle more. We are also pleased to confirm that 100% of the waste collected is being diverted from landfill. Several of our sites have taken the initiative to collect used coffee grounds and offer them to some of our customers who are keen gardeners as an alternative to compost. The nitrate levels in the coffee act as a natural soil improver and it’s an opportunity for this waste product to be used in a more sustainable way. Many of our sites work with our oil recyclers Olleco to collect waste cooking oil. Olleco recycles this oil creating a biodiesel product used to fuel vehicles. Over the past 12 months, it has collected 285,258 litres of oil from our pubs and hotels. This product reduces emissions from vehicles by up to 88%. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 45 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104    Sustainability Report Continued OUR SUPPLIERS’ SUSTAINABILITY JOURNEYS: PROTECTING THE PLANET THROUGH partnership Our supply chain is responsible for over 62% of our carbon emissions and our suppliers are the key to us reducing our impact on the planet. Fuller’s has always been proud of the relationships we hold with our suppliers and their willingness to support us on our mission. More than ever, this year, our suppliers have been working hard on their own sustainability journeys and these initiatives are helping u and nd them to strive for a better planet stronger communities. s a c L Severn & Wye Severn & Wye is one of our seafood suppliers and creates our iconi ondon Porter smoked salmon in its Gloucestershire smokery. Severn & Wye is committed to purchasing raw material from bot possible. Severn & Wye never purchase fish from species recorded on any endangered species list or with an Marine Conservation Society (“MCS”) rating greater than 3. ustainable and responsible supply base, wherever h a s . I n fe ed suppliers in their efforts to achieve zero net Severn & Wye fully supports the commitment of the farmed salmo deforestation through the cultivation of soy contained within s fe n order to achieve this, Severn & Wye only sources ed it w m aterials that are certified as sustainable by schemes such ra s P a roTerra or the Round Table on Sustainable Soy. This year, it participated in the responsible soy mapping through sustainability he use of soy in feed in the supply consultants 3Keel, assessin chain – with an aim t educe deforestation caused by soy in the industry. food o r g t e p Direct Seafoods “ Sourcing fish responsibly is paramount to our business. assionately believe in promoting the most sustainable W products available to us. We work closely with our fish and seafood suppliers, both mainstream and specialist. We have lin alternatives. We only ship fis available locally; minimum foo ith NGOs such as MSC to develop and market sustainable cross the country if they are not iles means maximum freshness. ks w d m h a A significant amount of seafood is wild caught which can lead o o t verfishing, unwanted by-catch and destructive catch methods. W industry to guide our customers towards sustainable choices. ake the view that we need to work within the e t Our Seafood Sustainability principles dictate that we: 1. 2. 3. Seek third party independent accreditation wherever possible and give preference to suppliers that are accredited. d we s We demand to know the source and origin of the seafoo n w chai ell and endeavour to shorten the supply ossible. hereve r p We never knowingly sell products that damage the environment or risk the survival of a species without a p o rectify the products’ sustainability credentials. n t la Likewise, where palm oil is used within the feed, it must be certified to th SPO principles and criteria, and must come through segregated supply chains. e R We believe that the process of investigating sustainability options for customers is a task without end. Nothing will ever remain completely sustainable and often unsustainable choices may become sustainable through proper management. Therefore, we treat the search as a journey rather than a destination.” d N Direct Seafoods was the first seafood business to join the Ethical Trading Initiative (“ETI”). The ETI is an allegiance of companies, trade unions an around the globe. It from exploitation and discrimination, and enjoy conditions of freedom, security, an GOs that promotes respect for workers’ rights s v ision is a world where all workers are free quity. d e 46 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.     Asahi Asahi plans to become carbon neutral within its breweries by 2030 and to engage its suppliers and partners to reduce carbon emissions of its products across the whole supply chain by 30% in the same period. Asahi’s ultimate commitment is to achieve Net Zero emissions across its entire supply chain by 2050. By lectrical energy that it uses in its breweries will be 2025, al m r coming fro enewable sources. l e “ By the year 2030, our ambition is that all of our breweries will be carbon neutral, all the packaging we use recyclable, ingredients coming from sustainable sources and we will continue to be the best in class in water consumption, while fostering partnerships across our supply chains, as well as in the communities where we operate.” m i Water is an absolutely crucial ingredient in brewing beer. Asahi’s ai s to make sure that it secures plentiful water of good quality. Over the past decade, Asahi has cut its water consumption to a l evel which is the best in class not only in Europe, but also worldwide. By 2030, it aims to reach an average consumption n E i single brewery it operates in Europe. urope of 2.75 litres of water per litre of beer brewed in every By 2030, Asahi will only use containers and secondary packaging that is reusable or fully recyclable, and made chiefly from recycled content. Asahi’s Draught Technical Services team recently moved its 10-vehicle fleet to plug-in hybrid electric vehicles (PHEVs). In an average year, the Draught Technical Services team covers 200k miles, generating a carbon output of around 67 tonnes per year. As a result of the switch to PHEV petrol vehicles, the estimated annual carbon output of the team should now be 22 tonnes – cutting emissions b wo thirds. y t p g While keeping a keen eye on EV and hydrogen development, ap alternatives are being considered such as sustainably sto sourced HVO biofuel to directly replace diesel. Not only would this cut emissions, but it would help reduce air pollution in urba reas. n a Sipsmith: Proud to be a B Corp In May 2021, Sipsmith achieved its B Corp certification and continues to maintain its high standards of social and ethical performance, public transparency and legal accountability – both in the sector a ne of the first gin distilleries to have B Cor nd within the wider business community. p a s o Sipsmith continues to source its electricity from renewable sources, eliminating Scope 2 emissions. It harnessed the power of cold water in the winter to reduce its energy use during distilling. Sipsmith continues to improve the efficiency of its steam generation by detecting and eliminating leaks. g 2 022, where 1.5k bottles were sent out. The feedback “ Flex-hex packaging was trialled for our single use bottles durin from customers was positive, with no complaints about breakages. Building on this success, we will be redesigning ou stock has been used.” ackaging for the new bottle once our existing packaging r p “ London Interdisciplinary School conducted research on behalf of Sipsmith to identify opportunities for us to collaborate with local businesses, researching possible uses for effluent and botanical by-products. For botanicals, recommendations included partnerships with sustainable fashion houses or othe recommended it was spread on the land, sent to an anaerobic digestion plant or further research could be conducted into it orp companies. For the reuse of effluent, the report se in emerging technologies.” r B C s u Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 47 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Sustainability Report Continued s e i t i n u m m o c R U O FULLER’S HAS BEEN ACTIVE IN ITS local communities SINCE 1845 AND TODAY, WE HAVE A COMMITMENT OF DONATING 1% OF OUR ANNUAL PROFITS TO CHARITY. WE SUPPORT A wide range OF CHARITIES. 48 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. OUR CHARITY PARTNERS: Special Olympics GB Since 2018, Special Olympics GB has been our main charity partner. Special Olympics GB provides opportunities for year-round, all- ability sports programmes for more than 10,000 athletes of all ages with intellectual disabilities – to help transform lives through sport. Since the beginning of our partnership, Fuller’s support has allowed Special Olympics GB to deliver its work to more than 6,500 athletes at 95 all-ability, inclusive sports clubs – covering 27 sports across England, Scotland and Wales. This provides nearly 13,000 regular, hour-long sporting sessions per year, all delivered by a team of mor han 3,800 volunteers. e t Pennies Pennies is a digital upgrade of the traditional charity box, designed o f it with our increasingly cashless lifestyles. It gives customers t n o ur Managed Pubs and Hotels the opportunity to give a few pence i o c harity when paying by card with the press of a button to round t p t o the nearest pound. u We have partnered with Pennies since July 2019. Last year, our customers donated £205,050 – proving that small donations go a l ong way. Of the money raised through our Pennies donations, 90% of this s c urrently donated to Special Olympics GB and the remaining i % g oes to Pennies, a registered charity – to help it grow 10 e o pportunities for UK consumers to give digital pennies mor o UK c harities. t What is an intellectual disability? Intellectual disability (“ID”) is a disability characterised by significant limitations both in intellectual functioning (reasoning, learning, problem solving) and in adaptive behaviour – which cover o before the age of 18. veryday social and practical skills. This disability originates ange s a r f e • Annual charity football tournament. In 2022, 16 teams from s F l t acros footbal uller’s – and our partners – played in a six-a-side ournament. We raised £10,000 on the day. • 90% of our Pennies donations go to Special Olympics GB. • We support all our pubs and team members across the Compan aise money in their own way. y to r There are 1.5 million children and adults with an intellectual y i n Great Britain. It is the most common disability in disabilit . I e U t’s caused by the way the brain develops and examples K th include Down’s Syndrome and types of autism. People with an ID are often socially excluded and many are bullied. ot take They have a shockingly lower life expectancy and 78% d part in any sport. o n How does Fuller’s support Special Olympics GB? We raise money on a corporate level in a number of ways including: • 50p from every children’s meal purchased is donated • Our annual charity fundraiser. In 2023, we held our second Bridge Walk – 98 Fuller’s and Special Olympics GB colleagues walked 21 miles, from The Swan in Staines to One Over the Ait in Brentford – raising £20,000. Employment project Employment within the ID community has, unfortunately, been exceedingly low. Recently, the number of those with an ID who hav ained and are within employment has dropped beneath 6%. e g t 2 We are working with Special Olympics GB to offer employment opportunities to people with IDs – with an initial goal of hiring at leas 0 individuals with IDs in Fuller’s pubs and hotels by the end of the summer. We will work with Special Olympics GB to co-create an employment pathway for those with IDs to work in our pubs and hotels. A select cohort of pubs has attended workshops alongside Special Olympics athletes – with the aim of creating this employment path together, to ensure the project is sustainable and beneficial for everyone. Throughout the project, we will take on feedback to offe nsight on how we can scale this up for all of our sites to use. r i Stuart Green, General Manager of The Cabbage Patch in Twickenham, has been employing people with IDs for a number f y o ears and provides first hand insight into the benefits they n b ca ring to our teams. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 49 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Sustainability Report Continued Made in Hackney Our recent partnership with Made in Hackney, a community cookery school and emergency food support service, kicked of ith Made in Hackney’s plant-based burger launching across Fuller’s estate – with 50p for every burger sold being donated back to the charity. f w Made in Hackney’s expert chefs developed the recipe for the plant-based burger to be a delicious and nutritious, wholefoods alternative to imitation meat. The burger patty comprises a selection of tasty and healthy ingredients – including mushrooms, beetroot, quinoa and more. Topped with a smoked cheese alternative, tahini-dressed kale, balsamic beef tomatoes and a s ecret sauce – the result is a mouth-watering treat that’s d f goo or you and the planet. hrough sales of the plant-based burger. Additionally, Since its launch in August, over £10,000 has been raised r t o f s a plant-based burgers are significantly less carbon intense than those made o d a round 20,000 Made in Hackney burgers, producing sol 0 fe 6 ons of carbon emissions than an equivalent we numbe eef – using roughly 60% less carbon. We’ve urgers made from beef. r t r of b f b r C Our partnership with Made in Hackney won the Best Community o harity Initiative at the Restaurant Marketer and Innovator Awards 2023. 50 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. OnSide In 2019, Fuller’s committed to investing £150,000 into a new yout one in the Borough of Hammersmith and Fulham. The project is being delivered by national charity, OnSide, which operates 14 youth zones across the UK. h z Based in White City, Hammersmith and Fulham Youth Zone wil art of an innovative education hub, known as EdCity. l be p Named WEST (standing for ‘Where Everyone Sticks Together’) y l b ocal young people, it will be open to young people from across Hammersmith and Fulham. They will have access to al antastic facilities for a cost of £5 for an annual membership and 50p per visit. e f l t h The WEST youth zone will be a brand new, purpose-built building l  buzzing with energy and crammed with incredible facilities. It wil be staffed by skilled and dedicated youth workers who truly believe in young people – helping them see what they can achieve, and giving them the skills, confidence and ambition t o for it. o g Fuller’s is committed to a long-term relationship with the WEST Youth Zone and is looking at further opportunities to support it through volunteering, career opportunities and hospitality skill raining. s t Only a Pavement Away We work with Only a Pavement Away – a charity which provides stability through employment for those who are homeless or in danger of being homeless. We support the charity with its fundraising activities, for example, the annual Fill a Flask event – where volunteers walk the streets of London and other cities offering water to rough sleepers in the summer. Volunteers also raise awareness of the charity and the opportunities available o t t hose who may be struggling to find employment due to their personal circumstances. t T We hosted the Pedalling for Pubs 10k Base Camp challenge a he Admiralty where three static bikes were set up and participants cycled 10k each in support of those taking on the main challenge. Only a Pavement Away’s head office is based in the offices above The Barrowboy and Banker, London Bridge – which we provide o t t he charity rent free. Local community support Our pubs are active members within their communities and ofte par n fundraising activities for local charities and organisations. t i n t ake The Builder’s Arms in Croydon raised over £1,000 through a hamper raffle and used the funds raised to purchase nine trolley-loads of goodies for the Esther Community Enterprise Food Bank. The Grove Lock in Leighton Buzzard raised £2,000 for Linsdale School Parent, Teacher, Friends Association (PT FA) at its annual fireworks event. Money was raised on the night through generous donations from customers, a bake sale and a charity raffle. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 51 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Sustainability Report Continued e l p o e P R U O DIVERSITY AND INCLUSION CHARTER F uller’s recently signed the British Beer and Pub Association’s (“BPPA”) Diversity and Inclusion charter – as o b r p part of our commitment t eing Open to All. The pledge signifies Fuller’s aim of ensuring ubs are inclusive spaces and taking a ou zero-tolerance approach to harassment or discrimination of any kind. The diversity and inclusion charter looks o e t nact real, long-term change across the brewing and pub industry. Our commitment to inclusion is for our team members and our customers. We want you to feel comfortable and safe whenever you’re in a Fuller’s pub – whether you are there as a team member or customer. We know that we still have work to do to achieve this goal. Therefore, we are looking at the steps we can take to ensure everyone feels a sense of belonging in our pubs. We recently launched the Equality of Voice survey – so that we can understand how our teams feel about diversity and inclusion at Fuller’s and understand more about the demographics of our team. 52 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Feedback In our employee Happiness Index survey, we saw significant improvement across response rates and average happiness and engagement scores since 2021. A year ago, we launched My Voice – a platform for our team members to give honest and anonymous feedback on how they’re feeling. This was a result of teams sharing in our first Happiness Index survey that they did not feel they had a voice and their opinions were sometimes not being heard. The policy outlines what the menopause is, typical symptoms one might experience and line management guidance on how to have supportive, open communications. Rest Less Fuller’s launched a new partnership with Rest Less – a digital community and advocate for people in their 50s, 60s and older – to reach out to potential older workers. We posted specific positions on Rest Less’ job board right across its businesses and geographical area. We launched the Fuller’s Forum – which gives our teams the opportunity to have their say about what happens in Fuller’s. The Fuller’s Forum is made up of 12 General Managers from across our Managed estate who meet every few weeks. Each member of the Forum represents a group of their fellow General Managers – who are encouraged to approach their Forum reps with any feedback the centre and operations. Our designated Non-Executive Director responsible for employee engagement, Helen Jones, also now attends the meetings. The Forum has create wo-way communication path between the team members in our pubs an our support centre. ave about the business. The Forum is run jointly by the support otels, and the teams in d a t d h y h The Fuller’s Forum has been a great success and, therefore, we are launching a Forum for our Head Chefs as well as one for our Pier House colleagues. We have launched a First Impressions survey which invites new members to the Fuller’s family to share their experiences pre-joining and then their experience through their induction phase. Mental Health Champions Our teams’ overall wellbeing is important to us and to help us support our teams, we have introduced our Mental Health Champions – 100 team members from across our Managed Pubs and Hotels who have been trained to help their colleagues with mental health support. Th health culture in our sites by regularly talking about mental health to tackle the stigma around it. They are encouraged to be open and to talk to their colleagues about the importance of mental health. Mental Health Champions help Fuller’s promote a positive mental e  s is t We have always had a number of older workers in Fuller’s, but thi a b he first time we have specifically targeted this group with d w espoke campaign. Older workers have a lot to offer u have a lot to offer them, with shift lengths and work pattern We are very much a people business, and the olde an exceptional level of customer service and s – a n s t consumer interaction. e o suit. eneration brings r g My Fuller’s My Fuller’s is the home of our employee benefits. Team members ca retailers to holidays, insurance, days out, restaurants and more. ccess discounts from a range of providers – from well-known n a We’ve recently increased the number of providers offering discounts, streamlined the process so it’s easier to use an discount available with many of the providers. ncreased the d i h E International Women’s Day We held our first ever International Women’s Day menu dish competition, with the winning dish – a superb banana bread from Kia nticknap of The Queen’s Head in Kingston – taking pride of place on menus across our Managed Pubs and Hotels during the month of March. A 50p donation for each dish sold, facilitated by Wor or Good, was given to Refuge – the country’s largest single provider of specialist support to women and their children experiencing domestic abuse. k f Our Mental Health Champions have all attended a one day course to ensure they are equipped with the knowledge and skills to help their colleagues. Some of our Champions will soon be attending a two day course to become Mental Health First Aiders. In January 2023, we held our first Mental Health Champions conference – a virtual event where all Champions were invited o f urther hel hem in their role. The conference covered a range t f t o opics – including where they can access support and self help exercises, followed by a session with the Licensed Trade Charity. p t Menopause Policy On 18 October 2022, World Menopause Day, we launched our Menopause Policy. We are now in a world where we are living longer and working longer, and it is our responsibility to ensure that anyone transitioning through menopause is fully supported at work. By talking about menopause openly, raising awareness and putting th ight support in place, we may be able to get to a place where menopause is no longer seen as taboo and those going through this transition face no barriers at work. e r Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 53 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Task Force on Climate-related Financial Disclosures (“TCFD”) Introduction We are pleased to present our second annual report in line with the recommended disclosures of the TCFD for the year ended 1 April 2023. This year marked a significant evolution in our TCFD reporting activities, as we followed the plan that we set out last year and continued to develop our work in this area. We have refreshed our assessment of our climate-related risks and opportunities, evolved our analysis of how we expect these to impact our business, and undertaken scenario analysis for the first time to gain further insights into some of our key climate risks. s y Thi s an i a r b f o o ear’s report reflects this significant work and the progress that we have made. However, we view our reporting activities for TCFD terative process, and while we have made a good start, we are continuing to mature our approach and understanding in this area usiness to enhance our disclosures on climate-related risks and opportunities. u The table below summarises where we have responded to each of the TCFD disclosure recommendations in this report. FY2023 compliance Page reference for disclosure Page 55 Page 55 Pages 56 to 59 Pages 56 to 59 Pages 56 to 59 Pages 34 to 39 and 60 Pages 34 to 39 and 60 Pages 34 to 39 and 60 Pages 60 to 61 Page 44 Pages 60 to 61 TCFD disclosure recommendations Governance a. Describe the board’s oversight of climate-related risks and opportunities. b. Describe management’s role in assessing and managing climate-related risks and opportunities. Strategy a. Describe the climate-related risks an s i pportunities the d l organisation ha dentified over the short, medium, an ong term. d o b. Describe the impact of climate-related risks and opportunities on rganisation’s businesses, strategy, an inancial planning. e o th d f c. Describe the resilience of the organisation’s strategy, taking consideration different climate-related scenarios, cenario. into includin C or l g a 2 owe r s ° Risk Management a. Describe the organisation’s processes for identifying d a g c an ssessin limate-related risks. b. Describe the organisation’s processes for risks. climate-related managing c. Describe how processes for identifying, assessing, and limate-related risks are integrated into the management. managin organisation’s overall risk g c Metrics & Targets a. Disclose the metrics used by the organisation to assess climate- related risks and opportunities in line with its strategy and risk management process. b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (“GHG” missions and the related risks. ) e c. Describe the targets used by the organisation to manage climate- erformance against targets. nd opportunities an related risk d p s a 54 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.             Governance Our approach to the governance of sustainability and climate-related matters, and in particular the associated risks and opportunities, s r ooted in our commitment to sustainability and our belief that i implementing both top-down and bottom-up structures ensures w an deliver on our strategy, with responsibility integrated appropriately throughout our business. e c r a The Board At Fuller’s, the Board has overall responsibility and accountability fo ll of our risks and opportunities, which includes those that are climate-related. The Board considers our climate-related issues as part of its broader role in ensuring our ability to perform in both the short and long term. The Board considers material climate-related issues when reviewing strategic projects and business objectives, such as the acquisition of a new site or the undertaking of major refurbishments, to understand potential operational impacts and ensure that Fuller’s can continue to perform as expected. The Board’s consideration of such issues is informed by advice from senior leaders within the business, including the Sustainability and Property Directors. The Audit an isk Committee supports the Board in its consideration of climate-related risks through its oversight of our integrated risk management assurance model and continues to monitor the potential materiality and impact of climate-related risks for the business through its role in our ongoing risk management. Climate-related risks are presented to the Audit and Risk Committee on an annual basis, whic implemented this year. s a key element of the new approach to TCFD that we have d R h i r a n o Executive Team The Chief Executive is the designated Board member responsible ll sustainability matters, including climate change, and leads fo o ur Life is too good to waste sustainability strategy. With regards to TCFD, the Finance Director acts as the Board member responsible for overseeing our work in this area. r s y t ustainability aste strategy, enior leaders within the business (se he Sustainability Director, the Environment Committee, and r s Our Executive Team is assisted in their delivery of ou o w and climate work, including our Life is too good t b othe Briefings on our sustainability work, including our climate-related risks and opportunities and progress against our targets and objectives, are provided to the Board by th ustainability Director, who attends the Environment Committee and leads our programme of work on climate change. etails below). urthe e S r d e f Performance against our sustainability agenda, which includes targets for our climate work, also forms part of the criteria for emuneration of our Executive Team. Further detail can be th d o foun n page 92. e r Senior Leadership and internal stakeholders Our Sustainability Committees as detailed on page 74 are responsible for establishing our targets and objectives, providing oversight and monitoring progress against key environmental an initiatives in collaboration with relevant departments, such as our property and purchasing functions. Th s c i Board, and it is tasked wit and achieve, our climate-related targets an nvironment Committee haired by the Retail Director, Fred Turner, who also sits on the nsuring that we make progress against, bjectives. ocial sustainability d o e E h e d s This year, to further progress our work in this area, we formed a TCFD Working Group. This group consists of relevant management-level stakeholders from across the business and acts as the key forum for our work on assessing climate-related risks and opportunities. In the next year, we plan to formally integrate this Working Group as a sub- committee of our Environment Committee, with our Sustainability Director responsible for convening the group to progress our TCFD programme of work moving forward. As the Board member responsible for our TCFD work, the Finance Director receives regular briefings from the Sustainability Director on the output of our TCFD programme of work. As our day to day lead on sustainability, our Sustainability Director also works with several departments across the business o e nsure that we deliver on our broader sustainability objectives. t Fuller, Smith & Turner PLC Board Audit and Risk Committee Executive Team TCFD Working Group Environment Committee Sustainability Director Business Departments Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 55 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104TCFD Continued Strategy Approach to Strategy disclosures As we have further developed our TCFD work this year, we are now able to disclose what we deem to be the key climate-related risks for our business and the opportunities in the transition to a low carbon economy that we feel we are well-positioned to pursue. We define key climate-related risks as those that we consider potentially material to Fuller’s, its investors, and its other stakeholders. f t Our approach to identifying, assessing, and managing these climate-related risks is set out in the Risk Management section his disclosure (see page 60). In line with guidance from the o D, we c ategorise our risks as transition risks and physical risks1. TCF Alongside this, we have also identified the periods in which we see these risks materialising as potential impacts on the business. These periods are defined as: short (1-5 years); medium (5-15 years); and long (>15 years). We view this categorisation of potential timeframes as appropriate for the nature of the climate-related risks assessed and how we view the life of our physical assets and business models, which generally require an analytical lens that goes beyond normal business planning cycles. We recognise the need to identify risks early and implement actions to mitigate any potential impacts on our business and on the planet. We also firmly believe that, by being proactive, we can position ourselves well to seize the opportunities presented by the transitio o a lower carbon economy. n t Scenario Analysis We have also engaged this year in our first scenario analysis to enhance our understanding of how some of the business’s key climate-related risks may develop over time under different scenarios. As a key recommendation of the TCFD and an evolving area, we recognise this is a complex exercise which will continue o d t analysis this year, we used the scenario analysis tools and framework set out by the Network for Greening the Financial Syste d s an upervisory bodies that share best practice and contribute “NGFS”). The NGFS represents a group of central banks evelop significantly in the coming years. For our initial scenario m ( e d evelopment of environment and climate risk management o t h t n t i he financial sector. The NGFS has broadened the intended audience for its work to include corporates, and its framework cenario analysis represents a useful starting point for fo organisations such a urs. s o r s In this year’s scenario analysis, we qualitatively assessed our key risks, and for some selected risks, we have also begun to explore quantitative analysis. To analyse our risks, in line with TCFD guidance, we used three scenarios defined by NGFS – ‘Current Policies’, ‘Delayed Transition’ and ‘Net Zero 2050’ – which represent a diverse set of scenarios covering different potential global warming levels2. We have begun to assimilate the results from this work internally to deepen our understanding of climate-related risks in the business and inform our approach to their assessment moving forward. As climate scenario analysis represents a relatively new process for us e look forward to continuing to develop our approach in this area and further enhance our understanding an related risks in the coming years. nsight on climate- , w d i t w e h Our identified climate-related risks and opportunities The following climate-related risks and opportunities are those tha e have identified as key for Fuller’s to consider over short, medium, and long-term time horizons. For the risks outlined here, w ave described how we define each risk and, in turn, how we think each one could affect our business. We have also identified various mitigation activities alongside each risk. These mitigation actions are either already in place, in the process of being implemented or are being considered as part of our strategy and financial planning. These mitigation actions will also be revisited an dapted over time to ensure that the business’s strategy is resilient to the potential effects of such climate-related risks. From our work conducted o f r t a s o assess all our climate-related risks and the mitigations e h ave in place, or are planning, we have reviewed the resilience w f o o ur strategies in light of them. On this basis, we have not identified any material concerns with respect to the resilience of our strategies and we do not currently view climate-related risks as a material concern to the business in the short term. d a Risks Risk Introduction of a carbon tax Type f r o isk? Risk sub- category Timeframe Transition Policy Medium How do we define this risk and see it impacting our business? Mitigation Activities The introduction by the UK Government of mandatory carbon pricing. t to t r d This risk could lead to a direct he business based on cos irect Scope 1 and Scope 2 ou operational emissions. • We are awaiting validation of cience-based targets and r s e in t ou ar a r e p h rocess of implementing eductions strategy for our G f GH ootprint. • Our decarbonisation actions include moving to 100% renewable energy supply for our Managed estate; pursuing electrification of sites where possible; shifting to low-GWP refrigerants; and transitioning the company car fleet to electric vehicles. 1 As described by TCFD, transition risks are “risks related to the transition to a lower-carbon economy” while physical risks are “risks related to the physical impacts of climate change” (TCFD, 2017) available at www.fsb-tcfd.org/publications 2 NGFS Scenarios available at www.ngfs.net/ngfs-scenarios-portal 56 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Type f r o isk? Risk sub- category Timeframe Transition Policy Medium Risk Legislative changes to support climate change initiatives How do we define this risk and see it impacting our business? Mitigation Activities The introduction by the UK government of mandatory policies to support transition to net zero in 2050 the . m (e.g for minimum energy performance standards in commercial properties). ore stringent legal requirements n i e a ware of our Tenanted estate’s • Regarding proposed legislation ncreased EPC standards, we o ar current performance and the changes that would be required. • The implementation of our climate This could result in increased costs s t he business adapts to comply a h a ny new legislation (e.g. the wit d t o invest in our properties to nee raise Energy Performance Certificate (“EPC”) ratings). This could also lead to an increased risk of costs associated wit on-compliance. h n Energy price volatility Transition Market Medium The fluctuation of energy prices economic conditions, supply as availability and changing weather patterns affect the energy market. This could result in increased operating costs for properties in our Managed estate. In our Tenanted estate, under extreme energy price rises, this could result in a loss of income if tenants were unable to mee he obligations of their leases. t t Increased supply chain disruption Physical / Transition Chronic / Market Medium / Long Disruption in global supply chains arising as a second-order effect of either physical or transition risks. This risk could lead to increased procurement costs and, in some cases, f p o the reduced availability roducts for our sites. and broader sustainability strategy, by lowering our overall impacts, should also put us in a good positio legislative changes. o respond to potential n t • Our Sustainability Director works with external consultants and industry bodies to monitor potential legislation that may impact our business and regularly meets with the Executive Team and the Board to keep them informed of any relevant developments and how the business may need to respond. • We are exploring opportunities to secure long-term electricity supply for our Managed estate through on- and off-site renewable installations, such as a power purchasing agreement (“PPA”). • We are implementing an energy efficiency strategy across our Managed estate to reduce on-site energy consumption. • We engage with our Tenanted estate to help them effectively manage their energy use and costs. r s • We continue to pursue a diversified supplier base, which allows the business to adapt to potential disruption more effectively. • We also regularly engage with uppliers to understand the ou challenges facing them and have recently begun to explicitly engage on sustainability issues, including climate, to understand what actions suppliers are taking to address their own impacts. • We have a flexible food and drink menu offering as a business, which prevents over-reliance on any single product/category of product. • We use local and seasonable produce where possible. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 57 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104        TCFD Continued Type f r o isk? Risk sub- category Timeframe Risk How do we define this risk and see it impacting our business? Mitigation Activities Flooding Physical Acute / Chronic Short Increased inland and coastal flooding due to more frequent and severe precipitation and rising sea levels. epairs and business interruption, h r This risk would primarily affect properties in the estate that are in flooding-prone areas and result in costs for the business associated wit where these are not covered by insurance. In the longer term, the business could also see increases n i i nsurance premiums and reduced asset values for sites that are highly impacted by flood risk. Water stress and Drought Physical Acute / Chronic Medium Drought events and/or prolonged periods of abnormally dry weather leading to water scarcity. r M f w This risk could lead to increased operating costs for properties in anaged estate as the cost ou o ater supply increases. In some cases, business interruptions costs may also arise where localised droughts severely impact water availability on sites. This risk could also lead to disruption in our supply chain. For example, it could disrupt the supply of key beverages, such as beer. Heat stress Physical Chronic Medium Prolonged periods of abnormally hot f F o weather affecting the operation uller’s sites. f h This could affect our business through (temporary) changes in customer demand during sustained periods o ot weather and the need for increased capital investment to manage the impact of hotter weather on our properties. 58 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. • We are already aware of the risk e e exposure of our estate at a property level, for both inland and coastal flooding, and have suitable insurance provisions in place. • For those properties considered particularly exposed to this risk, ngage with local partners, w h a suc to implement mitigation measures, including flood defences or dredging, where possible. The business has also invested in these sites to improve their resilience, for example, through the installation of site flood defences. s the Environment Agency, • We plan to actively evaluate our exposure for certain at-risk properties in the medium to long ter be nd explore how this can mitigated appropriately. m a • We continue to manage the water use of our properties by proactively identifying and repairing leaks in partnership with our water consultants, and we are investing n t he estate to improve water use i efficiency through the installation o ow flow taps, showers and toilets. We also work with our landscaping contractors to minimise our use of water through the installation of drip watering for hanging baskets and planters. f l • A detailed assessment of our property understand osed by water estate will be conducted t the full risk potentiall d d s a n stres t v s m igh thi rought, and how ary across sites. y p o  r s • We are in discussions with our upplier, Asahi, who are majo aware of this risk and are taking mitigating actions. • We continue to invest in our estate and, where appropriate, we are looking into glazing and shading opportunities as part of our site development work • We have also been installing air conditioning units in affected sites to mitigate the impact of heat on both our customers and our people.         Type f r o isk? Risk sub- category Timeframe Physical Acute Medium Risk Storm damage How do we define this risk and see it impacting our business? Mitigation Activities Site damage or interruption of service caused by extreme weather such as high winds, heavy rain or snowstorms. • Through our insurance provisions, we are aware of the risk exposure of our property estate to storm damage s a This risk could lead to increased cost ssociated with repair or business interruption, where these ar extreme weather may also lead to a f ot covered by insurance. Further, all in customer demand if visiting e n • We carry out annual property and maintenance reviews to ensure that our estate is in a good condition and that appropriate action has been taken where necessary to mitigate any property-specific storm risks. sites becomes undesirable or unsafe. Opportunities Opportunity Changing consumer expectations and demand Category Timeframe Market / Reputation Medium Site investment – reduced costs, increased efficiency Operations Medium How do we define this opportunity and see it impacting our business? o g iven our flexible menu offering and our continued otential trend that we are well positioned to respond The demand from consumers for ‘greener’ menu options s a p i o g t implementation of the Life is to Ou ha an environmentally impactful dishes. This could generate market and reputational advantages in responding to changing customer expectations and meeting new demands. ecent work with Made in Hackney, for example, emonstrated the opportunity to create both social nvironmental value in considering new and less ood to waste strategy. r r s d d e Investment in our sites to meet our climate targets and respond to potential legislative requirements could realise reductions in our operating costs in the medium to long term. We continue to explore, where appropriate, shifts to renewable energy on- and off-site; the electrification of kitchens and hot water heating; and the adoption of energy efficiency measures for our sites. Such investments could also contribute to mitigating multiple climate-related risks for Fuller’s and help to future-proof our business for a more uncertain world. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 59 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  TCFD Continued Risk Management Fuller’s views the effective management of our risks as key to ensuring that we achieve our strategic objectives in the long term, while delivering the high standard that our customers, our people, and our shareholders expect. Climate-related risks are treated as a s ubset of our wider corporate risks, and they are integrated into e c our robust corporate risk assessment framework and approach. W ontinually monitor these risks and review our climate-related risks on an annual basis. While we assess our climate-related risks individually, as part of our TCFD work, we also consider them as part of our broader assessment of sustainability and climate change- related risk. This overall assessment is included within our corporate risk register and represents our overall evaluation of the individual climate-related risks identified in this report, alongside other sustainability related risks (see page 39). The Chief Executive hold esponsibility for this broader risk category. The responsibility for addressing the individual climate-related risks and opportunities, identified in this report and accounted for within this category, sit Committee, and the TCFD Working Group. We believe tha approach ensures we have a top-down understanding of climate- related risks and opportunities within the business, which is reinforced by bottom-up systems to support the oversight of suc ith the Executive Team, Sustainability Director, Environment isks by the Board and Executive Team. his s w h r s r t t Our assessment of our climate-related risks and opportunities is informed by, and builds on, our approach to other corporate risks, with appropriate adjustments made where necessary to reflect the unique and complex nature of climate-related risks. This year, our newly formed TCFD Working Group, with the support of external advisors, acted as our key forum for identifying and assessing our climate-related risks. Through meetings of key stakeholders from across our business departments, we identified our potentially relevant risks and then considered their potential materiality to the business. For those risks deemed relevant to us in this process, the Working Group undertook an assessment of their potential likelihood, impact and timeframes, closely aligned with how we assess our other corporate risks. The outcomes of this work were then tested for robustness, with input from external advisors and members o Committee. The relevant risks identified through this process have been reported in this year’s disclosure and, from this, our Working Group has considered our existing and potential mitigations, which have als orking Group, the Executive Team and the Audit and Risk een fed back to the Executive Team. e W o b f t h Metrics and Targets We continue to track our performance across the business using several climate-related metrics. This year, we are pleased to have formally committed to set near-term company-wide emissions reductions in line with climate science via the Science Based Targets initiative (“SBTi”). These targets, which will cover our Scope 1, 2 and 3 emissions have been submitted for validation with SBTi and are currently awaiting approval. This marks a significant step forward fo s and, in the coming year, we will be working to further develop our data systems to enable regular reporting and tracking of progress against these targets. While we already report annually o ur Scope 1 and 2 emissions (see metrics and targets table below), our focus in the coming year will be on continuing to work with our strategic partners and suppliers to improve the accuracy and reliability of the data that we collect internally and externally, and t Scope 3 emissions. Our metrics and targets are outlined below: volve our reporting on o e n o r u Metric/Target Current, and historical, performance Future delivery plans Net Zero across our operational emission r s uppl ou y 2030, and across hain b s b y c 040 y 2 Secure 100% renewable electricit uppl ong term y s y l • Delivered an 8% reduction in gross operational carbon emissions in FY2023 (Scope 1 and 2). • The introduction of 100% renewable ed to a net carbon emissions energ reduction of 49% vs FY2022. y l • Continued investment into energy efficiency measures on our sites. • Continuing to explore the electrification of our sites to remove the use of natural gas. • Developing a comprehensive transition plan to map out in the longer term our pathway to Net Zero. • Working with strategic partners and suppliers to improve accuracy and reliability of the data we collect to evolv ur Scope 3 emissions reporting. e o • From October 2021, purchased 100% renewable electricity. • Exploring the implementation of on- and off-site renewables for our properties. % of o By 2025 we aim to recycle at t 7 leas d d an ivert 100% from landfill 5 ur operational waste • Increased from 35% to 57% in FY2023. • Further implementation of food wast sites d g e a n , w here feasible. lass collection for all • Introduction of a training programme to encourage correct waste segregation on-site. • Introduction of a food waste reduction programme to support redistribution befor ecycling. e r 60 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Metric/Target Current, and historical, performance Future delivery plans By 2030 we aim to reduce our overall energy usage by at least 25% • Like for like reduction of 13.4% in electricity and 14.3% in gas consumption in FY2023 vs our baseline year of FY2020. • Continued investment into energy efficiency measures in our properties and an education initiative and behavioural change programme to help our team reduc sage. e u By 2030 we aim to eliminate the use of natural gas, oil and LPG where feasible By 2030 we aim to eliminate all unnecessary plastics from our operation. • 14.4% reduction in the use of natural gas in FY2023, achieved though the implementation of energy efficiency measures and the transition to more electric kitchens and ho property estate. ater and heating systems in our t w • Implementation of Green Goblet reusable or major events to replace single-use s f cup plastic cups d o • Investment plans for sites using LPG il to transition to electric kitchens an and hot water and heating systems. • Where eliminating oil and gas is not possible due to building constraints, w ill focus on implementing reduction measures and upgrading heating systems to be more efficient. e w • Working with our suppliers to transition away from single-use plastic items, primarily in our hotel estate. ; w Other internal metrics that we track include packaging waste output For thes short, medium and long-term targets, which we have set in our Li aste processing and destination; and water consumption. etrics, we continue to assess our performance against oo good to waste strategy. fe is t e m Our climate-related metrics and targets are an area that we continue to develop and expand. While several of the targets mentioned above link to transition risks, such as such as a potential carbon tax and our focus on achieving GHG emissions reductions, we are looking to incorporate further metrics and targets in the coming year, particularly those focused on physical climate risks. The significant progress that we have made this year i how they relate to our business highlights the potential for new metrics to reflect how we are performing in mitigating these risks or seizing the opportunities, such as our exposure to flood risk across the business and investment in our estate to increase its sustainability. isclosing our climate-related risks and n d We also recognise that, as a business that has committed to Net Zero through the Hospitality Industry’s Net Zero Roadmap, it is important that we set out how we plan to achieve this target. We welcome the development of guidance on transition plans through the Transition Plan Taskforce, and this is an area that we will be working on further in the coming year. We have already outlined some of our plans o e t lectrify our estate and improve its performance, and this is something that we will be expanding on to outline how we intend o a t chieve Net Zero across all emissions scopes by 2040. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 61 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Stakeholder Engagement Active engagement with our stakeholders helps deliver better outcomes and supports the long-term sustainability of our business. Ou takeholders and a summary of what matters to them and how we engage and respond are set out below. y s r k e Stakeholder CUSTOMERS What matters How we engage and respond We welcome thousands of people to our pubs and hotels each week and strive to deliver positive and memorable experiences that nourish the soul, and where everyone leaves happier than when they arrived. • Vibrant and well-maintained venues at the heart of the community • Outstanding customer service • Fresh seasonal food and extensive drinks range • Value for money. We regularly review and act on customer feedback from across a range of channels to better understand what is important to our customers, to identify changing habits and trends, and mprove our offering. We undertake regular audits of our pubs and hotels to ensure high operational standards are maintained and have a programme of continuous investment o i t across our estate. PEOPLE We have more than 5,400 colleagues across 200 Managed Pubs and Hotels and support centre roles. Our people are what makes Fuller’s special, and they each play a critical role in the success f t o he business. They make the experience for our customers d d an eliver our business strategy at every level. • Fair and equitable pay and benefits • An inclusive, diverse, and respectful working environment • Open and transparent communication and being heard • Opportunities for personal and career development. n t retai d e an Our people are our biggest asset, and we continually strive to engage, develop and hem. During the year, we further reviewed and enhanced our benefits package mployee policies, formalised our Fuller’s Forum listening group, introduced our Mental Health Champions to support employee wellbeing, expanded our employee engagement surveys, and continued to develop our diversity and inclusion programme. TENANTS We support 177 Tenanted businesses. Our Tenants are an extension of the Fuller’s team, although they have autonomy n r unning their own business. We aim to recruit Tenants who i share our values and philosophy. • Affordable rents and mutually beneficial contracts • Well-maintained buildings and facilities • Open communication and engagement • Business support and development. We have a team of Business and Sales Development Managers led by an experienced Director of Tenanted Operations, who ensure that our Tenants are in the best place perate a successful business that delivers a good return for both parties. During ear, we have provided support to help our Tenants deal with rising energy prices. ere delighted to be named Tenanted Pub Company of the Year (up to 500 sites) at the Publican Awards in recognition of the excellent relationship we have wit ur Tenants. h o o o t th W e y e w SHAREHOLDERS • Robust operating and financial performance supported y a s b tron g s trategy Our shareholders range from founding family members to retail shareholders and large institutional investors. They own our business and provide us with the capital that enables us to progress our strategy. • Sustainable income and capital growth • Progressive dividend policy • ESG performance • Directors’ remuneration. SUPPLIERS An excellent supply chain is a key tenet of our business and ook for genuine partnerships that provide a real point w ifference. o e l f d COMMUNITIES The Great British pub has always been at the heart of the community and we strive to have a positive and lasting impact on the communities in which we operate by being a responsible business, and a good neighbour, supporting worthy causes, providing employment and minimising our environmental impact. 62 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. • Prompt and fair payments • Ethical and fair dealings tha h a n afety ealt d h d s an t p rotect human rights • Open communication and transparency. • Engaging with industry bodies and national policy makers • Acting fairly and ethically • Providing employment opportunities • Supporting community and charitable causes • Reducing the environmental impacts of our activities including carbon emissions, energy and water • Complying with legislation. Read more about our engagement with our customers on page 16 Read more about how we engage with our people on pages 52 to 53 Read more about how we engage with our Tenants on page 13 Read more about how e e w ngage with our shareholders on page 72 Read more about how we engage with our suppliers on pages 46 to 47 Read more on how e e w ngage with our communities n p o age s 4 8 to 51 We maintain a regular dialogue with all our shareholders. We actively engage with them art of our investor roadshows following our half year and full year results presentations, and we are easily accessible to respond to questions and feedback throughout the year. Al hareholders are encouraged to attend our AGM, and relevant Company announcements, s p a l s reports and documentation are readily available via a dedicated section of our website. Shareholders receive a copy of The Griffin, our quarterly inhouse magazine. We aim to develop long-term relationships with our key suppliers and build a solid relationship with them that allows for mutually beneficial collaboration. We work with ood and drink suppliers to monitor consumer trends and changing tastes to allow volve and adapt our offer and menus to reflect these macro trends. r f ou u s to e We regularly meet with both our local MPs and other legislative stakeholders, including through membership of both the British Beer and Pub Association and UKHospitality, an ontribute to consultations on issues that impact our sector. Our sustainability strategy Life is too good to waste is a key principle of our overall business strategy and outlines our d c approach to engaging with our communities, the environment and our people.       Stakeholder What matters How we engage and respond We welcome thousands of people to our pubs and hotels each • Vibrant and well-maintained venues at the heart of the community week and strive to deliver positive and memorable experiences • Outstanding customer service that nourish the soul, and where everyone leaves happier than • Fresh seasonal food and extensive drinks range when they arrived. • Value for money. We regularly review and act on customer feedback from across a range of channels to better understand what is important to our customers, to identify changing habits and trends, and o i t mprove our offering. We undertake regular audits of our pubs and hotels to ensure high operational standards are maintained and have a programme of continuous investment across our estate. n t hem. During the year, we further reviewed and enhanced our benefits package Our people are our biggest asset, and we continually strive to engage, develop and retai d e an Mental engagement surveys, and continued to develop our diversity and inclusion programme. mployee policies, formalised our Fuller’s Forum listening group, introduced our Health Champions to support employee wellbeing, expanded our employee We have a team of Business and Sales Development Managers led by an experienced Director of Tenanted Operations, who ensure that our Tenants are in the best place o o perate a successful business that delivers a good return for both parties. During t e y ear, we have provided support to help our Tenants deal with rising energy prices. th e w ere delighted to be named Tenanted Pub Company of the Year (up to 500 sites) at the W Publican Awards in recognition of the excellent relationship we have wit ur Tenants. h o art of our investor roadshows following our half year and full year results presentations, We maintain a regular dialogue with all our shareholders. We actively engage with them s p a and we are easily accessible to respond to questions and feedback throughout the year. Al reports and documentation are readily available via a dedicated section of our website. Shareholders receive a copy of The Griffin, our quarterly inhouse magazine. hareholders are encouraged to attend our AGM, and relevant Company announcements, l s We aim to develop long-term relationships with our key suppliers and build a solid relationship with them that allows for mutually beneficial collaboration. We work with ou ood and drink suppliers to monitor consumer trends and changing tastes to allow u volve and adapt our offer and menus to reflect these macro trends. r f s to e Read more about our engagement with our customers on page 16 Read more about how we engage with our people on pages 52 to 53 Read more about how we engage with our Tenants on page 13 e e Read more about how w ngage with our shareholders on page 72 Read more about how we engage with our suppliers on pages 46 to 47 We have more than 5,400 colleagues across 200 Managed Pubs • Fair and equitable pay and benefits and Hotels and support centre roles. Our people are what makes • An inclusive, diverse, and respectful working environment Fuller’s special, and they each play a critical role in the success • Open and transparent communication and being heard he business. They make the experience for our customers • Opportunities for personal and career development. f t o an d d eliver our business strategy at every level. We support 177 Tenanted businesses. Our Tenants are an • Affordable rents and mutually beneficial contracts extension of the Fuller’s team, although they have autonomy • Well-maintained buildings and facilities unning their own business. We aim to recruit Tenants who • Open communication and engagement n r i share our values and philosophy. • Business support and development. Our shareholders range from founding family members to retail • Sustainable income and capital growth shareholders and large institutional investors. They own our • Progressive dividend policy business and provide us with the capital that enables us to • ESG performance progress our strategy. • Directors’ remuneration. • Robust operating and financial performance supported y a s b g s tron trategy An excellent supply chain is a key tenet of our business and • Ethical and fair dealings tha rotect human rights ook for genuine partnerships that provide a real point e l f d w o ifference. • Prompt and fair payments t p d h h a d s n ealt an afety • Open communication and transparency. The Great British pub has always been at the heart of the community and we strive to have a positive and lasting impact on the communities in which we operate by being a responsible business, and a good neighbour, supporting worthy causes, providing employment and minimising our environmental impact. • Engaging with industry bodies and national policy makers • Acting fairly and ethically • Providing employment opportunities • Supporting community and charitable causes • Reducing the environmental impacts of our activities including carbon emissions, energy and water • Complying with legislation. d c We regularly meet with both our local MPs and other legislative stakeholders, including through membership of both the British Beer and Pub Association and UKHospitality, an Life is too good to waste is a key principle of our overall business strategy and outlines our approach to engaging with our communities, the environment and our people. ontribute to consultations on issues that impact our sector. Our sustainability strategy Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 63 Read more on how w our n p o ngage with communities 8 to 51 age s 4 e e FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104      Stakeholder Engagement Section 172 Statement This section outlines how, as required by Section 172 of the Companies Act 2006 (the “Act”), the Directors have acted in a way they consider, n g i ood faith, promotes the success of the Company for the benefit of its members as a whole, while having regard to the matters set out in Section 172(1)(a) to (f). The Board strives to ensure that its decision making is consistent and aligned to our purpose, values and strategy. During the year, the Directors consider that, in complying with their statutory duties, they had regard to: The likely consequences of any decision in the long term A e l For Fuller’s and the Board, this has always been an integral part of our culture. As a long-established family business, th by the Board and is underpinned by our value of always asking what’s next? ong term for Fuller’s means much more than normal business modelling entails. It is at the heart of all decisions taken The interest of the Company’s employees B Our people are what makes Fuller’s special and our commitment to their personal development is reflected through our value of celebrating individuality. Each and every one plays a key role in the success of the Company. Details of the normal engagement process with employees can be found in the Stakeholder Engagement section on page 62 to 63, the Sustainability Report on pages 52 to 53 and the Corporate Governance Report on page 71. The need to foster the Company’s business relationship with suppliers, customers and others C The Board believes that successfully delivering our strategy requires strong mutually beneficial relationships, in line with our value of being part of the family, with our Tenants, suppliers and customers, and with industry bodies that further the interests of the sector as a whole. More details of engagement can be found in the Sustainability Report and Stakeholder Engagement on pages 46 to 51 and 62 to 63. The impact of the Company’s operations on the community and the environment D We are committed to always doing the right thing for our communities and the environment through our sustainability strategy Life is too good to waste. Details can be found from page 40. The desirability of the Company maintaining a reputation for high standards of business conduct E Fuller’s is well regarded as a business because it has a consistent record of always doing things the right way – one of the mos nduring key values of the business. This is integral to our culture. t e The need to act fairly as between members of the Company F The unique capital structure of Fuller’s as a partly listed company has always required the Board to balance the interests iverse shareholder base. The focus on the long term is well understood by the Company’s shareholders themselves. o f a d The Board recognises the value of engaging with all its stakeholders and building strong relationships with them, to understand what matters to them and their changing needs, which helps inform strategic decision making and ensures our long-term success. More information about our key stakeholders and how we engage with them can be found on pages 62 and 63. Principal Decisions Taken During the Year SHARE BUYBACK PROGRAMME DIVIDEND Factors considered: A E F Factors considered: A E F The share buyback programme, announced in September 2022, to buyback one million ‘A’ ordinary shares completed in February 2023. The Board considered the effective management and utilisation of cash and the need to balance planned investment into the business, alongside internal and external opinion eedback from shareholders on the preferred use of cash. an The Board supported the use of proceeds from the disposal of non-core assets in the year and agreed that the share buyback programme was aligned to our strategy of long-term sustainable growth and delivering value for our shareholders. d f 64 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. During the year, the Board declared an interim dividend of 4.68p per ‘A’ and ‘C’ ordinary share and 0.468p per ‘B’ ordinary share and is recommending a final dividend of 10.0p per ‘A’ and ‘C’ ordinary share and 1.0p per ‘B’ ordinary share. The Board considered if declaring an interim and final dividend supported the long-term sustainable success of the Company. Following the return to profitability during FY2022 and the increase in revenue and growth in earnings per share during th in the year, in line with the stated intention to return to a progressive dividend policy. ear the Board decided it was appropriate to pay dividends e y IMPACT OF INFLATIONARY PRESSURES ON OUR PEOPLE, CUSTOMERS, SUPPLIERS AND COMMUNITIES Factors considered: A B C E f i During the year, the Board has continued to monitor the impact o nflationary pressures on our people, customers, suppliers, and our communities. To support our colleagues, we shifted our pay structures to ensure that all are paid above the National Minimum Wage or the National Living Wage depending on their age. Pay increases of between 6% and 11% have been granted in 2023, following a 3% increase in 2022, and the earlier award date of April (previously June) has been retained. Following a review of benefits, the Board supported the introduction of salary sacrifice for our defined contribution pension scheme and extending medical benefits to all team members with more than one year’s service through a healthcare cash plan. We have delayed increasing prices where possible during the year, but it has not been possible to absorb all cost increases while ensuring the business remains profitable. When necessary, the Board have carefully considered the need to balance rising costs against ensuring that our suppliers receive a fair price for the goods they provide and that for our customers a visit to our pubs always remains an affordable treat. ESTATE RATIONALISATION Factors considered: A B C D E A key part of our strategy has always been to maintain both a M anaged and Tenanted business, allowing us to constantly review and holistically manage our pub estate, operating individual sites under the business model that works best for th best for Fuller’s. Following 12 months’ trading with no restrictions and combined with the changing economics of running a pub, we undertook a strategic review of the whole estate to ensure it provided the best composition for the long term. As a result of this review, the decision was made to move 23 of our Managed Pubs and Hotels into the Tenanted Inns division. We have also decided to exit a small number of leasehold sites and earmarked a handful of pubs for disposal. ub and e p The Board considered the needs of impacted employees and ensured that appropriate plans were in place to communicate th throughout the transfer process. hanges clearly and transparently and to support employees e c The Board is of the view that pubs being transferred will thrive s p art of the Tenanted business and will deliver a better financial a ub, for Fuller’s and ultimately our shareholders, and return for th in the case o isposals, no value was seen in retaining ownership of these pubs. The changes will put Fuller’s in the strongest position to continue building, growing, and enhancing the estate. e p f d Non-Financial Information Statement The table below, together with signposts to other relevant sections of the Annual Report and Fuller’s website, constitutes the Company’s non-financial information statement, in compliance with Sections 414CA and 414CB of the Companies Act 2006. Reporting requirement Business model Principal risks and t on b impac usiness Non-financial Key Indicators Performance Environmental matters Employees Social matters Human rights Anti-corruption and anti-bribery matters * Available at www.fullers.co.uk Key policies/standards/frameworks For additional information Business Model on pages 14 and 15 Risk Management on pages 34 to 39 Strategic Report on pages 16 and 17 Sustainability Report on pages 40 to 53 Sustainability Report from page 40 TCFD Report on pages 54 to 61 Sustainability Report on pages 52 to 53 Stakeholder Engagement on pages 62 to 63 Corporate Governance Report on page 71 Sustainability Report from page 40 Stakeholder Engagement on pages 62 to 63 Directors’ Report on page 102 Audit and Risk Committee Report on pages 84 to 85 e i ncluding maternity, paternity and adoption leave; Sustainability strategy – Our environment Responsible Sourcing Policy*; Environmental Policy* Sustainability strategy – Our people People policies including flexible working; parental leav mental wellbeing; employee conduct; recruitment, training and development; and health and safety. Whistleblowing Policy Sustainability strategy – Our people, environment, an ommunities; Gender Pay Gap reporting* Modern Slavery Statement* Privacy policies in relation to employees, customers* and tenants* Anti-Bribery and Corruption Policy (covering gifts an ospitality); Responsible Sourcing Policy* Whistleblowing Policy d h d c 2023 Strategic Report The Group’s Strategic Report, encompassing pages 1 to 65, was approved by the Board and signed on its behalf by: Simon Emeny Chief Executive 14 June 2023 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 65 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Chairman’s Introduction to Governance “ I WOULD LIKE TO THANK MY FELLOW BOARD MEMBERS FOR THEIR SIGNIFICANT contributions DURING THE YEAR.” Dear Shareholder, I am pleased to present our Corporate Governance Report for the year ended 1 April 2023. e u nprecedented disruption to our business on a number of fronts. As described in my Chairman’s Statement, there has continued to b Despite the challenges we have faced, we have a clear pathway o f urther growth which has remained the focus of the Board. t d s Fundamental to supporting the delivery of our purpose, vision trategy for the long-term benefit of all our stakeholders, is an o e nsure we maintain good and appropriate governance. Details t f o o ur well-established corporate governance framework and compliance with the UK Corporate Governance Code are set out n t i ollowin ages. g p e f h The Board met regularly during the year and, following two years of disruption, has welcomed the return to in-person meetings, both at Pier House and within the retail estate, and a more regular meeting schedule. Our Board Committees have been busy during the year urther detail of their work is reported on pages 76 to 100. an d l I w ike to thank my fellow Board members and th xecutive oul e E d f Team for their significant contribution through the twists and turns throughout the year. 66 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. f t r s urthe upport the Board in its work with regard to ominations Committee, which I chair, has been e N h The role o o f broadened t Board composition, succession planning and initiatives on diversity and inclusion, as detailed on pages 77 to 79. Ou progress in the important area of diversity and inclusion will be further supported by the Nominations Committee in the coming year as we look to review the Board’s policies and objectives, and increase our oversight of diversity and inclusion objectives across the business. evelopment and r d As a people focused business, engagement with our team members s a i lways high on the agenda. Throughout the year we have exposure to talent as members of the Executive Team and Senior Management are invited to make presentations to the Board on key business and strategic projects. Board members also make time to visit our sites and meet team members so we can hear their views first-hand and w our designated Non-Executive Director responsible for employee engagement. More about Helen’s role and employee engagement ca ow also benefit from employee insights provided by Helen Jones, e read on page 71. n b e n , c f d ommunities and planet, and we know that governance We have an embedded approach to sustainability across our people around sustainability is fundamental to the success of the business and ensures we can deliver on our strategy. To drive this important agenda item, the Board puts sustainability at the front and centre o We have continued to receive regular updates on sustainability matters from our Executive Team and Oliver Rosevear, our Sustainability Director, throughout the year and, with the support of the Audit and Risk Committee, we have evolved our TCFD reporting. Our TCFD Report can be found on pages 54 to 61. ecision making and proactively manages risks and opportunities. Following the external Board evaluation in 2022, our review this year was carried out by our Senior Independent Director, Juliette Stacey. I a m pleased to report that the results show that the Board and its Committees continue to be working effectively. We are currently developing an action plan in response to the feedback identified in the evaluation. Further details of the evaluation and progress against our action plan from last year can be found on pages 79 and 80. Our AGM this year will once again be held at The George IV in Chiswick, London, on 20 July 2023 and, along with my Board colleagues any questions you may have about the business. orward to meeting you on the day and answering , I l oo k f We have a group of Directors with the skills required to run this business and a good balance of experience, independence and knowledge, as outlined on pages 68 to 69. As reported in my Chairman’s Statement, I am delighted to welcome Dawn Browne to the Board with effect from 3 July 2023. We are a people focused business and the Board will benefit from her knowledge of our team members and operational experience. We very much look forward to working with Dawn. Michael Turner Chairman 14 June 2023 At an Executive level, the business was also pleased to welcome Sam Bourke as Marketing Director in November 2022. She brings a w ealth of knowledge of hospitality retail marketing and a focus customer engagement and experience to the Executive Team. on Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 67 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Board of Directors Top to bottom: Sir James Fuller; Rachel Spencer, Richard Fuller, Juliette Stacey, Robin Rowland, Fred Turner, Neil Smith, Simon Emeny, Michael Turner an elen Jones d H Key to Committee membership: A Audit and Risk Committee N Nominations Committee R Remuneration Committee Committee Chair Chairman Michael Turner Non-Executive Chairman N Date appointed to the Board: January 1985 Experience: Michael brings an in-depth understanding and knowledge of this long- established family business and extensive experience in leadership and executive management. A Chartered Accountant with international experience, Michael joined Fuller’s n 1 i 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. 978, initially running the Wine Division as Wine Key external appointments: None Executive Directors Simon Emeny Chief Executive Neil Smith Finance Director Fred Turner Retail Director Date appointed to the Board: May 1998 Date appointed to the Board: Novembe r 2 021 Date appointed to the Board: June 2019 f F Experience: Simon has a detailed knowledge o uller’s operations gained through his 25 year experience with the Group and valuable commercial expertise in consumer-focused businesses. 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. Previously Senior Independent Director and Chair of the Remuneration Committee of Dunelm Group plc. An economics graduate and alumnus of Harvard Business School. Experience: As well as extensive financial experience in hospitality and consumer-focused businesses, Neil has strong commercial expertise, including business and strategic development. Previously served as Chief Financial Officer of Domino’s Pizza Group PLC and, prior to this, Chief Financial Officer of Ei Group plc (formerly Enterprise Inns plc). Neil has also held senior financial roles at Compass Group plc, Virgin Media, Telewest Global Inc. and Somerfield plc. Qualified as a Chartered Accountant with PwC. Key external appointments: None Experience: Fred has a strong financial background and a deep understanding of Fuller’s operations having worked in a number of roles in the business. 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. Key external appointments: None Key external appointments: Non-Executive Director of The National Gallery Company Limited and UKHospitality, and Senior Independent Director o H Smith PLC. f W 68 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Board composition Board gender balance Board tenure 11% 33% 33% 23% Chairman Executive Directors Non-Executive Directors Independent Non-Executive Directors Non-Executive Directors Juliette Stacey Senior Independent Non-Executive Director 22% Male Female 78% 12% 44% 44% 0-3 years 3-6 years +9 years A N R Sir James Fuller, BT Non-Executive Director N Richard Fuller Non-Executive Director Date appointed to the Board: March 2018 Date appointed to the Board: June 2010 e b rings extensive knowledge of business and Experience: Juliette has over 30 years’ leadership experience with a strong finance background. Sh strategic (including M&A) development, listed company experience and risk management. She is an experienced audit committee chair. 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 & Y f C oung LLP and is a Fellow of the Royal Institution hartered Surveyors. o Experience: James has a deep understanding of the Fuller’s business and provides a key link with family shareholders. Served in The Life Guards from 1991 o 1 t 998. Employed by the Company from 1998 to 2003, working in the Tied and Managed Pub estate, and has since been running his own business. Key external appointments: None Date appointed to the Board: December 2009 Experience: Richard has a deep understanding of the Fuller’s business and operations, having worked for the Company since 1984. Appointed a Divisional Director in 1992 and to the Board in December 2009, with responsibility initially for sales then, additionally, personnel, corporate affairs and government relations. Became Non-Executive Director in February 2020. A G MP graduate of Harvard Business School. Master of the Worshipful Company of Brewers 2020-2022. f b Key external appointments: Non-Executive Chair oth the Cotswold Cider Company and Kempton o Park Racecourse. Key external appointments: Non-Executive Director and Chair of the Audit Committees of Renishaw PLC and Sanderson Design Group plc, and Non-Executive Director of Willmott Dixon Holdings Limited. A N R Helen Jones Independent Non-Executive Director Robin Rowland, OBE A N R Independent Non-Executive Director Rachel Spencer Company Secretary Date appointed to the Board: March 2019 Date appointed to the Board: March 2020 f h Experience: Helen has over 35 years of commercial and general management experience in consumer- focused businesses. She brings valuable operations, marketing and branding expertise, and also remuneration committee chair experience in othe o er background, Helen is th responsible for employee engagement for aff Formerly Group Executive Director o e I and Managing Director of Zizzi, th dining chain, and Non-Executive Director o o S fast-dining restaurant group Vapian Fuller’s. è N ero talian casual esignated Director nternational lcs. In light e d f C r p E. f i d G Key external appointments: Senior Independent Director and Chair of the Environmental, Social an overnance Committee of Halfords Group plc, Non-Executive Director and Chair of the Remuneration Committees of Virgin Wines UK Plc and Premier Foods plc. She is also the workforce engagement director fo alfords and Premier Foods. r H business and strategic development experience. Experience: Robin brings over 35 years’ experience in the restaurant and food and beverage sectors, and has strong financial, commercial expertise, and Previously Chairman and Chief Executive of YO! Sushi, and Non-Executive Director of Marstons PLC and Tortilla. Awarded an OBE in 2015 for outstanding services to hospitality. f T Key external appointments: European Partner o riSpan Private Equity with Chairman and Non-Executive Director roles with five portfolio companies: Mowgli, Pho, Rosa Thai, Rosa Mexicano (USA) and Thunderbird. Independent Non-Executive Director at Caffè Nero and UKHospitality. Date appointed to the Board: January 2021 Experience: Rachel is an experienced company secretary and has significant corporate governance, regulatory and compliance expertise. Previously held positions at a number of other listed companies, including Invensys PLC, Aldermore Group PLC (both the listed entity and the regulated bank) and, most recently, Clarkson PLC. Fellow of the Institute of Chartered Secretaries and Administrators. Rachel serves as a trustee to the Fuller, Smith & Turner Pension Plan. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 69 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104        Corporate Governance Report Statement of Compliance with the UK Corporate Governance Code 2018 (“the Code”) The Board is committed to maintaining effective corporate governance and integrity, enabling us to deliver our strategy for the long-term benefit of all our stakeholders. With this in mind, the Company has applied the main principles of the Code throughout the year. However, given the structure of the Group – we are a listed public company but still very much a family-controlled concern – there are some provisions of the Code where we do not comply but where we do consider our governance framework remains appropriate. These are summarised in the table below. The Code can be found on the Financial Reporting Council’s website at www.frc.org.uk Code Provision Detail of non-compliance Further information Principle 2: division of responsibilities 11 At least half of the Board, excluding the Chairman, ot independent ar Non-Executive Directors. e n The Board considers that membership is well balanced with the right mix of skills and experience. The presence of Non-Executive Directors who are long-standing family shareholders is important in this professionally run family business. Principle 3: composition, succession and evaluation 18 Directors are not subject annual re-election. to In accordance with the Company’s Articles of Association (“Articles”), all Directors are subject to election by shareholders at the first AGM after their appointment and to re- election at three yearly intervals. As part of the annual Board effectiveness review, the performance of the Directors is evaluated and forms the recommendation in the Notice of AGM as to why the Company believes an individual Director should be re-elected. In view he Company’s size, its ownership structure and its history, the Board is not minded to o move to annual re-election of Directors but will keep this requirement under review. f t 19 Chairman has been in post for more than nine years. The Board considers that the Chairman’s knowledge and understanding of this long- established family business and its requirements is extremely valuable. Principle 5: remuneration 38 d R Pension contribution rates for the Chief Executive an aligned with those available to the workforce. etail Director are not t t Given the pension rate for the Chief Executive and Retail Director represents an existing contractual commitment, the Board does not consider it appropriate to make a reduction his stage. However, whenever any new Executive Director is appointed, the pension a opportunity will be aligned with the policy for the majority of the workforce. This was th osition with the Finance Director who was appointed in November 2021. e p The pages that follow in this Governance section explain how we have complied with and applied the Code during the year. Board leadership and company purpose Role of the Board Led by the Chairman, the Board is collectively responsible to the shareholders for the performance and long-term success of the Group, as well as to other stakeholders for the wider impact we have ts role includes the establishment, review and monitoring o he Company’s strategy, approval of major acquisitions, disposals and capital expenditure, setting the Company’s purpose and values, overseeing the Group’s systems of internal controls, governance an isk management, and ensuring that the appropriate resources are in place to deliver these. d r f t . I The Board has an established governance framework which ensures we meet our responsibilities and enables effective decision making. An overview of the governance framework is set out on page 74. e B oard has delegated some of its responsibilities to mandated A formal schedule of matters reserved for the Board is in place. Th Committees, each of which operates under written terms of reference approved by the Board and reviewed annually. Committee Chairs report to the Board on their activities following meetings, and the minutes of those meetings are made available to Board members (other than if there is a conflict of interest in respect of any particular matter). Board 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. 70 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. e g The Board delegates all operational matters and execution of the strategy to the Chief Executive, who is supported by the Executive Team (which comprises the Executive Directors, the Marketing Director, the People & Talent Director, and the Property Director) who collectively make up the Executive Committee. As set out in overnance framework on page 74, three sub-committees th t i repor nto the Executive Committee and are responsible for reviewing and approving capital related projects and investments and central costs, and driving and monitoring progress against th sub-committees are reported to the Executive Committee. Life is too good to waste strategy. Regular updates from these e  Purpose, values and culture The Board is responsible for establishing the Company’s purpose, values and strategy, and for defining, monitoring and overseeing th o o individuality and always asking what’s next, and it defines our culture and everything that we do. ompany’s culture to ensure that they are aligned. Our purpose eating experiences that nourish the soul underpins our values oing things the right way, being part of the family, celebrating e C f cr f d The Board, through the Executive Directors, strives to ensure that everyone understands the key role they play in delivering our purpose, vision and strategy. In March 2023, senior team members from across the business came together for the annual Senior Managers Conference, ‘Fuller’s Future’, following its relaunch i 022. The event provided an n 2   m to r ea r a y r of c e-articulate the Company’s opportunity for the Executive Tea purpose and values afte hallenging trading conditions, and to outline the key strategic priorities for the year ahead. In May 2023, following the unprecedented times we have faced, we relaunched our General Managers Conference, which provided our operational team leaders with the same opportunity as well as an occasion to reconnect with colleagues and celebrate achievement. The Board monitors the values and culture of the business through a n umber of channels, including regular updates to the Board on operational performance and health and safety reporting, the results of employee engagement surveys and action plans, and the approval of key policies. The Board also receives regular updates from the designated Non-Executive Director responsible for employee engagement. Directors regularly visit our pubs and hotels i capacity, outside of formal Board visits, which gives them a true insight into how our values and culture are embedded across the business and the guest experience our teams deliver. ersonal n a p Engagement with employees The Board receives regular updates on employee matters throughout the year from the Executive Directors, from the designated Non-Executive Director responsible for employee engagement, and through briefings on key employee matters provided by the People & Talent Director. The Chief Executive has continued to deliver vlogs to the business, first introduced in 2020 in response to the Covid-19 pandemic, to keep everyone informed of key events and activity across the business an ey decisions taken by the Executive Committee and the Board. d k In March 2022, the Board approved the appointment of Helen Jones as the designated Non-Executive Director responsible for employee engagement. During the year, Helen has worked with the People & Talent Director to develop her role and connections with the wider business. This has included. • providing advice and guidance on employee engagement initiatives • attending Fuller’s Future, the General Managers Conference and similar events across the business • becoming a regular attendee of the Fuller’s Forum meetings – o r t e H ead more about the work of the Fuller’s Forum, go to page 53 • reviewing feedback from various listening channels including appiness Index survey; My Voice; recruitment and induction th surveys; and exit interviews and Glass Door reviews • providing regular reports to the Board on the themes emerging from the different listening channels, any relevant matters and concerns that may arise through the role. We provide opportunities for the Non-Executive Directors to spend time in the business with members of the Executive Team and Operations team. This helps to keep Non-Executive Directors up to date with the operations in our pubs and hotels and provides them with an opportunity to engage directly with a broad range of our team members and hear valuable feedback. Attendance at events such as the Fuller’s Future and General Managers Conference, as well as the ‘Long Service Celebration’ to recognise employees reaching a service milestone of more than 15 years, provides Non-Executive Directors with another opportunity to engage with employees. The Board recognises the benefits of encouraging employee share ownership, and the Company offers employees the opportunity to purchase shares in the Company at a discounted price through its Sharesave plan. The Company Secretary and the Executive Directors keep all employees, including employee shareholders, informed of publicly available financial updates an overnance changes such s n a ew Director appointments. d g Q&A Helen Jones, designated Non-Executive Director responsible for employee engagement d i ear n the Boardroom? Q. How do you ensure the voice of employees s h i During the year, I was invited to join the Fuller’s Forum meetings, following their establishment in 2022, and I have attended a number of meetings in the year. I also meet on a quarterly basis with the People & Talent Director and the People Experience Manager to review feedback from our listening channels and to discuss emerging themes. I always encourage colleagues to be honest when providing their feedback – both positive and negative – a nd I really appreciate how open they have been with their comments. Listening to the employee voice and providing a link o t he Board is a responsibility I take very seriously. In addition t o m t ore informal updates throughout the year, I provide a formal report on a bi-annual basis highlighting the key themes from my various engagement activities including what’s working well for colleagues but also, importantly, those of concern which the Company should address. As the Chair of the Remuneration Committee, I also find it particularly helpful in the context of executive pay to gain insight on pay and benefit matters for discussion with my fellow Committee members. t a ction is taken? Q. How do you ensure you don’t just listen but tha The results of the Happiness Index survey and other survey and listening channel outputs are carefully reviewed and considered by the Board. Associated action plans are regularly reviewed by the Board and are incorporated into functional area engagement plans. For FY2023, employee engagement and satisfaction, measured by reference to improvement in the results of the Happiness Index survey, was also incorporated as an objective for the annual bonus for Executive Directors and the Executive Team. e s trengthened trust with our colleagues through regular Q. What were the key highlights this year? During the year, we have created a culture of listening and hav communication and consistent language, committing to actions and closing feedback loops, as evidenced by our improved employee engagement score. An added highlight for me personally is how I h ave been so warmly welcomed by members of the Fuller’s nd following the success of its launch, I look forward to Foru e e stablishment of and participating in forum groups for our th Head Chef and support centre colleagues, which will broaden ou ngagement across other areas of the business. r e m a Q. What are the Board’s areas of focus going forward? Diversity and inclusion is a key area of focus for the Board for the coming year. Following the launch of the Equality of Voice survey n S i eptember 2022, we have a better understanding of how our colleagues currently feel about diversity and inclusion at Fuller’s and have better insight of our demographics. Feedback from this survey will inform our company-wide inclusion plan and will help shape our strategy. As part of this work, we need to ensure that the voices of al a s ur colleagues are heard and that everyone feels l o ense of belonging. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 71 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Corporate Governance Report Continued Engagement 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 the presentation of 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. All Board members receive feedback from the results presentations and meetings with shareholders, enabling them to keep in touch with shareholder opinion. The Board supports the use of the AGM 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 se ut in the Stewardship Code for institutional shareholders. Should they have n t concerns over any issues being voted upon at the AGM, they ca meet the Directors and discuss them in person. The Chairman arranges for the Committee Chairs to answer relevant questions at th and encourages all Directors to be present. eeting hen e m t o f t The 2022 AGM was held at The George IV, in Chiswick, in July. Shareholders were given the opportunity to ask questions ahead o he meeting, usin to attend in person. T in proportion t line with best practice, conducted by way of a poll. edicated email address if they were unable nable all shareholders to vote on all resolutions heir shareholding, voting at the 2022 AGM was, in g a d o e o t Shareholders can opt to receive Company communications such s t he Annual Report electronically in PDF format, either via email a r f o rom our website, or continue to receive a hard copy in the post. The Board continues to encourage shareholders to consider moving to electronic communications to benefit from timely and secure communications and to help reduce the cost and environmental impact of our communications. Annual Reports and other key communications are also made available on request from the Company Secretary, should beneficial shareholders have difficulties receiving documentation via their nominee providers. Engagement with stakeholders The Board recognises the importance of building strong relationships with its key stakeholders to ensure we understand how our decisions may impact them. We therefore actively encourage and carry out engagement with our key stakeholders to understand their views, predominately through the Executive Directors, who ensure that the Board is kept informed of any key issues or changes, which helps to inform our decision making. Our Section 172 statement outlined on pages 64 and 65 explains how the Board’s duty to promote the success of the Company takes into account stakeholder considerations. Board activity Key strategic matters considered by the Board in the year under review and to date included: Standing agenda items • Reports from the Executive Directors and Company Secretary covering , f • Reports from the Audit and Risk, Remuneration d N s C operational inancial and governance matters in the period an omination ommittees • Employee engagement reports • Monthly management accounts Q1 FY2023 • Group refinancing of banking facilities • Directors’ valuation of the estate • FY2022 Board evaluation feedback and agreed areas of focus • FY2022 Results Announcement and Annual Report and Accounts, includin g r k r is eview Q2 FY2023 • Appointment of Sir James Fuller to the Nominations Committee • Group interest rate hedging arrangements • Anti-Bribery and Corruption Policy • Review of long term market trends and our strategic response Q3 FY2023 • FY2023 Interim Results, including risk review • FY2023 Interim dividend payment Q4 FY2023 • Employee engagement survey outcomes and action plans • FY2024 Group-wide remuneration proposal • Nominations Committee terms of reference • Diversity and inclusion training • Estate rationalisation plan Q1 FY2024 • FY2022 Final dividend payment • Inflation and supply chain pricing increases, including energy management • Re-appointment of Richard Fuller and Sir James Fuller as Non-Executive Directors • Re-appointment of Michael Turner as Chairman • Inflation and supply chain pricing increases, including energy management • Modern Slavery Statement • Cyber security update • Tax Strategy Statement • FY2024 budget • Environmental Policy and Responsible Sourcing Statement • Annual review of Board governance documents • Re-appointment of Helen Jones as Non-Executive Director • FY2023 Board evaluation report • FY2023 Results Announcement and Annual Report and Accounts, • FY2023 Final dividend payment • Appointment of Dawn Browne to the Board including risk review 72 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.       e G The Board holds at least six meetings a year, with additional meetings scheduled as required. Meetings are held in-person at th roup’s support centre, Pier House, and also within the retail estate. Board calls which are scheduled to provide business updates between meetings are also held. An annual programme of agenda items is agreed with the Board in advance of the start of the financial year. It is developed from the matters reserved for the Board, strategic objectives and the financial calendar, and provides a framework to ensure that key matters are addressed. The process for agreeing the final agenda is managed by the Company Secretary in consultation with the Chairman and with input from the Chief Executive. The programme includes updates from each of the Executive Directors and the Company Secretary on matters for which they are responsible. It also includes presentations from members of the Executive Team and Senior Management. This gives the Board exposure to talent in the business while also providing an opportunity to engage in the key areas being worked on and agreed strategic projects. Presentations during the year have included information about further developing our people and sustainability strategies, our food and drink proposition, and our l  Be & The Dragon, Cotswold Inns & Hotels, and Tenanted Inns Divisions, utilities risk strategy and cyber security. These sessions also enable the Board to provide feedback and guidance to the individual presenting. r f or an in-depth review of the Group’s strategy, which includes, In addition to scheduled meetings, the Board also meets every yea among other things, discussions about market trends, consumer market, competitor landscape and capital structure. This year, trategy day was held over two days in south-west London. th oard was joined by members of the Executive Team to Th e t heir views on the strategy, together with external provid s w speaker UK, ho provided input on the economic forecast for the sector and consumer trends, and investor considerations. e s e B Division of responsibilities Board balance and independence The Board currently comprises the Chairman, three Executive Directors, and five Non-Executive Directors, of which two, Sir James Fuller and Richard Fuller, and the Chairman Michael Turner, are family members. The other three Non-Executive Directors, all of whom are deemed independent under the Code, are experienced business leaders, and collectively all of the Non-Executives bring a wide range kills and experience to the Board. Although at least half of the o Boar excluding the Chairman) does not comprise independent Non-Executive Directors, the Board considers it is well balanced s it h a 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. as the right number of members for the size of the Group, with d ( f s p a nd set out on the next page is the Company’s governance Board and Committee structure The Board has overall responsibility for governance across the Grou framework. There is clear differentiation between the roles of Chairman, Chief Executive and Senior Independent Director, and the particular responsibilities of Board members are also set out below. The responsibilities of the Chairman, Chief Executive and Senior Independent Director, and the terms of reference of the Board Committees are set out in writing an re available on the Company’s website. d a As well as the dialogue within the boardroom, the independent Non-Executive Directors communicate privately, under the leadership of the d o an o m als a r y t e d Senior Independent Director, without the Executive Directors ther Non-Executives present. All Non-Executive Directors eet informally with the Chairman and the Chief Executive on egular basis. These meetings allow for the review of issues faced he business, the continuation of dialogue on strategic issues, b th iscussion of Board appointments when appropriate, succession planning, and the provision of support to the Chairman and the Chief Executive in their roles. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 73 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104    Corporate Governance Report Continued Governance Framework The Board Chairman Is responsible for: Chief Executive Is responsible for: Finance Director Is responsible for: Retail Director Is responsible for: d t d m g a c one o Leading the Board and maintainin ulture of openness, debate and constructive challenge Setting the agenda, style f B an Monitoring the Board’s effectiveness Ensuring effective communication with the Group’s shareholders and stakeholders other oar eetings Day to day management of the e G business of th roup Developing and implementing the Group’ b trategy agreed he Board s s y t Delivering the Group’s sustainability strategy Ensuring effective communication with the Group’s other stakeholders shareholders and Senior Independent Director Is responsible for: Non-Executive Directors Are responsible for: Acting as a sounding board o t t he Chairman and an intermediary for Non-Executive Directors when necessary Being available to shareholders if they wish to raise concerns outside of the usual communication channels Evaluating the Chairman’s performance as part nnual Board o process evaluation e a f t h Providing independent judgement, knowledge and commercial experience to discussions and decision making Providing oversight of the trategy Group’ s s e t e E Providing constructive challeng xecutive o th Directors and scrutinising erformance against thei d p agree erformanc e o r p bjectives Managing the Group’s financial affairs and supporting the Chie management of the Group xecutive in the f E Overseeing the implementation nd monitoring the of strateg performance of th usiness e b y a e B Providing regular updates o t t oard o matters of significance ll financial n a h Non-Executive Director responsible for employee engagement Is responsible for: Facilitating two-way communication between the Board and the workforce through various employee engagement initiatives Ensuring that information feeding into the Board’s decision-making process reflects the views of employees d s Managing the Group’s operational affairs upporting the an f E Chie management of the Group xecutive in the Overseeing the implementation of strategy and monitoring the performance of th usiness e b n a Providing regular updates to the ll operational matters Board o of significance Company Secretary Is responsible for: Advising the Board on all corporate governance matters and ensuring good governance practices are followed throughout the Group Supporting the Chairman and Non-Executive Directors with their Communications with shareholders and organisation o All Directors have access to the he Company Secretary advice o responsibilities he AGM f t f t Audit and Risk Committee Monitors the integrity of the financial reporting for the Group, manages the relationship with the external auditors, and oversees the effectiveness of the risk management and internal control systems Board Committees Nominations Committee Responsible for leading the process for appointment of Directors for approval by e B oard, succession planning, reviewing th e s tructure, size and composition of oard and overseeing diversity inclusion initiatives and e B th th Remuneration Committee Sets the Remuneration Policy for the Chairman and the Executive Directors, and also reviews the remuneration framework for other Senior Management Executive Committee The Chief Executive is supported by the Executive Team consisting of the Executive Directors, the Marketing Director, d t r a n he Property Director irecto e & T eopl alen e P t D th Approvals Committee Responsible for reviewing and approving central costs, support centre staffing changes and material procurement contracts Investment Committee Responsible for reviewing and approving capital related projects and investments Sustainability Committees Responsible for developing the Group’s sustainability strategy around our people, communities and the planet, and providing oversight of key sustainability initiatives, targets and objectives 74 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.             Board and Committee meetings The table below shows the attendance of Directors at Board and Committee meetings held during the year under review. Director Michael Turner Simon Emeny Neil Smith Fred Turner2 Sir James Fuller3 Richard Fuller4 Helen Jones2 Robin Rowland2 Juliette Stacey Board1 Audit and Risk Committee Nominations Committee Remuneration Committee 13/13 13/13 13/13 12/13 13/13 10/13 12/13 12/13 13/13 – – – – – – 4/4 4/4 4/4 4/4 – – – 3/3 – 4/4 4/4 4/4 – – – – – – 4/4 4/4 4/4 1 Includes scheduled and ad hoc meetings. 2 Unable to attend one ad-hoc meeting called at short notice due to prior commitments. 3 Sir James Fuller was appointed as a member of the Nominations Committee on 18 July 2022. 4 Unable to attend one scheduled meeting due to a long standing arrangement and two ad hoc meetings called at short notice due to prior commitments. Time commitment The Board is satisfied that all Directors can devote sufficient time o t heir roles to discharge their duties effectively. All Directors t e r equired to seek permission before accepting any external ar appointments so that, amongst other things, the Board can be satisfied that they will continue to have sufficient time available o d t evote to the Company. Further, the Nominations Committee considers the time commitments of proposed candidates prior to appointment to the Board to ensure that they are able to dedicate sufficient time to the role. y p e a c Conflicts of interest 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 ossibly conflict, with the interests of the Company. Directors ma hav ontinuing duty to update any changes to their conflicts of interest. The Company maintains a register of authorised conflicts of interest which is reviewed at least annually and authorisations reconfirmed. The Board may impose certain limits or conditions whe uthorisation. ivin g a n g Advice for the Board All Directors have access to the advice and services of the Company Secretary, whose appointment and removal is a matter for the whole Board. There is also a formal procedure in place under which Board members can, at the Company’s expense, obtain independent professional advice should they decide it is necessary in order to fulfil their responsibilities as Directors. 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 75 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Nominations Committee Report NOMINATIONS COMMITTEE At a glance “We continue to oversee development of the Board’s policy and initiatives on diversity and inclusion.” M I C H A E L T U R N E R C H A I R O F T H E N O M I N A T I O N S C O M M I T T E E Key Activities During the Year • Reviewed and updated the Committee’s terms of reference embership, including the appointment of Sir James Fuller d m an o t t he Committee • Reviewed the Board composition, supported by the development of the Board skills matrix • Monitored the changes to the Listing Rules and Disclosure Guidance and Transparency Rules regarding gender and diversity requirements • Considered succession planning at the Board and received briefings on changes to the Executive Committee and other ke eadership roles y l • Recommended the re-appointment of Helen Jones as a Non-Executive Director, Chair of the Remuneration Committee and t t a the he expiry of her term designated Director responsible for employee engagement • Facilitated the annual Board evaluation process for FY2023 • Recommended the appointment of Dawn Browne, People & Talen irector, to the Board with effect from 3 July 2023. t D Members Michael Turner (Chair), Juliette Stacey, Sir James Fuller, Hele ones, Robin Rowland n J Michael Turner (Chair) Juliette Stacey Sir James Fuller (appointed 18 July 2022) Helen Jones Robin Rowland Number of meetings held Number of meetings attended 4 4 3 4 4 4 4 3 4 4 Key Duties of the Committee • Lead the process for appointment and re-appointment of Directors, for approval b h oard y t e B • Regularly review the size, structure and composition of the Board d i an ts Committees • Consider succession planning for the Board and Executive Committee positions • Oversee the development of the Company’s policy and initiatives on diversity and inclusion • Oversee Board induction, training and professional development • Assist the Chairman and Senior Independent Director with the implementation of the annual Board evaluation. 76 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.       Dear Shareholder, As Chair of the Nominations Committee, I am pleased to present the Nominations Committee Report for the year ending 1 April 2023. e S tacey, and Non-Executive Director, Sir James Fuller, The Nominations Committee comprises our three Independent Non-Executive Directors, Helen Jones, Robin Rowland and Juliett o w wh o w t s he i a a d ommittee in July 2022. I was delighted ominations Committee, particularly s the key contact with family shareholders so can offer as appointed to th elcome James to th ifferent perspective during discussions. The majority of e C e N d J e m member re considered independent and, in the event of any matters discussed concerning my role, I would absent myself, an th attends meetings by invitation and the Company Secretary acts s s a uliette Stacey as Senior Independent Director would chair eeting, in line with the Code requirements. The Chief Executive ecretary to the Nominations Committee. s a d t As reported in my Chairman’s Statement, as part of our ongoing succession planning, I am pleased to announce that, on the recommendation of the Nominations Committee, the Board approve t f effec r i he n-depth insight of people matters as well as operational experience will be invaluable to the Board. A customised induction programme is being developed to support her in her new role. he appointment of Dawn Browne to the Board with rom 3 July 2023. We are a people focused business and h f t g t e N As outlined in last year’s report, the Board agreed that the role o ominations Committee would be broadened to further support the Board in its work with regard to Board composition, succession planning and initiatives on diversity and inclusion. Durin he year, revised terms of reference were developed by the Committee and adopted by the Board. The Nominations Committee met four times during the year. Key matters discussed at the meetings included a comprehensive review of the composition of the Board; succession planning for the Board and Executive Committee; consideration o hanges to the Listing Rules and Disclosure Guidance and Transparency Rules regarding gender and diversity requirements; th Hele ones; and the Board evaluation process for FY2023. on-Executive Director e-appointment o n J f N e r f c longer-term succession planning to ensure that appropriate During the year ahead, the Nominations Committee will continue to focus on succession arrangements are in place for the Board and Executive Committee members. The Nominations Committee will also continue to oversee development of the Board’s policy and initiatives on diversity and inclusion, and consider our approach to collecting numerical data across the business to both monitor progress against o c t omply with reporting requirements. initiatives and Michael Turner Chair of the Nominations Committee 14 June 2023 Composition, Succession and Evaluation Board Composition Details of the Directors, including their qualifications, experience an no changes to the Board during the year. ther commitments, are set out on pages 68 and 69. There were d o f r o c w o , e onsidered as part of the annual Board evaluation. During the Following the adoption of the revised Nominations Committee terms eference, the Committee, on behalf of the Board, is responsible o continually assessing the composition of the Board and its for Committees to ensure there is the right balance of skills and experience. The composition of the Board and its Committees is als year, the Nominations Committee undertook a comprehensive revie f the composition of the Board, taking into account the skills was supported by the development and introduction o matrix to capture the current skills and expertise of th o a t future Board composition and succession planning. The matrix demonstrates, along with the Director biographies on pages 68 t that the Directors have a range of relevant skills and experience, oard has and the Nominations Committee is satisfied that th the necessary mix of skills and subject matter expertise, further supported by the expertise of the Executive Committee members an eview oard skills oard and ssist the Nominations Committee in its discussions regarding xperience, diversity and tenure of the Directors. Th f a B e B unctional heads. e B o 6 e r d f 9, While at least half of the Board, excluding the Chairman, is not independent as stipulated by the Code, the Committee believes that the presence of Non-Executive Directors who are long-standing family shareholders is important. The Nominations Committee also acknowledges that the Chairman has been in post beyond nine years; however, th ominations Committee considers that the Chairman’s knowledge and understanding of this long-established family business and its requirements are extremely valuable. In line with th ode and letters of appointment, independent Non-Executive Directors serve no more than nine years and the chart below summarises their current tenure and unexpired terms. e N e C Independent Non-Executive Director Tenure Juliette Stacey Helen Jones Robin Rowland 2018 2020 2022 2024 2026 2028 2030 Current term ends Nine year rule Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 77 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104          Nominations Committee Report Continued Induction and Professional Development On appointment, the Nominations Committee will, in conjunction with the Chairman and the Company Secretary, ensure that new Directors undertake a tailored induction programme. This would typically consist of an introduction to the Board and the Executive Team, visit o pubs and hotels across the estate, an induction reference material pack, briefings o obligations a overnance requirements and legal an s a D irector, and access to independen egulatory dvisors. d r t a n g s t oi s a n B nd specialist briefings relevant to their role throughout the Directors are encouraged to attend training courses, industry forum year. The Company Secretary, in consultation with the Chairman and Nominations Committee, has developed a Learning and Development programme for the Board and arranges for external speakers and specialists, such as the Company’s brokers and legal advisors, o j t oard meetings to brief the Board on topics of interest as appropriate. During the year, the Board received a refresher on Directors’ duties and the Market Abuse Regulation presented by th ompany’s legal advisors to ensure that Directors continue to understand their obligations. In line with our commitment to create inclusive spaces where everyone – employees and customers – feel they belong, WiHTL facilitated a session on diversity and inclusion. For the year ahead, future topics will include sustainability and climate competence, cyber security and developments i e C echnology. n t Executive Directors are permitted to hold one other paid directorship, with the Board’s consent, as the Board believes that experience o th ow other boards work enhances the Directors’ contribution to f h e C ompany. Succession Planning Succession planning is a key issue for a business that has very low turnover amongst its Senior Management and is still very much a family-controlled concern while also being a public listed company. f k Following the adoption of the revised Nominations Committee terms of reference, succession planning and the development of talent has become a key focus of the Nominations Committee, and is a standing agenda item at each meeting. During the year, the Committee has reviewed and updated the plan that is in place for the succession o identified, and each individual has their own development plan, owned by the individual and supported and overseen by their leader and the People Team. Development plans are grounded in data from assessments and feedback, and external partners and experts are engaged to support development where required. critical to retain” individuals have been ey roles. Talented an d “ Role descriptions and personal specifications for key Board positions, including the Chairman and Chief Executive, have been reviewed by the Committee and updated to reflect the needs of the business and to support longer-term succession planning. During the year ahead, the Nominations Committee will continue to focus on longer-term succession planning to ensure that appropriate succession arrangements are in place for the Board and Executive Committee members. 78 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Election and Re-election The Nominations Committee is responsible for recommending to the Board the appointment of new Directors and the re-appointment of existing Directors. As outlined in last year’s report, the Nominations Committee recommended the re-appointment of Sir James Fuller, whose three year term expired in May 2022, for a further three years, to May 2025. The Committee also considered the re-appointment of Helen Jones as Non-Executive Director, Chair of the Remuneration Committee and the designated Director responsible for employee engagement, whose three year term expired during the year, and recommended that her term be renewed for a further two years, to March 2025. On the recommendation of the Nominations Committee, the Board has approved the appointment of Dawn Browne as a Director with effect from 3 July 2023. y r At every AGM, one-third of the Directors are subject to retirement b otation. In addition, if any Director has, at the start of the AGM, been in office for more than three years since their appointment or re-appointment, they shall retire at that AGM and offer themselves for re-election. At the AGM in July 2023, Dawn Browne and Helen Jones will offer themselves for election/re-election following their appointment/re-appointment by the Board. Robin Rowland and Juliette Stacey will retire by rotation and offer themselves for re-election. The Board is of the opinion that each Director standing for election or re-election makes an effective and valuable contribution to the Company towards its long-term sustainable success. r D The Nominations Committee has considered the Code requirement irectors to be subject to annual re-election. In view of the fo Company’s size, its ownership structure and its history, the Board agreed with the Nominations Committee not to move to annual re-election of Directors but will keep this requirement under review. Diversity and Inclusion The Board is committed to diversity and inclusion at both the Board level and across the business. Whilst the Board is alert to the need to ensure diversity in all its forms is promoted, it 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 o onduct. f C d t r d arassment o Diversity and inclusion has been a focus of the business in the year. Fuller’s has signe he British Beer and Pub Association’s (“BPPA”) diversity and inclusion charter and our aim is to ensure all our venues are inclusive spaces and that we have a zero-tolerance approach o h t iscrimination of any kind. Inclusive leadership training has been introduced for the Executive Team and our senior leaders and, as part of this work, a company-wide inclusion plan een developed. Going forward, the Nominations Committee ha he Board’s policy and objectives, and will increase its oversight o iversity and inclusion objectives across n a usiness, and a th l be p initiatives wil eopl th nnual report on diversity and inclusion he Nominations Committee by resented t alent Director. undertake a review o f t f d e & T e P e b s b o t     The Board is aware of the changes to the Listing Rule introduced y t he Financial Conduct Authority (“FCA”) around setting targets b n r i elation to Board diversity and the disclosure of diversity and inclusion metrics at the Board and Executive Committee level going forward. Currently, the Board does not meet the target of having women make up at least 40% of the Board or having at least one Board member from a non-white ethnic minority background. Juliette Stacey is our Senior Independent Director and therefore there is at enior Board position, as defined in the rules. least one woman i The Committee is cognisant of the disclosure requirements and we are currently collecting numerical data regarding ethnic background and gender identity or sex at the Board and Executive Committee level and across the business to enable reporting next year when w ecome in scope. n a s e b In line with the Code, the Nominations Committee has reviewed the gender balance of those in Senior Management, considered o be t t t 1 A a balance across the Board and all-employees is also disclosed. he Executive Committee members, and their direct reports pril 2023, as illustrated on the right. Details on the gender o p Board Evaluation The annual Board and Committee evaluation continues t t o a v aluable opportunity for the Board to reflect on how i rovide perates, enabling it to improve its effectiveness and that of its Committees. Following the completion of an in-depth external review for FY2022, on the recommendation of the Nominations Committee, for FY2023, the Board completed an internal evaluation process between Marc e e Th e B th the performance of the Board as whole and its Committees, the effectiveness of the Executive Directors and Non-Executive Directors, key learnings from the year in review and considerations fo valuation consisted of a questionnaire which probed how oard had operated during the year under review and included nd May this year, led by the Senior Independent Director. uture area f focus. h a s o r f s C Outcomes and recommendations from FY2023 evaluation The consolidated output was finalised in June 2023. Overall, feedback was positive and demonstrated that the Board and it Further d e an f t o oard was considered to comprise relevant skills xperience, and all Directors were committed to the success ommittees were considered t e working effectively. he Company. e B o b , t h y B e B oard members to increase effectiveness to ensure that the As would be expected, there were some opportunities identified b Company benefits from the combined expertise and insight of th oard. Work has begun on developing an action plan and, once approved by the Board, the recommendations will be incorporated n a t i year, to monitor progress. racker, alongside any ongoing recommendations from the prior Directors 22% 78% Male 7 Female 2 Executive Team and their direct reports 47% 53% Male 20 Female 18 All Employees (excluding Directors and Executive Team) 47% 53% Male 2,871 Female 2,515 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 79 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Nominations Committee Report Continued Update on FY2022 Evaluation Recommendations Progress made against the recommendations arising from the Boar d e valuation completed at the end of FY2022 are set out in the table below. Recommendation Provide further opportunities for Board members o c t onnect with the business Broaden the role of the Nominations Committee Review the approach to Board learning Progress update Following the re-introduction of Board visits in the second half of 2021, the Board spent the day in trade visiting several pubs and hotels in Hampshire in June 2022. Board members have also been partnered with members of the Operations team to facilitate days in the Fuller’s estate and were invited to attend the Fuller’s Future and General Managers Conference. d t The terms of reference of the Nominations Committee have been reviewed an he duties of the Committee expanded to include responsibility for Board composition, succession planning, training and development, evaluation and initiatives on diversity and inclusion. e N d D Responsibility for Board training and development has been delegated to ominations Committee. The Committee has established a Learning th an evelopment programme and identified topics for inclusion, with regular sessions scheduled throughout the year. Develop the Board’s oversight of people an ustainabilit atters y m d s h u pdates on sustainability matters now being presented to the Board on a Updates from the Sustainability Director to the Board have been formalised, wit regular basis. Helen Jones, as designated Non-Executive Director responsible for employee engagement provides a formal report bi-annually t usiness and the results outcomes of her engagement with colleagues across th e B o t oard by the People & h of the annual Happiness Index survey are presented t f k d a e B oar ey people Talent Director. The Chief Executive also keep g f and sustainability matters throughout the year. Goin orward an annual report on diversity and inclusion initiatives will be presented to the Nominations Committee by the People & Talent Director. oard on the ppraised o e B e b o t s t h h 80 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Audit, Risk and Internal Control Audit and Risk Committee Report T A ND RISK AUDI COMMITTEE At a glance “Our work during the year has focused on the impacts of the challenging trading environment. While we are more optimistic about the future, monitoring any ongoing disruption will continue to be a key agenda item over the next year.” J U L I E T T E S T A C E Y C H A I R O F T H E A U D I T A N D R I S K C O M M I T T E E Members Juliette Stacey (Chair), Helen Jones, Robin Rowland Juliette Stacey (Chair) Helen Jones Robin Rowland Number of meetings held Number of meetings attended 4 4 4 4 4 4 Key Duties of the Audit and Risk Committee • Monitors the integrity of the financial reporting for the Group • Manages the relationship with the external auditors • Oversees the effectiveness of the risk management and internal control systems. Key Activities During the Year • Reviewed the effectiveness of the Group’s internal controls isk management systems and assessed the need for an d r an internal audi t f unction • Reviewed all matters relating to the half year and full year results announcements, including reports presented by the external auditors (EY) and assessment of key judgements and accounting policies, and assessed whether taken as a whole the Annual Report was fair, balanced and understandable • Conducted a review of the effectiveness of the external audit process and external auditor, and recommended EY’s re-appointment • Reviewed and recommended to the Board for approval the revised Anti-Bribery and Corruption Policy • Reviewed and confirmed the appropriateness of the Policy on Auditor Independence and Provision of Non-Audit Services • Reviewed and recommended to the Board for approval the Tax Strategy Statement for the year ended 31 March 2023 • Considered reports on key areas of compliance, including data protection, employee relations, health and safety, cyber security, and whistleblowing • Conducted an annual review of the Audit and Risk Committee’s effectiveness and terms of reference • Reviewed the outputs of the FRC’s inspection of the FY2022 • Monitored the progress in the documentation of the Group’s audi onducted by EY internal control framework to identify enhancements to controls • Oversaw the development of our TCFD reporting (the TCFD • Received updates on specific risk areas, including cyber risk ontrols, and an extensive review of our supply chain d IT c valuate supplier, performance and service an o e t Repor s set out on pages 54 to 61) • Considered changes to the half year review process • Reviewed EY’s plan for the FY2023 audit, terms of engagement t c t i • Reviewed the Group’s principal risks register ahead of the an announcement of the half year and full year results d p roposed fee. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 81 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Audit and Risk Committee Report Continued Dear Shareholder, I am pleased to present the Audit and Risk Committee Report for th ear ended 1 April 2023. e y e l ast report, which underlines our wider focus on th As you will have noted, the Committee’s name has changed since th and control environment, alongside the oversight that we maintain over the statutory audit and the relationship with the external auditors. roup’s risk e G Our work during the year has focused on the impacts of the challenging trading environment and national inflationary environment, cost of living crisis, and disrupted trading due to tube and rail strike action. In particular, we have reviewed and robustly challenged management’s assessment of various trading scenarios and management of risks given the uncertain UK economic environment. The Audit and Risk Committee is satisfied that the factors considered and assumptions used are appropriate to support the going concern and viability of the business going forward and, while as a B oard we are more optimistic about the future, monitoring any ongoing disruption will continue to be a key agenda item over the next year. r a e w Ernst & Young LLP (“EY”) are conducting their third audit following ppointment in 2021. Both the Audit and Risk Committee and thei management have an open and transparent relationship with EY. W elcome the fresh perspective and robust challenge they continue to provide to the Audit and Risk Committee’s deliberations. We were also pleased that the outcome of the FRC’s inspection of EY’s FY2022 audit was in the top classification, with no key findings and only limited improvements required. We are supportive of EY’s re-appointment which shareholders will be asked to vote on at the 2023 AGM. f t During the year, the Audit and Risk Committee considered the Government’s audit and governance reform agenda and has received regular updates from EY and management following the publication o he draft Audit Reform Bill ahead of the introduction of the Audit, Reporting and Governance Authority (“ARGA”). We have developed ou wn roadmap for those changes we consider appropriate to enhance our internal control environment and each element is being process mapped and documented to provide assurance to the Audit an ommittee to aid future reporting and transparency. d R k C r o is We recognise the importance to all our stakeholders in understanding and managing the climate related risks and opportunities to our business and supply chain, and this is the second year that we have reported against the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”). Supported by our Sustainability Director, we have evolved our TCFD reporting and, given the ever-evolving requirements in this area and changing market landscape, we now have an annual update and training session on climate risk included on ommittee’s agenda. You can read the full TCFD Report on th s 5 page 4 to 61. e C I will be attending the AGM on 20 July 2023 and I look forward to answering any questions about the work of the Audit and Risk Committee. Juliette Stacey Chair of the Audit and Risk Committee 14 June 2023 82 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Committee Membership The Audit and Risk Committee comprises three independent Non- Executive Directors and has a good balance of skills, with competence and experience in the sector in which the Group operates. The Chair f t he Audit and Risk Committee is a Chartered Accountant and has o a b road range of experience in senior finance roles, and is therefore e m e A ember should have recent and relevant financial experience. udit and Risk Committee is advised internally by the Company considered to meet the requirement under the Code that at least on Th Secretary, Rachel Spencer, who also acts as secretary to th ommittee. e C Meeting Attendance All meetings are attended by the external auditors and the Company Secretary, and regular attendees include the Chairman, Chief Executive, Finance Director, Group Financial Controller and Head of Risk. Other Senior Management attend relevant meetings at the Audit and Risk Committee Chair’s request or submit reports as required by the agenda. The Audit and Risk Committee meets at least once a year with the external auditors, without management present, to discuss any matters they may wish to raise. The Audit and Risk Committee Chair also meets separately with the Finance Director and auditors outside of the formal meeting programme, which helps to identify key areas o ocus and emerging issues that may need to be added to the Audit and Risk Committee’s agenda. f f Key Activities The Audit and Risk Committee has a detailed annual meeting planner which sets out the key items to be covered at its scheduled meetings. This includes reviewing the financial statements and announcements, monitoring changes in accounting practices and policies, and reviewing decisions with a significant element of judgement. At each meeting, an update on risk management and internal controls is presented, together with reports on compliance with health and safety, employee relations, data protection and cyber security. In light of the impact of inflation and tube and rail strikes o rading during the year, there has continued to be focus around potential risks arising from any ongoing economic and operational uncertainty. n t The Audit and Risk Committee keeps abreast of regulatory and governance developments as part of ongoing reporting from the auditors and the Company Secretary. The effectiveness of the Audit and Risk Committee formed part of the Board evaluation process described in the Nominations Committee Report on page 79. Financial Reporting and Significant Judgement The Audit and Risk 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 o 1 A t pril 2023, the Audit and Risk 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 f a n o n c onnection with the preparation of the financial statements. i ignificant financial reporting issues and judgements made y s The key issues and judgements considered by the Audit and Risk Committee are detailed in the table below: Key accounting judgement Going concern Impairment testing o ropert ssets y a f p Separately disclosed items How the issue was addressed d R t p The Audit and Risk Committee considered the appropriateness of the decision to adopt the going concern basis of reporting in the preparation of the financial statements. The Audit isk Committee reviewed two scenarios – the “base case” and the downside “severe an bu lausible” case, as well as the reverse stress test and the mitigations available to the Group, as disclosed in note 1 to the financial statements. The Audit and Risk Committee has challenged the assumptions used in each scenario and is satisfied that, even under a severe but plausible scenario, the Group has adequate resources for the going concern assessment period and supports the Group adopting the going concern basis. The Audit and Risk Committee considered the proposed impairment of property assets for both the Half Year Report and the Annual Report. The Audit and Risk Committee challenged management’s approach, in particular the methodology and inputs used to estimate both value in use and fair value less cost to sell for site level impairment reviews, including challenging the underlying trading forecasts. The Audit and Risk Committee also reviewed the disclosures in the Annual Report to ensure their appropriateness. The Audit and Risk Committee was satisfied with the approach presented by management, the judgements made for those properties at risk of impairment and the related disclosures in the 2023 Annual Report and Accounts. The Audit and Risk Committee considered the nature of items classified as “separately disclosed items” in the financial statements. The Audit and Risk Committee was satisfied he items management proposed to be shown as separately disclosed items were not tha linked to the underlying trading of the Group. Separately disclosed items include: t t • costs relating to the corporate reorganisation of the Group • profit or loss on property disposals • impairment on properties. l R In addition, the Audit and Risk Committee reviewed these disclosures within the 2023 Annua GAAP measure. eport and Accounts to ensure they clearly identified and reconciled to the relevant 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 Audit and Risk Committee. The Audit and Risk Committee was satisfied with the proposed accounting treatment and disclosures of the Group’s defined benefit plan in the financial statements. e F inancial Review on page 33. This involved looking at potential Going Concern and Viability Statement The Audit and Risk Committee assessed in detail the going concern and viability reviews undertaken by management, as detailed in th revenues, costs and cash flow modelling on both a prudent base case and downside case scenario where there was much greater uncertainty. The Audit and Risk Committee was satisfied with the approach presented by management, including the judgements mad financing, and considering the high proportion of freehold propert n the estimation of future cash flows and the Group’s hat underpins the estate. e i y t Internal Control and Risk Management The Board has overall responsibility for the Group’s system of internal control and management of risks and for reviewing its effectiveness. The system was designed to provide reasonable bu ot absolute assurance of: t n • 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 inancial information used within the business or for publication f f o In addition, the Audit and Risk Committee has reviewed the Group’s assessment of viability over a period greater than 12 months. The Audit and Risk Committee considered the potential financial impact of the Group’s principal risks and uncertainties, including the impact of climate change and climate change legislation on the Group’s operations. The Audit and Risk Committee has concluded that the factors considered and assumptions used are appropriate in assessing the Group’s viability. • compliance with applicable laws and regulations. The Directors’ statement on the Company’s system of internal controls is set out on the next page. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 83 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Audit and Risk Committee Report Continued e C ompany’s risk management process and, on behalf of the , c onsidered the Group’s principal risks which had been ndividual risk owners and, where applicable, At the start of the year, the Audit and Risk Committee discussed th Board reviewed b th ratin n e i itigating actions and controls had been updated and the risk g u pdated. Any significant changes to risks were discussed ach subsequent Audit and Risk Committee meeting. e m e i y t h e A During the year, a selection of key risks were presented to either th udit and Risk Committee or the Board. This has included risks around increasing focus on sustainability issues, including climate change risk, and IT security and cyber security. e B The Group maintains business continuity plans and normally tests the resilience of these plans on an annual basis. During the year a cr oard and Audit and Risk Committee consider the thorough he Executive Team and the broader management isis management test of all emergency communication groups was completed to ensure that call tree procedures work. In addition, a scenario planning exercise was undertaken to test the actions should an announced or unannounced power blackout occur. Th responses b teams to significant challenges they have faced during the year – ajor fire at the Admiralty in July 2022, supply chain including th e c issues, th hallenging trading environment due to inflation and the UK economic uncertainty, and the repeated disruption to trading due o t t ube and rail strike action – as solid evidence of the effectiveness of existing disaster recovery and business continuity plans. e m y t e a The Finance team is responsible for th ppropriate 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 i timely manner. n a e E f c xecutive Committee, further strengthen contro The new finance system, launched in November 2021, has simplified the accounting process and control framework. It has improved controls on expenditure and has enabled more insightful reporting o b e used by both finance and operational management, as well t s i a ncreasing the quality of our budgeting process. The Investment Committee and Approvals Committee, two sub-committees of th o osts across the business below Board level authority. The Investment Committee is responsible for reviewing and approving capital related projects and investments and for completing post-investment appraisals. The Approvals Committee i for reviewing and approving central costs, support centre staffing changes and material procurement contracts. Th inance Director chairs both committees and provides regular updates to the Executive Committee, and to the Audit and Risk Committee an oard as required. nd scrutiny e B e F d t s r l a h esponsible a p • the preparation of annual budgets for each division, including commentary on key business opportunities and risks • the reviews by the Executive Team of actual monthly results against budget, together with commentary on significant variances and updates of both profit and cash flow expectations for the year • a detailed investment approval process requiring Board authorisation for all major projects • post-implementation appraisals of major capital rojects as requested by the Board expenditur e p • regular reporting of legal and accounting developments to e B th oard • regular review of the Group’s risk register and discussion of h a significant risks by the Audit and Risk Committee and the Board, whic mong other things take account of the significance of environmental, social and governance matters to the business • regular reporting of compliance with, dat rotection and health and safety, and the monitoring of accident statistics and the results of health and safety audits. Internal Audit The Group does not have a dedicated internal audit function but uses its own Finance team and Retail Audit team, augmented with external specialists as required, to provide assurance regarding the strength of the control environment and risk management. e c l & T ontrols over stock and cash in the Managed Pub estate, The team of retail business auditors monitor, in particular, th Be he Dragon sites, and Cotswold Inns & Hotels. The function reports into the Head of Risk who attends all meetings of the Audit and Risk Committee to provide an update on the activities of the Retail Audit team. y a reas of risk or controls where the Audit and Risk Committee External resource is used when specialist advice is required on an considers the business may be exposed. The Audit and Risk Committee received regular reports covering third party audits o ealth and safety and food safety matters. n h For FY2024, the Audit and Risk Committee confirmed that the rrangements of internal audit remained appropriate. existin g a e e Climate Risk and TCFD Disclosure The Audit and Risk Committee is responsible for overseeing that th ffects and consequences of climate change are adequately reflected in our financial statements. Climate-related risks are presented to the Audit and Risk Committee on an annual basis, h i whic n i bee e e th o t t s a key element of the new approach to TCFD that has mplemented this year. In addition a training session on volving requirements around climate risk has been added e a nnual meeting planner. h Throughout the period, the Executive Directors provided relevant and timely financial commentary to supplement the financial reporting, ensuring the Audit and Risk Committee and the Board were informed of the financial position and results of the Group. The Audit and Risk Committee reviewed and agreed that the TCFD disclosures set out on pages 54 to 61 were appropriate and that ssumptions used in the financial statements are consistent th these disclosures. with e a The Audit and Risk Committee and the Board have considered the effectiveness of the Group’s system of internal controls. Key elements of the system of internal control designed to address significant risks and uncertainties, as documented on pages 34 t 5, include: o 3 • clearly defined levels of responsibility and delegation throughout the Group, together with well-structured reporting lines up to th oard e B 84 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. e a Whistleblowing The Audit and Risk Committee is responsible for reviewing th dequacy and security of the Company’s arrangements for employees and contractors to raise concerns about any suspected wrongdoing, as set out in the Company’s Whistleblowing Policy. Th ompany has in place mechanisms for concerns to be raised n c i f a o onfidence internally an n independent whistleblowing service operated by Safecall. nonymously through the appointment e C d a     Any whistleblowing reports are reported immediately to the Audit and Risk Committee Chair and, following investigation, to the full Audit and Risk Committee and, at least annually, to the Board. A s tanding report is tabled at each Audit and Risk Committee meeting providing an update on employee relation matters in the period, which allows the Audit and Risk Committee to identify an y t rends. l e Anti-Bribery and Corruption To prevent bribery and corruption, the Group has a policy which al mployees and contractors must follow. This includes guidance around the acceptance of gifts and hospitality. The policy sets out our commitment to conducting business in an honest and ethical manner and our zero tolerance approach to bribery and corruption from our people and any third parties, including customers an uppliers. d s External Audit Ernst & Young LLP were first appointed in 2021, following a tender process, to conduct the audit of the Group’s financial statements for the financial year to 27 March 2021, and this is its third year auditing the Group’s Annual Report. In accordance with best practice and professional standards, the external auditor is required to adhere o a r t otation policy whereby the audit engagement partner is rotated at least every five years. The FY2023 audit is the third year of Rachel Savage’s tenure as lead audit engagement partner. The auditors are invited to attend all meetings of the Audit and Risk Committee and report on the plan and approach for the full year audit and half year review. The Audit and Risk Committee Chair meets the auditors on a regular basis during the year and the Audit and Risk Committee meets with the auditors, without management present, at least annually in order to allow both the members of the Audit and Risk Committee an auditors to raise any issues directly and to discuss the auditors’ remit. he d t The Audit and Risk Committee reviewed the effectiveness of EY’s performance of the external audit process, taking into account: • the quality and scope of the audit plan, and evaluation of delivery and performance against the plan • qualifications, efficiency and performance of the audit team • the communication between the Company and EY • EY’s understanding of the Group’s business and industry sector • the results of the FRC’s Audit Quality Inspection Report on EY • any specific observations arising from the FRC’s inspection of the FY2022 audit conducted by EY. After considering these matters, the Audit and Risk Committee was satisfied with the effectiveness of the year end audit process and recommended to the Board that EY be re-appointed at the Company’s AGM on 20 July 2023. During the year, the Company complied with the provisions of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Process and Audit Committee Responsibilities) Order 2014. Auditor Independence and Non-Audit Services Auditor independence and objectivity are safeguarded by a number of control measures, and a formal written policy was approved in January 2021 and reviewed during the course of the year to confirm its continued appropriateness. The Policy sets out processes for assessing independence and objectivity, including disclosure e a requirements of the auditors, restrictions on the employment o th uditors may be permitted to undertake non-audit services. uditors’ former employees and the circumstances in which f t h e a The Policy is in line with the recommendations set out in the FRC’s Guidance on Audit Committees and the requirements of the FRC’s Revised Ethical Standard 2019 (the “Standard”). In respect of non-audit services, only a very short list of non-audit services is ermitted under the Standard, which are detailed in the Policy, no and all spend has to be approved by the Audit and Risk Committee, which ensures full visibility. w p d t In FY2023, the fees paid to EY for audit services were £465,000. No fees were paid for non-recurring audit services (FY2022: £366,500 including £55,000 for non-recurring audit services). During the year, fees pai of the FY2023 half year results announcement and £5,000 for the ompliance certificate from the auditors required completion o f t he 6.875% Debenture Stock 2018 Trust Deed. under the terms o o EY for non-audit services included £45,000 for the review f a c In line with the approach taken by many companies, it has been agreed that EY will no longer be engaged to provide a review opinion in accordance with International Standard on Review Engagements 2410 (UK) on the half year results. The auditors will continue to attend all meetings of the Audit and Risk Committee, including the discussions to approve the half year results and will conduct limited agreed upon procedures for the benefit of the directors. Fair, Balanced and Understandable The Audit and Risk Committee reviewed whether the 2023 Annual Report, taken as a whole, was fair, balanced and understandable, and also whether it provided the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. In making its assessment, the Audit and Risk Committee took the following into account: • A timetable for the production of the 2023 Annual Report was agreed by the Finance team and the auditors, with overall co-ordination of the report being overseen by the Finance Director • Each section of the report was prepared by a member of management with appropriate knowledge and experience, including representatives from finance, communications, compan ecretariat and risk y s e t • Management’s views on each of the key judgements, which hen discussed by the Audit and Risk Committee • Reports and feedback from the auditors which were presented wer o t t he Audit and Risk Committee • Board members received drafts of the report for review, which provided an opportunity to provide comments and ensure messaging was cohesive. e B Following its review, the Audit and Risk Committee confirmed o t t understandable, and the Board’s statement is set out on page 104. oard that the 2023 Annual Report was fair, balanced and h Juliette Stacey Chair of the Audit and Risk Committee 14 June 2023 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 85 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Remuneration Directors’ Remuneration Report REMUNERATION COMMITTEE At a glance “One of our key focus areas is to ensure the Executive Directors are appropriately rewarded for implementing our strategic plan and delivering long-term growth for the Company and all our stakeholders .” H E L E N J O N E S C H A I R O F T H E R E M U N E R A T I O N C O M M I T T E E Members Helen Jones (Chair), Juliette Stacey, Robin Rowland Helen Jones (Chair) Juliette Stacey Robin Rowland Number of meetings held Number of meetings attended 4 4 4 4 4 4 Key Duties of the Committee • Sets the Remuneration Policy for the Chairman, Executive Directors, Executive Team members and Divisional Directors • Determines the total remuneration package (including pensions, service agreements and termination payments) of the Chairman and Executive Directors and, in consultation with the Chief Executive, determines the total remuneration package of the members of the Executive Team and Divisional Directors • Reviews workforce remuneration and related policies. Key Activities During the Year • Reviewed performance under the Long-Term Incentive Plan (“LTIP”) and Executive Share Option Scheme (“ESOS”) awards granted in 2020 and confirmed vesting outcomes • Set Executive Director objectives and bonus targets for nd approved proposals for the Executive Team 3 a FY202 and Divisional Directors • Agreed the targets for the annual FY2023 LTIP awards and 3 E FY202 SOS awards • Approved pay increases for FY2023 for Executive Directors, Executive Team and Divisional Directors taking into account th ay review for the wider workforce e p • Considered remuneration arrangements for the wider workforce n t i he context of the current cost of living crisis • In conjunction with the Board, received regular reports on Group-wide remuneration for FY2023 and wider workforce remuneration arrangements and issues • Reviewed the Group’s gender pay gap reporting for FY2022 • Approved an invitation under the Group’s all employee “SAYE”) Scheme for FY2023 Sharesav e ( • Approved the remuneration arrangements for the incoming Marketing Director • Reviewed the Chairman’s fee • Noted remuneration proposals for the wider workforce for FY2024 mplemented with effect from 1 April 2023 , i • Reviewed the independence and effectiveness of the Remuneration Committee advisor, Deloitte • Conducted an annual review of the Remuneration Committee terms of reference. 86 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Dear Shareholder, On behalf of the Board, I am pleased to present the Remuneration Report for the year ended 1 April 2023. Against the backdrop of a challenging trading background, the Group has delivered sales growth of 33% with revenues of £336.6m and adjusted profit of £12.7 million, up by 76% on the prior year. The increase was largely due to improved ability to trade in FY2023, particularly in London as people returned to offices and international tourism recovered. While sales and profit growth has been strong, it was held back by significant external factors such as rising energy, food and labour costs and the impact of train and tube strikes. This resulted in the outcome for the year being below original expectations which is reflected in no payouts being awarded against variable elements of pay as detailed below. Going forward, one of the key focus areas for the Remuneration Committee is to ensure that our Executive Directors are appropriately rewarded for implementing our strategic plan to return to pre-pandemic levels of profitability and deliver long-term growth for the Company and all our stakeholders. Directors’ Remuneration Policy (“Policy”) Our remuneration philosophy is to incentivise management to drive business performance to deliver sustained and profitable growth. We presented our revised Policy to shareholders at the AGM in 2021, where we received strong support with a vote in favour of 86.15%. The Policy is intended to cover the three year period to the AGM in 2024 and it was applied consistently during the year ended 1 April 2023. The Remuneration Committee did not exercise any discretion to adjust remuneration outcomes in the year. No changes are proposed to the Policy for FY2024. t b 6 m efore tax (pre IFRS 16) performance and 20% on individual Incentive Outcomes for FY2023 The annual bonus for FY2023 was based 80% on Group adjusted profi strategic performance. Group adjusted profit (pre IFRS 16) was £13. illion, which was below the minimum financial target. Performance against individual strategic objectives was assessed and, while these objectives had been fully achieved, the Remuneration Committee agreed with the recommendation of the Executive Directors that no bonus should be paid. The performance targets for the LTIP and ESOS awards granted in October 2020 and January 2021 respectively, which were based on Group adjusted EPS before tax performance for the LTIP, and Group adjusted EBITDA performance for the ESOS measured over the period to FY2023, were not met and therefore the awards will lapse in full. Executive Director Remuneration for FY2024 Salary The Remuneration Committee reviewed carefully the approach for the wider workforce when considering salary increases taken r E xecutive Directors, given the significant cost pressures faced fo y c olleagues over the last 12 months. Salary increases across b e G th roup consisted of increases of between 6% and 11%, with those earning the least receiving the largest increases to support those most impacted by increasing costs. Base salaries for Executive Directors have been increased by 6% in line with the lowest increase for the wider workforce. In light of the increasing pressures on the cost o iving, the implementation of pay increases across the wider business was brought forward in 2022, to take effect from 1 April his change has been retained for 2023, although the normal an review date of 1 June remains in place for the Executive Directors. d t f l Annual bonus The maximum annual bonus will continue to be 100% o based 80% on Group adjusted profit before tax (pre IFRS 16) performance and 20% on individual strategic objectives. ase salary, f b Long term incentive awards The maximum LTIP award will continue to be 125% of base salary fo he Chief Executive and Retail Director, and 100% for the Finance Director, based on the achievement of EPS performance for FY2026. r t Awards under the ESOS will be granted to Executive Directors with reference to the increased tax efficient limit which has increased from £30,000 to £60,000 with effect from 6 April 2023. e y Non-Executive Director Fees The Remuneration Committee reviewed the Chairman’s fee during ear and determined that a reduction was appropriate. The th Chairman’s fee was therefore reduced from £250,000 per annum to £210,000 per annum effective 1 January 2023. Non-Executive Director fees were last reviewed by the Board in November 2021 and remain unchanged fo Y2024. r F y a nd benefits throughout the Group and considers workforce Employee Engagement and Support The Remuneration Committee receives updates on workforce pa remuneration as part of the review of executive remuneration. The agreed average annual pay increase for all employees was taken into account by the Remuneration Committee when agreeing pay reviews for the Executive Directors, Executive Team and Divisional Directors. h t he impact of the pandemic and the current cost of living crisis. We have taken a number of steps to help our employees through bot These include a shift in our pay structures to ensure that all our employees are paid above the National Minimum Wage or the National Living Wage depending on their age; implementing salary sacrifice for our defined contribution pension scheme; extending medical benefits to all team members with more than one year’s service through a healthcare cash plan; and continuing to offer th e s which gives all employees the chance t negating the need for expensive payday loans. alary ahead of payday, agestream App, e W o t ak Shareholder Engagement The Remuneration Committee welcomes ongoing shareholder dialogue. Our intention is that shareholder views will be sought when there is any significant change to Directors’ remuneration. Should shareholders have any concerns about the Policy, the Remuneration Committee Chair will endeavour to meet with them, as appropriate, o u t nderstand and respond to any issues they may have. h t it h e p elps demonstrate how Directors’ remuneration is linked erformance of the Company. On behalf of the Remuneration I hope that you find the report clear and comprehensive and tha o t t Committee, I would like to thank shareholders for your continued support and feedback over the year and I hope that you are able to support the resolution on the Annual Report on Remuneration being presented at this year’s AGM on Thursday 20 July 2023. Helen Jones Chair of the Remuneration Committee 14 June 2023 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 87 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  Directors’ Remuneration Report Continued Annual Report on Remuneration This Annual Report on Remuneration from pages 86 to 100 will be put to an advisory shareholder vote at the Company’s AGM on Thursda y 2 0 July 2023. Directors’ Remuneration Policy We presented our Remuneration Policy (the “Policy”) to shareholders at the AGM in 2021, where we received strong support with a vote n f i avour of 86.15%. This Policy covers the three year period until the AGM in 2024 and it was applied consistently during the year ended 1 Apri (www.fullers.co.uk). The table below provides a summary of the main elements of the Policy for Executive Directors: 023. The full Policy can be found on pages 58 to 68 of the 2021 Annual Report and is available in the Investor section of our website l 2 FIXED SALARY BENEFITS PENSION VARIABLE LTIP & RECOVERY LTIP ESOS ANNUAL BONUS + TOTAL REMUNERATION = Remuneration Philosophy and Principles In developing the Policy, the Remuneration Committee considered the key principles set out in Provision 40 of the UK Corporate Governance Code. The Remuneration Committee believes that the Policy is clear and transparent and aligned with our culture. In normal years, we operate a s imple incentive framework of an annual bonus, an LTIP award, and an ESOS award, subject to maximum award levels set by HMRC. Award r t levels are capped with pay-out linked to performance against a limited number of measures which are linked to our strategy. Stretching but fai argets are set. This ensures that potential reward outcomes are clear and aligned with performance achieved, with the Remuneration 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 risks. Remuneration arrangements are determined throughout the Group based on the same principle: that the remuneration policies and practices should be aligned to the Company’s purpose and values, support the delivery of the strategy and promote long-term sustainable success. Key features Implementation in FY2023 Implementation in FY2024 FIXED f t Base Salary Reflects the importance o and the experience the individual brings to it he role to the business Benefits Provides competitive benefits which also protect the individual an care for them d p rovides preventative Reviewed annually with increases normally effective from 1 June Increased by 3% from 1 June 2022 n l i ider workforce e w e w h t in it h e 2 Increased by 6% from 1 Jun 023 i wider workforce increase ine with the n l Increases will normally be in line with increases across the Group • Chief Executive – £525,300 • Finance Director – £363,000 • Retail Director – £210,000 • Chief Executive – £556,500 • Finance Director – £385,000 • Retail Director – £222,500 The Company offers Executive Directors a range of benefits consistent with the role Taxable benefits included: No changes proposed • a car allowance • private medical insurance • optional cash vouchers for use in Fuller’s pubs and hotels Non-taxable benefits included: • life assurance and permanent health insurance • Group-wide employee benefits, such as an employee discount linked to length of service and all-employee share plans 88 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Pension Provides an e l appropriat evel of retirement benefits Key features Implementation in FY2023 FIXED Executive Directors are either deferred members of the Company’s defined benefit pension plan (closed to future accruals), the defined contribution plan or receive a cash allowance in lieu of pension The Chief Executive received an annual cash allowance in lieu of pension and the Retail Director received an annual pension contribution of 17.5% f b o ase salary The Finance Director received an annual cash allowance in lieu of pension of 5% of base salary in line with the policy for the majority of the workforce Implementation in FY2024 No changes proposed For any new Executive Director appointed to the Board, th b th ension opportunity will ine with the policy for ajority of the workforce e p e in l e m Key features Implementation in FY2023 Implementation in FY2024 VARIABLE Annual Bonus Incentivises achievement of annual financial objectives and delivery he business strategy o f t f s Maximum opportunity of 100% o alary based on annual performance targets f 7 e d Any bonus earned in excess 5% of salary will normally o eferred into shares for b e y thre ears The maximum bonus award for Executive Directors was 100% of base salary based 80% o and 20% o roup adjusted profit before tax (pre IFRS 16) ndividual strategic performance n G n i Bonus pay-out: • Chief Executive – nil • Retail Director – nil • Finance Director – nil LTIP Incentivises the delivery of long-term sustainable returns hareholders fo r a l l s The maximum annual award n r espect of a financial year i s 1 f base salary 25 i % o Awards vest based on performance over three years financial The Chief Executive and Retail Director were granted awards of 125% of salary and the Finance Director was granted an award of 100 f base salary % o Awards were based on pre-tax adjusted EPS performance for FY2025 of: Normally 25% of awards vest for threshold levels of performance • Threshold – EPS of 49.93p • Maximum – EPS of 60.15p h t ESOS Aligns interests of Executive Directors hose of wit shareholders and deliver sustainabl incentivises ong-term eturns y of l e r n a o Recovery LTIP awards (granted ne-off basis in 2022) have o a m aximum opportunity of 250% f b ase salary o Executive Directors may be granted market value options u se aximum total value MRC p to a m t by H Options vest based on performance over three years financial Once vested, options must exercised before the be h a nniversary of grant 10t Awards made to the Finance and Retail p to the maximum value set Director t the time of award MR b s u C a y H s h No award made to the Chief Executive as option eld were equal to the maximum l v tota alue set by HMRC at the time of d ( awar previously £30,000) Awards were based on adjusted EPS performance for FY2025 of 49.93p. Executive Directors will have a m aximum opportunity of 100% of salary for FY2024 The annual bonus will be based 80% on Group adjusted profit before tax (pre IFRS 16) and 20% on individual strategic performance Awards will be granted at 125% of base salary to the Chief Executive and the Retail Director and 100% of base salary to the Finance Director Awards will be based on pre-tax adjusted EPS performance for FY2026 of: • Threshold – EPS of 39.78p • Maximum – EPS of 55.9p xecutive Directors, to xtent they are eligible, Awards will be granted o E t th u se o the maximum value y HMRC e e p t t b n p Awards will be based o re-tax adjusted EP FY202 erformance for 6 of 2 3.58p S p Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 89 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104        Directors’ Remuneration Report Continued Statement of implementation of Remuneration Policy for FY2024 This part of the Directors’ Remuneration Report sets out how the Policy will be operated in the coming year. Base Salaries The Executive Directors’ base salaries have been increased by 6% in line with the lowest increase received across the wider workforce. The Remuneration Committee reviewed carefully the approach taken for the wider workforce when considering salary increases for Executive Directors, given the significant cost pressures faced by colleagues over the last 12 months. Salary increases across the business consisted of osts. increases of between 6% and 11%, with those earning the least receiving the largest increases to support those most impacted by increasin g c In 2022, in light of the increasing pressures on the cost of living, the implementation of pay increases across the wider business was brought forward to take effect from 1 April and this change has been retained in 2023, although the normal review date of 1 June remains for the Executive Directors, other members of the Executive Team and Divisional Directors. Salary increases for the Executive Directors from 1 June 2023 are therefore as follows: Chief Executive – £556,500 Finance Director – £385,000 Retail Director – £222,500 Benefits No changes to Executive Directors’ benefits are proposed for FY2024. Annual Bonus For FY2024, we intend to operate an annual bonus in line with our normal Policy. The maximum annual bonus will be 100% of base salary fo strategic performance. irectors. The annual bonus will be based 80% on Group adjusted profit before tax (pre IFRS 16) performance and 20% on individual l D r a l Targets are considered to be commercially sensitive and have therefore not been disclosed. Our intention is to disclose targets in the FY2024 Directors’ Remuneration Report, provided that these are no longer considered to be commercially sensitive at that time. d t d t LTIP The Remuneration Committee intends to continue to grant LTIP awards for FY2024 to ensure that management are aligned with shareholders and incentivise e R an regarding reviewing award levels where there has been a fall in share price. We are not planning to reduce grant sizes given the significant need to continue to motivate and retain management. However, the Remuneration Committee retains discretion to adjust vesting outcomes f it c i etail Director, and 100% of base salary to the Finance Director. The Remuneration Committee is aware of shareholder guidance o deliver long-term performance. Awards will be granted at the Policy level of 125% of base salary to the Chief Executive onsiders that there have been any “windfall” gains. h The LTIP will be based on pre-tax adjusted EPS performance as the Remuneration Committee considers that this provides a clear objective anagement and supports our strategy. The portion of the LTIP award that vests for threshold performance will be 25% of maximum. fo Y2024 LTIP awards, EPS targets have been set as absolute pence targets for FY2026 as set out below. Fo r m r F h e l atter could be improved, for example, by the issuance of shares to raise cash or to finance an acquisition, having a consequent diluting 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 s t a effect on existing shareholders’ interests. Additionally, given the aim of encouraging long-term performance, we believe that the earnings per sale o performance, we believe that any earnings per share measure for the LTIP should be based on pre-tax earnings. share figure should not reflect short-term non-trading impacts on profit, whether positive or negative, for example, profits or losses on the reehold properties, and such items should be adjusted for. Lastly, given that changes in tax rates are unrelated to Executive Directors’ f f The awards will be subject to clawback provisions and a two year post-vesting holding period. Pre-tax adjusted EPS targets for the FY2024 awards are proposed as follows: Pre-tax adjusted EPS pence in FY20261 1 Vesting increases on a straight-line basis between Threshold and Maximum. Threshold (25% vesting) Maximum (100% vesting) 39.78p 55.90p These targets were set taking into account internal and external expectations of performance and the Committee considers that these targets are appropriately stretching taking into account the macroeconomic context. 90 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   ESOS The Remuneration Committee intends to grant ESOS awards to Executive Directors up to the increased HMRC limit of £60,000. The Awards wil e based on pre-tax adjusted EPS performance for FY2026 of 23.58p. l b Pension and Benefits No changes are proposed to the pension and benefits provision for Executive Directors for FY2024. The Chief Executive receives an annual cash allowance in lieu of pension of 17.5% of base salary and the Retail Director receives an annual pension contribution of 17.5% of base salary. The Remuneration Committee is aware of shareholder guidance that pensions for Executive Directors should be aligned with the wider workforce. However, given the current rate represents an existing contractual commitment, emuneration Committee does not consider it appropriate to make a reduction at this stage. The Remuneration Committee will keep th pproach under review. thi e R s a As previously advised, the pension opportunity for new Executive Directors appointed to the Board will be in line with the maximum employer contribution available for the majority of the workforce. Accordingly, the Finance Director, appointed in November 2021, receives an annual cash allowance in lieu of pension of 5% of base salary. Implementation of Remuneration Policy for FY2023 This part of the Directors’ Remuneration Report sets out the Directors’ remuneration paid in respect of FY2023. Sections in the report not specifically stated as audited are not subject to audit. Single Total Figure of Remuneration Table (audited) Annual bonus2 Taxable benefits1 Salary/Fees LTIP/Options3 Pension Total variable Total fixed Total Simon Emeny Neil Smith4 Fred Turner Michael Turner Sir James Fuller Richard Fuller Helen Jones Robin Rowland Juliette Stacey 2023 £000 523 361 209 241 55 50 70 60 80 2022 £000 2023 £000 2022 £000 2023 £000 2022 £000 2023 £000 2022 £000 2023 £000 2022 £000 2023 £000 2022 £000 509 119 203 250 51 46 64 56 76 25 23 23 27 – – – – – 25 7 23 27 – – – – – 0 0 0 – – – – – – 312 69 125 – – – – – – 0 0 0 – – – – – – 0 0 0 – – – – – – 91 18 37 – – – – – – 89 6 36 – – – – – – 0 0 0 – – – – – – 312 69 125 – – – – – – 2023 £000 639 402 269 268 55 50 70 60 80 2022 £000 623 132 262 277 51 46 64 56 76 2023 £000 639 402 269 268 55 50 70 60 80 2022 £000 935 201 387 277 51 46 64 56 76 1 Taxable benefits include a car allowance, family private medical insurance and cash vouchers for use in Fuller’s pubs and hotels. 2 The annual bonus in respect to FY2022 was paid in cash. 3 LTIP/Options may include the value transferred to Directors from the LTIP, ESOS and SAYE Schemes. For LTIP and ESOS, the benefit is calculated as the share price at the year end less the exercise price multiplied by the number of vested options. For SAYE, the benefit is calculated as the share price at the grant date less the exercise price, multiplied by the number of shares under option being purchased. 4 From his appointment on 30 November 2021. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 91 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Directors’ Remuneration Report Continued Base salary Executive Directors’ base salaries were increased by 3% in line with the increase received across the wider workforce, effective 1 June 2022. Benefits Executive Directors received taxable benefits which include a car allowance, private medical insurance and optional cash vouchers for use in Fuller’s pubs and hotels. Executive Directors also received other non-taxable benefits including life assurance and permanent health insurance and other Group-wide employee benefits, such as an employee discount linked to length of service and all-employee share plans. Annual bonus (audited) The annual bonus for the year was based 80% on Group adjusted profit before tax and 20% on individual strategic objectives. The following sets out details of actual performance against the targets set: Financial targets (80%) Measure Group adjusted profit before tax (pre IFRS 16) Threshold Target Maximum % of financial target Required performance % of financial target Required Performance % of financial target Required performance Actual performance Pay-out as % of max 10% £25.9m 50% £28.8m 100% £31.7m £13.6m nil Individual strategic performance (20%) The non-financial element of the bonus for FY2023 was dependent on personal performance against non-financial strategic objectives approved by the Remuneration Committee. The table below summarises the achievements against each of those objectives. Strategic performance measure Outcome 1. Employee engagement and satisfaction Measured by reference to increasing the overall response rat th nnual Happiness Index survey and improving ngagement score e to t e o h veral e a l e Exceeded – The overall response rate and score for the ndex survey increased from prior year 202 appines 2 H s I 2. Customer Satisfaction Measured by an enhancement in NPS score Exceeded – The overall NPS for the year increased from FY2022 3. Sustainability Agenda Measured with reference to a reduction in energy usage in FY202 eduction in Scope 1 and 2 emissions for FY2023. 3 a n d a r % a Exceeded – Reduction in like for like electricity and gas usage of 13 a r nd 14% respectively against the baseline of FY2020 and eduction in Scope 1 and 2 emissions of 8% against FY2022 The Remuneration Committee discussed the formulaic outturns of the financial targets and individual strategic performance objectives in the context of the Group’s overall performance and shareholder return performance. The Remuneration Committee noted the significant progress that had been made against the strategic objectives, which would have resulted in an award of 100% against individual strategic performance, but as the financial target was not met and, on the recommendation of the Executive Directors, it was decided no bonus should be paid. 92 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. LTIP awards vesting in respect of FY2023 (audited) LTIP awards granted in October 2020 were based on pre-tax Group adjusted EPS performance for FY2023. The EPS targets were not met and therefore these awards will lapse. The Remuneration Committee did not exercise any discretion in relation to the LTIP outcome. The following sets out details of performance against targets set: LTIP Performance measure Pre-tax Group adjusted EPS Minimum (25% vesting) 50.16p Target set Maximum (100% vesting) Value of award Actual performance Value of award 61.09p Percentage vest of original grant: Minimum – 25% Maximum – 100% 20.86p nil ESOS awards vesting in respect of FY2023 (audited) ESOS awards granted in January 2021 were based on a Group EBITDA performance target for FY2023 of £47 million. Th wa et and therefore awards will lapse. No awards are held by Executive Directors. t m s n o e E BITDA target Total pension entitlements Michael Turner and Richard Fuller are pensioners of the defined benefit Company pension plan, which is closed to future accrual, under th irectors’ section. e D 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 fo o se as part of his retirement planning. Following closure of the pension plan, Simon Emeny is paid an annual salary supplement of 17.5% is salary by the Company. r u f h During the year, Neil Smith was paid an annual cash allowance of 5%, in line with the Policy. Fred Turner received an annual pension contribution of 17.5%, in line with his existing contractual arrangements. Executive Directors who receive a cash allowance are required to use the supplement as part of their overall retirement planning. They are also normally expected to contribute 8% of their salary to their pension or another investment vehicle. The Remuneration Committee considers that the Policy operated as intended during the year. Scheme Interests Awarded During the Financial Year (audited) In respect of the 53 week period ended 1 April 2023, the following share awards were granted: Director Simon Emeny Total Neil Smith Total Fred Turner Total Type of award LTIP LTIP ESOS LTIP ESOS Number of ‘A’ shares Number of ‘B’ shares Face value at grant £0001 Date of grant Performance period end2,3 % of award grant vesting at minimum threshold 87,754 87,754 48,513 5,000 53,513 35,081 834 35,915 219,386 219,386 121,282 – 121,282 87,704 – 87,704 05/07/2022 31/03/2025 25% 05/07/2022 31/03/2025 05/07/2022 31/03/2025 05/07/2022 31/03/2025 05/07/2022 31/03/2025 25% 100% 25% 100% 657 657 363 30 393 263 5 268 1 Face values have been calculated using the actual grant price of £5.99 per ‘A’ ordinary share and an assumed share price of £0.599 per ‘B’ ordinary share for the LTIP, being the average share price during the five dealing days ending immediately before the date of grant, and £6.00 per ‘A’ ordinary share for the ESOS, being the share price on the day immediately before the date of grant. 2 The LTIP awards are subject to a pre-tax adjusted EPS performance condition, with the targets set on an absolute basis and measured over a period of three years. f the awards vest for pre-tax adjusted EPS of 49.93p in FY2025, with 100% vesting for pre-tax adjusted EPS of 60.15p (straight-line vesting in-between). 3 The ESOS awards are subject to a pre-tax adjusted EPS performance condition, with the target set on an absolute basis and measured over a period of three years, 9.93p in FY2025. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 93 % o 25 f 4 o FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Directors’ Remuneration Report Continued Non-Executive Directors’ Fee Non-Executive Directors receive a basic fee and additional fees for further duties and the Chairman receives a basic fee. The Remuneration Committee reviewed the Chairman’s fee during the year and, in consultation with the Chairman, agreed that a reduction was appropriate. hairman’s fee was reduced from £250,000 per annum to £210,000 per annum effective 1 January 2023. Non-Executive Director fees Th ast reviewed by the Board in November 2021 and remain unchanged for FY2024. wer e C e l A summary of the current fee structure for the Non-Executive Directors, including the Chairman, is set out below: Michael Turner Sir James Fuller Richard Fuller Helen Jones Robin Rowland Juliette Stacey Base fee £210,000 £50,000 £50,000 £50,000 £50,000 £50,000 Senior Independent Director Committee Chair Committee member (Audit and Remuneration) Family Shareholder Liaison Total – – – – – – – – £10,000 – £10,000 £10,000 – – – £10,000 £10,000 £10,000 – £210,000 £5,000 – – – – £55,000 £50,000 £70,000 £60,000 £80,000 Payments to Past Directors (audited) There were no payments made to past Directors in the period. Payments on Loss of Office in Prior Year (audited) No payments were made in respect of loss of office in respect of the financial year ended 1 April 2023. Executive Share Ownership The Company has share ownership guidelines for Directors which state that Executives should hold shares worth at least 200% of their salary. Accordingly, until their guideline is met, Executives are expected to retain: • all shares they hold in the Share Incentive Plan (“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 ESOS net of the cost of those options • at least 50% of any post-tax and National Insurance vested shares under the LTIP and the Bonus and Deferred Bonus Plan (“BDBP”). Based on the share price on 1 April 2023 of £4.65, Simon Emeny held shares with a value of 211% of salary, Fred Turner held shares with a value of 340% of salary and Neil Smith held shares with a value of 8% of salary. All of the Executive Directors’ shareholdings therefore already meet the guideline with the exception of Neil Smith, who joined the Company on 30 November 2021. 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 Remuneration Committee retains discretion to waive this guideline if it is not considered appropriate in the specific circumstances. 94 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Directors’ Shareholdings (audited) Directors’ share interests Simon Emeny ‘A’ ordinary 40p shares ‘B’ ordinary 4p shares ‘C’ ordinary 40p shares Neil Smith ‘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 Helen Jones ‘A’ ordinary 40p shares Robin Rowland ‘A’ ordinary 40p shares Juliette Stacey ‘A’ ordinary 40p shares 1 There were no changes in the interests of any Director to 14 June 2023. Beneficial interest at 1 April 20231 Non-beneficial interest at 1 April 20231 Beneficial interest at 26 March 2022 Non-beneficial interest at 26 March 2022 130,472 1,055,684 2,000 6,000 2,571 502,400 100,819 4,342 271,378 3,056,388 624,260 71 88,942 10,486,379 2,703,003 – – – – – – – – – – – – – – 130,472 1,055,684 2,000 6,000 1,471 496,050 100,819 4,324 271,378 3,050,243 624,260 71 88,942 10,486,379 – – – – – – – – – – – – – – 621,050 2,702,003 621,050 15,267 893,937 13,267 872,937 3,065,726 10,935,015 3,065,726 10,935,015 20,000 303 2,970 7,165 2,454 – 7,499 – – – 20,000 303 2,970 7,165 2,454 – 7,499 – – – Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 95 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Directors’ Remuneration Report Continued Scheme Interests Outstanding at the Year-End (audited) Executive Directors’ share options Scheme1,2, 3 As at 26 March 2022 Granted Exercised Lapsed As at 1 April 2023 Exercise price Date of grant Performance period end Exercisable from Expiry date Director Simon Emeny Total Total Fred Turner Total ESOS SAYE 3,296 6,896 10,192 – – – Neil Smith ESOS – – 5,000 5,000 ESOS ESOS ESOS SAYE 2,590 520 – 6,896 10,006 – – 834 – 834 – – – – – – – – – – – – – – – – 3,296 6,896 10,192 5,000 5,000 £9.10 01/07/13 31/03/16 01/07/16 30/06/23 £4.35 30/09/20 n/a 01/12/25 01/06/26 £6.00 05/07/22 31/03/25 05/07/25 04/07/32 2,590 £9.65 30/06/14 31/03/17 30/06/17 29/06/24 (520) – – – 834 £9.61 15/01/20 31/03/22 15/01/23 14/01/30 £6.00 05/07/22 31/03/25 05/07/25 04/07/32 6,896 £4.35 30/09/20 n/a 01/12/25 01/06/26 (520) 10,320 1 The ESOS and SAYE are both tax-advantaged share option schemes. 2 SAYE options are normally exercisable for a period of six months from the maturity date at an option price that is discounted by 20% of the average market price for the three days prior to grant. 3 The ESOS performance conditions are disclosed in note 27 to the financial statements. 4 It is intended that in July 2023, Fred Turner will surrender vested awards granted to him on 30 June 2014 under the ESOS and will be eligible to receive an award under e E th SOS in 2023 up to the revised HRMC limit to £60,000. Vested but unexercised options Executive Directors’ Long-Term Incentive Plan Director Simon Emeny ‘A’ ordinary shares ‘B’ ordinary shares Neil Smith ‘A’ ordinary shares ‘B’ ordinary shares Fred Turner ‘A’ ordinary shares ‘B’ ordinary shares Total held at 6 M arch 2022 2 Awarded Vested Lapsed Total held at 1 April 20231 337,849 844,624 87,754 219,386 104,360 260,902 48,513 121,282 130,559 326,403 35,081 87,704 – – – – – – (45,785) (114,464) 379,818 949,546 – – 152,873 382,184 (13,735) (34,339) 151,905 379,768 1 Includes annual LTIP awards and the one-off Recovery LTIP awarded to Executive Directors during FY2022. The performance conditions are disclosed in note 27 o t e f h t inancial statements. 96 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. e e vent of early termination, Executive Directors are entitled to a payment equal to the salary due for the unexpired period of their notice, Directors’ Service Contracts and Letters of Appointment Executive Directors have rolling service contracts terminable on no more than one year’s notice served by the Company or Director. In th payable in monthly instalments, subject to mitigation. Simon Emeny’s contract has been in place for a number of years and in the event of earl notice ermination, he would be entitled to a payment equal to his base salary and the value of all benefits for the unexpired period of his , w ithout any reduction for mitigation. y t The Chairman and Non-Executive Directors serve the Company on the basis of renewable letters of appointment which can be terminated b ritten notice by either party. No compensation is awarded on termination. y w The following sets out the date of the Executive Directors’ service contracts and Non-Executive Directors’ dates of appointment: Executive Directors Simon Emeny Neil Smith Fred Turner Non-Executive Directors Michael Turner1 Juliette Stacey Sir James Fuller Richard Fuller2 Helen Jones Robin Rowland Date of contract 13 January 1999 16 June 2021 23 May 2019 Date of appointment 1 July 2013 21 March 2018 1 June 2010 1 February 2020 12 March 2019 24 March 2020 Notice period 12 months 12 months 12 months Term expires June 2025 July 2024 May 2025 January 2025 March 2025 March 2024 1 Michael Turner was first appointed to the Board as an Executive Director in January 1985 and became Non-Executive Chairman on 1 July 2013. 2 Richard Fuller was first appointed to the Board as an Executive Director in December 2009 and was appointed as a Non-Executive Director on 1 February 2020. Service contracts and letters of appointment are available for inspection at the AGM and at the Company’s registered office. External Directorship Fees The Board may give approval for Executives to hold one paid non-executive role and to retain any related fees paid. Simon Emeny is the Senior Independent Director of WH Smith PLC, for which he receives and retains an annual fee of £78,000. 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 0 f 1 e R th inancial years against the TSR for the companies in the FTSE All Share Index. The Company is a constituent of this Index and therefore emuneration Committee considers that it is an appropriate choice for this report. Fuller, Smith & Turner P.L.C. 7,068 FTSE All Share 16,868 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18 Mar 19 Mar 20 Mar 21 Mar 22 Mar 23 Fuller, Smith & Turner P.L.C. FTSE All Share Source: Thomson Data stream Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 97 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Directors’ Remuneration Report Continued 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 bonus4 LTIP 20141 977 77% 64% 2015 2016 2017 2018 2019 20202 20213 2022 2023 1,244 76% 96% 1,418 85% 100% 1,097 41% 100% 1,089 48% 56% 687 48% nil 600 nil nil 590 nil nil 935 61% nil 639 nil nil 1 Simon Emeny was appointed as Chief Executive in July 2013. This single total figure comprises the remuneration received by him 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 in 2020, the Remuneration Committee and the Executive Directors agreed that it was not appropriate to pay this portion of the annual bonus. 3 Total remuneration includes the Chief Executive’s voluntary 25% reduction in salary from 1 April 2020 to 30 June 2020. 4 Annual bonus as a percentage of the maximum available. Percentage Change in Remuneration of Directors and Employees The table below shows the percentage change in the remuneration (based on salary, benefits and annual bonus) of the Board of Directors compared with that of the average of all employees of the Company taken as a whole. The Chairman and Non-Executive Directors do not receive any variable pay. FY2022-FY2023 FY2021-FY2022 FY2020-FY2021 Change in annual salary/ fees10 Change in annual taxable benefits Change in annual bonus1 Change in annual salary/ fees10 Change in annual taxable benefits Change in annual bonus1 Change in annual salary/ fees Change in annual taxable benefits Change in annual bonus1 (17.0)% (100)% Average of all employees2,3 Simon Emeny Neil Smith4 Adam Councell5 Fred Turner6 Michael Turner7 Sir James Fuller Richard Fuller8 Helen Jones8 Robin Rowland9 Juliette Stacey8 3.3% 2.8% – – 2.8% (3.7)% 7.3% 8.1% 9.4% 6.7% 4.9% (12.2)% 0.2% – – 0.6% 0.8% n/a n/a n/a n/a n/a 100% 100% – – 100% n/a n/a n/a n/a n/a n/a 2.3% 8.4% – 0.3% – (44.6)% (49.5)% 8.4% 6.7% 9.3% 9.6% 10.1% 9.1% 8.4% 1.0% 1.3% n/a n/a n/a n/a n/a 1.0% (4.0)% (1.6)% (0.1)% (1.2)% nil% – – – (6.2)% (6.2)% – – – 1.5% n/a (73.9)% (93.8)% (4.5)% – (0.7)% n/a n/a n/a – – – n/a n/a n/a n/a n/a n/a nil% – nil% nil% n/a n/a n/a n/a n/a n/a 1 Reflects the increase or decrease in the percentage of annual salary paid out as bonus. In the prior year no bonus was paid out and therefore the bonus as a percentage of salary has increased by 100% as a bonus was paid in the current year. 2 The employee comparator group excludes employees not employed by the parent company. 3 The change in taxable benefits is principally due to the phasing out of company cars into a car allowance benefit since 2020. 4 Neil Smith was appointed on 30 November 2021 part way through the comparative year, therefore the annual comparison from FY2022 to FY2023 is not relevant. 5 Adam Councell was appointed on 27 August 2019 and resigned on 30 September 2021. 6 Fred Turner was appointed on 1 June 2019. 7 Michael Turner’s fee was reduced from £250,000 to £210,000 per annum from 1 January 2023. 8 A number of Non-Executive Directors changed roles in FY2020 (Richard Fuller, Juliette Stacey and Helen Jones), which impacted the year on year comparison. 9 Robin Rowland was appointed on 24 March 2020. 10 Board members took a voluntary pay decrease between April 2020 and June 2020. Non-Executive Director fees were also increased from 1 January 2022. 98 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. CEO Pay Ratio The following table sets out CEO pay ratio figures, in respect of the financial year ended 1 April 2023. Year FY2023 FY2022 FY2021 FY2020 Method Option B Option B Option B Option B 25th percentile pay ratio Median pay ratio 75th percentile pay ratio 30.8:1 49.1:1 35.7:1 33.0:1 26.0:1 43.6:1 33.2:1 32.6:1 18.9:1 30.7:1 23.8:1 31.6:1 The decrease in the pay ratio between FY2023 and FY2022 is predominately driven by the CEO receiving a bonus in relation to FY2022 whereas in the current year no bonuses were paid. The relevant individuals have been identified using Option B, as defined under the relevant regulations, which the Remuneration Committee considered to be the most appropriate methodology based on the availability of data at the time the Annual Report was published. The respective single figure values for each individual for FY2023 have then been calculated. No estimates were required, and no elements o were omitted in calculating the relevant single figures. The figures do not include amounts paid to individuals in respect of their tronc share. f p ay 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 53 weeks ended 1 April 2023, alternative employees were selected for the 25th, median and 75th percentile. Year FY2023 Supporting information Salary Total pay Chief Executive £522,750 £639,543 25th percentile pay ratio Median pay ratio 75th percentile pay ratio £20,777 £20,777 £24,531 £24,618 £33,096 £33,802 Relative Importance of Spend on Pay The graph below shows the total remuneration for the Group’s employees compared with other key financial indicators: 2023 2022 120 100 80 60 40 20 0 £m Remuneration Taxes payable to HMRC1 Capital expenditure and business combinations2 Dividends and share buybacks 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. 2 Capital expenditure (including business combinations) represents cash paid in the year. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 99 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Directors’ Remuneration Report Continued The Remuneration Committee The Remuneration Committee consists entirely of Independent Non-Executive Directors and the members during the period were Helen Jones (Chair), Juliette Stacey and Robin Rowland. Its terms of reference are available on the Company’s website. 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 emuneration and performance of the Executive Directors and related matters, except in circumstances where their own remuneration th is being discussed. Members of the Remuneration Committee have no personal financial interest in the Company, other than as shareholders and Directors. The Remuneration Committee is advised internally by the Company Secretary, Rachel Spencer, who also acts as secretary to th ommittee. e C e r s p art of the review of executive remuneration. The Remuneration Committee will take into account any feedback on executive remuneration Employee Engagement The Remuneration Committee receives updates on workforce pay and benefits throughout the Group and considers workforce remuneration a provided by the People & Talent Director and any relevant feedback from employee surveys. As part of her role as Non-Executive Director responsible for employee engagement, the Remuneration Committee Chair engages with employees which also provides an opportunity for feedback on remuneration matters. Share ownership amongst employees is encouraged and awards were made under the SAYE scheme durin those of other shareholders. he course of the year. This tax-advantaged scheme allows employees to participate as shareholders and aligns their interests with g t Independent Advisors Deloitte LLP was appointed by the Remuneration Committee in June 2019 and, during the year under review, provided the Remuneration Committee and the Company with advice in connection with remuneration matters as well as the Company’s LTIP and share option schemes. f t Deloitte is a founding member of the Remuneration Consultants’ Group (“RCG”), which is responsible for the development and maintenance o he voluntary Code of Conduct that clearly sets out the role of executive remuneration consultants and the professional standards by whic (plus VAT)). During the year, Deloitte also provided other unrelated tax advice to the Company. hey advise their clients. Fees are charged on a time and expenses basis and totalled £7,750 (plus VAT) during FY2023 (FY2022: £26,620 h t The Remuneration 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 Remuneration Committee have no connections with Fuller’s or its Directors that may impair their independence. Th safeguards against such conflicts. emuneration Committee reviewed the potential for conflicts of interest and judged that there were appropriate e R S P XPS Pension Group provides the Company with advice on matters relating to the defined benefit Company pension plan (now closed). XP b ension Group is authorised and regulated by the Financial Conduct Authority and its actuaries are also separately required to abide ctuarial Profession Standards which include the requirement for them to provide objective and independent advice. y A Committee Evaluation The Remuneration Committee reviews its performance with Board members and other participants, through the annual Board evaluation. Se urther information on page 79. e f Statement of Voting at Annual General Meeting The results of the shareholder votes at the AGM on 23 September 2021 in respect of the Directors’ Remuneration Policy and at the AGM on 21 July 2022 in respect 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 2022 Approval of Remuneration Policy 2021 88,580,372 89,801,044 80.69% 21,192,410 19.31% 109,772,782 68,505 86.15% 14,436,237 13.85% 104,237,281 5,833,531 The Directors’ Remuneration Report, encompassing pages 86 to 100, was approved by the Board and signed on its behalf. Helen Jones Chair of the Remuneration Committee 14 June 2023 100 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Directors’ Report The Directors present their report to shareholders together with the audited financial statements for the 53 weeks ended 1 April 2023. The Directors’ Report (pages 101 to 103) and the Strategic Report (pages 1 t o 65) together constitute the management report for the purpose f R ule 4.1.8R of the Disclosure Guidance and Transparency Rules. o Other information relevant to the report, including information relevant pursuant to the Companies Act 2006 and UK Listing Rule 9.8.4R, i ncorporated. s i As permitted by legislation, some of the matters required to be included in the Directors’ Report have instead been included in the Strategic Report as the Board considers them to be of strategic importance. Specifically, these are: Information Reported in Pages Future business developments Strategy Employee engagement Engagement with suppliers, customers and others Emissions reporting 16 and 17 62 and 63 52 and 53 62 and 63 Stakeholder Engagement Sustainability Report Stakeholder Engagement Sustainability Report 44 Annual General Meeting The 2023 AGM will be held at 11am on Thursday 20 July 2023 at The George IV, 185 Chiswick High Road, London, W4 2DR. The Notice of Meeting which sets out the resolutions to be proposed has been posted to shareholders and is available on the Company’s website at www.fullers.co.uk. Articles of Association The Company’s Articles of Association were adopted in 2014. In accordance with the Companies Act 2006, the Articles of Association may only be amended by a special resolution of shareholders in a general meeting. Directors The names and biographical details of the Directors who served on the Board and Board Committees during the financial year and up to the date of this report are given on pages 68 and 69. All Directors served for the full year. t t Appointment and retirement of Directors The Articles state that the Board may appoint Directors and that he subsequent AGM, shareholders may elect any such Director. a 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 or her 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 or she resigns, or becomes of unsound mind o ankrupt. r b At every AGM, 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 otation, he or she shall retire. In addition, if any Director has at b tart of the AGM been in office for more than three years since th her last appointment or re-appointment, he or she shall retire his t A t t a y r e s or ha GM. Powers of the Directors 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 AGM. Directors’ indemnities and insurance 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 Act). Th 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. ompany purchases Directors and Officers liability insurance, e C Directors’ interests Details of all Directors’ interests as at the end of the financial year are ut in the Directors’ Remuneration Report on pages 95 to 96. se t o h a Dividends The Company paid an interim dividend of 4.68p per ‘A’ and ‘C’ ordinary share of 40p each and 0.468p per ‘B’ ordinary share of 4p each on 3 January 2023 (FY2022: 3.90p per A’ and ‘C’ ordinary share of 40p eac nd 0.39p per ‘B’ ordinary share of 4p each). The Directors now recommend a final dividend of 10.0p per ‘A’ and ‘C’ ordinary share of ach and 1.0p per ‘B’ ordinary share of 4p each. This makes a total 40 dividend for the financial year of 14.68p per ‘A’ and ‘C’ ordinary share of 40p each and 1.468p per ‘B’ ordinary share of 4p each (FY2022: 11.31p per ‘A’ and ‘C’ ordinary share of 40p each and 1.13p per ‘B’ ordinary share of 4p each). p e The total proposed final dividend on ordinary shares will be £6.1 million, which together with the 2023 interim dividend payment of £2.8 million and the £120,000 of cumulative preference share dividends paid in the year, will result in total dividend payments of £9.0 million. Employees The Company is committed to treating all of its employees and job applicants equally. No employee or potential employee receives less favourable treatment or consideration on the grounds of race, colour, religion, nationality, ethnic origin, sex, sexual orientation, marital status, or disability. We give full consideration to applications for employment from disabled persons where the requirements of the job can be adequately fulfilled by people with disabilities. We endeavour to retain the employment of, and arrange suitable retraining for, any employee who becomes disabled during their employment as well as providing training, career development an romotion to disabled employees wherever appropriate. d p During the year, the Company maintained arrangements to provide employees with information on matters of concern to them, to regularly consult employees for views on matters affecting them, o e ncourage employee involvement in the Company’s performance t through share schemes, and to make all employees aware of financial and economic factors affecting the performance of the Group. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 101 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104      Directors’ Report Continued External Auditor The auditors, Ernst & Young LLP, were appointed by the Directors n 2 i 021 following a formal tender process. Ernst & Young LLP have indicated their willingness to continue in office, and a resolution tha hey be re-appointed will be proposed at the AGM. t t Human Rights The Board has overall responsibility for ensuring the Company upholds and promotes respect for human rights. We respect all human rights and regard those rights relating to non-discrimination, fair treatment and respect for privacy to be most relevant in conducting our business. The Company seeks to anticipate, prevent and mitigate any potential negative human rights impacts as well as enhance positive impacts through our policies and procedures and, in particular, through our policies regarding employment, equality and diversity, treating our stakeholders and customers fairly, and information security. Group policies seek to ensure that employees comply with the relevant legislation and regulations in place to promote good practice. We are committed to ensuring that there are no forms of modern slavery within our operations or supply chains. In line with the Modern Slavery Act 2015, we publish an annual Modern Slavery Statement on our website. Information Required under the Listing Rules For the purposes of LR9.8.4R, the information required to be disclosed by the LR9.8.4R can be found in the Annual Report in the following locations and is hereby incorporated by reference into this Directors’ Report: • Information about long-term incentives is disclosed in the Directors’ Remuneration Report on page 96. • Information about any waiver of dividends or future dividends y a s b hareholder is disclosed on page 102. Political Donations The Group does not make political donations. Post-Balance Sheet Events There were no post-balance sheet events. urchase up to 3,982,025 ‘A’ ordinary shares to be held as treasury Purchase of Own Shares At the AGM held on 21 July 2022, the Company was given authority o p t shares to be used in connection with, among other purposes, the LTIP and/or other share option schemes. Shareholders will be asked to give a similar authority to purchase shares up to 10% of the ‘A’ ordinary capital at the 2023 AGM. The Company’s maximum issued ordinary share capital during the year was £25,381,446, comprising 41,082,339 ‘A’ ordinary shares, 89,052,625 ‘B’ ordinary shares and 13,466,013 ‘C’ ordinary shares. During the year, the Company purchased a total of one million ‘A’ ordinary shares at a total cost of £4,819,569 (exclusive of stamp duty). These share purchases represented 0.7% of the Company’s maximum issued ordinary share capital and 2.4% of the Company’s ‘A’ ordinary share capital. 11,300 ‘A’ ordinary shares held in treasury were allocated to participants of the Savings Related Share Option Scheme, and Executive Share Option Scheme on exercise of options, generating net cash proceeds of £60,816.70. As at 1 April 2023, a total of 2,251,818 ‘A’ ordinary shares and a total of 4,327,915 ‘B’ ordinary shares are held as treasury shares. Share Capital Information on the Company’s financial instruments, capital structure and related restrictions is given in notes 25 and 26 to the financial statements. Details of significant shareholdings are set out below. As at 1 April 2023, Computershare Trustees Limited held a total of 159,543 ‘A’ ordinary shares on behalf of employees of the Company who are participants in its SIP. This represents 0.41% of the issued ‘A’ ordinary share capital (excluding shares held in treasury) ividend waiver is in place in respect of the shares that have not been allocated to participants. 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. . A d As at 1 April 2023, the Fuller, Smith & Turner Employee Share Ownership Trust held 316,441 ‘B’ ordinary shares and 5,935 ‘C’ ordinary shares in the Company. A dividend waiver is in place to cover the entire holding. The Trustees do not exercise the voting rights attached to shares held in the Trust. Substantial Shareholdings The Company had been notified under the Disclosure Guidance and Transparency Rules of the following holdings of voting rights of its listed issued share capital: ‘A’ ordinary shares of 40p each BlackRock, Inc Lansdowne Partners (UK) LLP Ameriprise Financial, Inc. (Columbia Threadneedle) % of total voting rights As at 1 Apr 2023 As at 13 June 2023 9.97 8.40 4.68 9.97 8.40 4.68 It should be noted that these holdings may have changed since the Company was notified of them as notification of any change is not required until the next notifiable threshold is crossed. 102 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   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: ‘B’ ordinary shares of 4p each Mr A W M Mitchell & Burges Salmon Trustees Ltd1 Mr R H F Fuller & Mr P J Turner & Mr P A Sheils1 Mr A G F Fuller Mr R H F Fuller & Mr P A Sheils & Mr P J Turner1 Mr R D Inverarity Dunarden Limited Mr G F Inverarity Mr M J Turner Miss S M Turner Mr R H F Fuller Mr T J M Turner ‘C’ ordinary shares of 40p each Mr A W M Mitchell & Burges Salmon Trustees Ltd1 Mr T J M Turner Miss S M Turner Mr P A R Carter & Sir J H F Fuller1 Sir J H F Fuller & Mr A W M Mitchell1 Mrs D M St. C Turner Mr C D W Williams 1 Shares held for the benefit of a Trust. As at 1 April 2023 As at 13 June 2023 14.85 14.85 7.66 5.74 4.62 3.62 3.60 3.48 3.39 3.33 3.08 3.00 7.66 5.74 4.62 3.62 3.60 3.48 3.39 3.33 3.08 3.00 As at 1 April 2023 As at 13 June 2023 33.31 33.31 6.66 5.64 4.61 4.43 3.32 3.25 6.66 5.64 4.61 4.43 3.32 3.25 Significant Agreements The Group has entered into a number of agreements with the major brewers operating in the UK under which it buys beer, 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 ew borrowing requests and the facilities will lapse after 30 days from the change of control if terms on which they can continue have an een agreed. All borrowings including accrued interest will become repayable within 10 days of such a lapse. no y n t b The service agreements of the Executive Directors include provisions regarding a change of control. Further details are included in the Directors’ Remuneration Policy published in the 2021 Annual Report. By order of the Board Rachel Spencer Company Secretary 14 June 2023 Fuller, Smith & Turner P.L.C. Pier House 86-93 Strand-on-the-Green London W4 3NN Registered in England under number: 241882 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 103 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Directors’ Responsibilities Statement n R f t he Financial Statements Statement of Directors’ Responsibilities i o The Directors are responsible for preparing the Strategic Report, nnual Report, the Remuneration Report, and the Group and th Company financial statements in accordance with applicable Unite ingdom law and regulations. espect e A d K Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected o p t accounting standards in conformity with the requirements of the Companies Act 2006. repare the financial statements in accordance with international 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. d T Under the Financial Conduct Authority’s Disclosure Guidance ransparency Rules, Group financial statements are required an o b t e prepared in accordance with International Financial Reporting Standards (“IFRSs”). In preparing the Group and Company financial statements, the Directors are required to: • select suitable accounting policies in accordance with IAS 8 The Directors are responsible for preparing the Annual Report in accordance with applicable law and regulations. 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 international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company taken as a whole; • that the Annual Report and the Strategic Report include 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; and • that they 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. Accounting policies, changes in accounting estimates and errors and then apply them consistently; The Directors of Fuller, Smith & Turner P.L.C. are listed on pages 68 and 69. Auditors Directors’ Statement as to Disclosure of Information to The Directors who were members of the Board at the time of approving the Directors’ Report are listed on pages 68 and 69. Havin auditors, each of these Directors confirms that: ade enquiries of fellow Directors and of the Company’s g m • 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 14 June 2023 • present information, including accounting policies, in a hat provides relevant, reliable, comparable and r t manne understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company financial position and financial performance; • make an assessment of the Company’s ability to continue as a going concern; • state that the Group and Company have complied with international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs subject to any material departures disclosed and explained in the financial statements; and • make judgements and estimates that are reasonable and prudent. inancial position of the Group and Company, and enable them nsure that the financial statements and the Remuneration Report 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 e f th o e t 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. 104 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C.   Independent Auditor’s Report to the members of Fuller, Smith & Turner P.L.C Opinion In our opinion: • Fuller, Smith & Turner P.L.C.’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair view of the state of the Group’s and of the Company’s affairs as at 1 April 2023 and of the Group’s profit for the 53 week period (the ‘period’) then ended; • the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; • the Company financial statements have been properly prepared in accordance with UK adopted international accounting standards as applied in accordance with section 408 of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Fuller, Smith & Turner P.L.C (the ‘Company’) and its subsidiaries (the ‘Group’) for the 53 week period ended 1 April 2023 (the ‘period’) which comprise: Group Group balance sheet as at 1 April 2023 Group income statement for the 53 week period then ended Group statement of comprehensive income for the 53 week period then ended Company cash flow statement for the 53 week period then ended Group statement of changes in equity for the 53 week period then ended Company Company balance sheet as at 1 April 2023 Company statement of changes in equity for the 53 week period then ended Related notes 1 to 29 to the financial statements including a summary of significant accounting policies Group cash flow statement for the 53 week period then ended Related notes 1 to 29 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 UK adopted international accounting standards and as regards the parent company financial statements, as applied in accordance with section 408 of the Companies Act 2006. 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group and 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. The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Company and we remain independent of the Group and the Company in conducting the audit. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Company’s ability to continue to adopt the going concern basis of accounting included: • We confirmed our understanding of the Group’s going concern assessment process and Management’s related Board memoranda; • The audit engagement partner increased her time directing and supervising the audit procedures on going concern and utilised corporate finance specialists, with relevant hospitality sector expertise, to assist in assessing the assumptions employed; • We validated the covenants and terms of the debt facilities in the model to executed debt agreements and re-performed the calculation of the Net Debt and Interest cover covenants against the terms of these agreements; • We assessed the appropriateness of the duration of the going concern review period to 29 June 2024, which is a period of at least 12 months from the date of approval of the financial statements, and considered whether there are any known events or conditions that will occur beyond the period; • We obtained the cash flow forecast models (base case, downside, stress and reverse stress test) to 29 June 2024, used by the Board in its assessment, reviewing their arithmetical accuracy, whether they have been approved by the Board and considering the Group’s historical forecasting accuracy for periods when the Group’s pubs were able to trade without restrictions due to Covid-19; • With the assistance of our hospitality sector specialists, we challenged the cash flow forecasts with reference to historical trends and considered any evidence or market forecasts that contradict the assumptions in management’s forecasts; • We assessed the consistency of the base case cash flows with the cash flow forecasts used within our impairment and deferred tax recoverability assessment; • We challenged the integrity of the models used by re-performing calculations and testing of formulas applied throughout; • We confirmed the calculation of the reverse stress test scenario; • We enquired of any climate change commitments in the going concern period and challenged whether any associated cash outflows should be included within the forecasts; • We read the Board minutes to identify any matters that may impact the going concern assessment; and • We assessed the appropriateness of the going concern disclosures in describing the risks associated with the Group’s ability to continue as a going concern for the review period to 29 June 2024. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C 105 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Independent Auditor’s Report to the members of Fuller, Smith & Turner P.L.C Continued The key observations we communicated to the Audit and Risk Committee were that following the amend and extend refinancing arrangements agreed in May 2022, the Group has committed borrowing facilities and available liquidity through the going concern period (under both the base case and downside case). In management’s base case and sensitised scenarios (which reflect a slowdown in customer spending influenced by the current cost of living crisis and cost pressures on margin from the well documented cost increases), the Group remains in compliance with its covenants, through the going concern period. In addition, based on the reverse stress testing, the events that would lead to the covenants being compromised were considered of remote likelihood by management. Going concern has also been determined to be a key audit matter. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Company’s ability to continue as a going concern for the period to 29 June 2024. In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group or Company’s ability to continue as a going concern. Overview of our audit approach Audit scope • We performed an audit of the complete financial information of the Group, which accounted for 100% of the profit before taxation, 100% of revenue and 100% of total assets. Our approach to scoping and resulting coverage is consistent with 2022. Key audit matters • Going concern • Impairment of property, plant and equipment and right-of-use assets • Management override in the recognition of revenue Materiality • Overall Group materiality of £1.68 million (2022: £1.27 million) which represents 0.5% of Group revenue. An overview of the scope of the Company and Group audits Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. The Group’s operations are based solely in the United Kingdom with a single head office and finance function and therefore all audit procedures are completed by one audit team at this location. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment, the potential impact of climate change and other factors such as recent external and internal audit results when assessing the level of work to be performed. In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements we performed full scope audit procedures over 100% of the Group’s results for the 53 week period ended 1 April 2023 and 100% of the Group’s total assets at that date. We obtained an understanding of the entity-level controls of the Group which assisted us in identifying and assessing risks of material misstatement due to fraud or error, as well as assisting us in determining the most appropriate audit strategy. This approach is consistent with the prior period. Climate change Stakeholders are increasingly interested in how climate change will impact the Group. The Group has determined that the most significant future impacts from climate change on its operations will be from higher sourcing costs/supply issues for ingredients affected by increased extreme weather events impacting harvests and the risk of increased extreme weather events (e.g. flooding) in the UK causing reduced footfall/pub closures and impacting staff travel and wellbeing. These are explained in the Task Force for Climate related Financial Disclosures on pages 54 to 61 and in the principal risks and uncertainties. They have also explained their climate commitments on page 42. All of these disclosures form part of the “Other information,” rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other information”. In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material impact on its financial statements. The Group has explained in the basis of preparation (note 1 of the financial statements) how it has reflected the impact of climate change in their financial statements. Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s assessment of the impact of climate risk, physical and transition, its climate commitments, the effects of material climate risks disclosed on pages 56 to 59 and the significant judgements and estimates disclosed in note 1. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal specialists, to determine the risks of material misstatement in the financial statements from climate change which needed to be considered in our audit. We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above. Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key audit matter. 106 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Key audit matters Key audit matters are those matters that, in our professional judgment, 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 which 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 our opinion thereon, and we do not provide a separate opinion on these matters. Key observations communicated to the Audit and Risk Committee Based on our audit procedures we have concluded the impairment charge of £14.3million is appropriately determined. We highlighted that a reasonably possible change in certain key assumptions including sales forecasts and risk adjustment factors could lead to material additional impairment charges. We concluded appropriate disclosures had been included by management for the above assumptions and that the impairment is appropriately presented as separately disclosed items given market practice. Risk Our response to the risk Impairment of property, plant and equipment (PPE) and right-of-use assets (ROUA) Refer to the Audit and Risk Committee Report (page 83); Accounting policies (page 123); and Note 13 of the Consolidated Financial Statements (page 141) As at 1 April 2023, the carrying value of PPE is £583.3 million (2022: £592.7 million) and right-of-use asset is £66.4 million (2022: £73.8 million). The challenging trading environment driven by high levels of cost inflation and changes in consumer spending habits arising from the ‘cost of living’ crisis, has been identified as an indicator of impairment. Impairment for tangible assets (PPE and ROUA) is tested on the basis of each individual cash generating unit (CGU) – an individual pub site. There is a risk that pubs may not achieve the anticipated business performance to support their carrying value. This could lead to an impairment charge that has not been recognised by management. Significant judgement is required in forecasting future cash flows of each pub, the long-term growth rate and the rate at which cash flows are discounted. For a portion of the pub estate where the value-in-use model may indicate an impairment charge, an overlay based on the market value approach is performed which involves significant judgement in determining the fair value of these pubs. The impairment charge is classified as a separately disclosed item in the Income Statement. We gained an understanding through a walkthrough of the process and controls management has in place over the impairment process. We validated that the methodology of the impairment exercise is consistent with the requirements of IAS 36 Impairment of Assets, including appropriate identification of cash generating units and the allocation of central service costs in the value in use calculations. We tested the arithmetical accuracy and integrity of the impairment model and confirmed that the forecasts were consistent with the Board approved forecasts and those used in the going concern assessment. We agreed the carrying value of each CGU back to the fixed asset register. Below we summarise the procedures performed in relation to the key judgements for the tangible (PPE and ROUA) assets impairment review: • In respect of the cost inflation and consumer spending habit assumptions on both short-term trading and the longer-term growth rate, we compared management’s assumptions against external economic forecasts and actual performance from the last year. • We also performed sensitivity analysis based on reasonable possible changes to key assumptions determined by management being revenue, discount rate and long-term growth rate. We assessed that the reasonably possible change in assumptions applied by management were appropriate by reference to the ranges independently established by our work. • We used our internal valuations specialists to support our assessment of the discount rate and long-term growth rate applied to cash flows by independently determining an acceptable range of values for each assumption. • Where management’s pub impairment assessment was based on the fair value approach, we obtained an external property valuation from management’s specialists on a sample of pubs and reviewed the methodology applied and audited the key assumptions that form part of the valuation in light of recent transactions in the market with the assistance of our internal valuation specialists. We assessed the disclosures in notes to the financial statements against the requirements of IAS 36 Impairment of Assets, in particular the requirement to disclose further sensitivities for CGUs where a reasonably possible change in a key assumption would cause an impairment. We also assessed the related separately disclosed item accounting treatment by reference to the Company’s accounting policy, industry practice and the FRC guidance. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C 107 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 Independent Auditor’s Report to the members of Fuller, Smith & Turner P.L.C Continued Risk Our response to the risk Management override in the recognition of revenue Key observations communicated to the Audit and Risk Committee We performed a walkthrough of each of the Group’s significant revenue processes, including the recording of manual journal adjustments, and assessed the design effectiveness of the key controls that are in place. We concluded that revenue was reasonably stated. We did not identify any instances of management override in relation to revenue. We applied correlation data analysis over the Group’s entire revenue journal population to identify how much of the Group’s revenue is converted to cash postings and to isolate non-standard revenue transactions for further analysis, focusing our testing on higher risk transactions identified. We determined the higher risk journal entries to be the adjustments made at or near the end of the reporting period, post-closing adjustments and other adjustments made to record transactions outside the normal course of business and performed substantive procedures to obtain sufficient appropriate audit evidence that those entries were properly supported and approved. We searched for any topside journals to revenue, but none were identified. We performed cut-off testing procedures including review of post period end cash receipts and journals, and an analytical review of significant variances to the prior year, to assess for completeness. e 1 Refer to the Accounting policies (pag financia 26) and Note 3 of the l s tatements (page 131) The Group recorded revenue of £336.6 million in the period (2022: £253.8 million), including £306.8 million in the Managed houses segment (2021: £228.8 million) and £29.8 million in the Tenanted Inns segment (2022: £25.0 million). The vast majority of the Group’s revenue transactions are non-complex, with no judgement applied over the amount recorded. We consider the significant risk relating to fraud in revenue recognition to be around management override of controls and topside journals to revenue in the managed and tenanted estate. For managed houses, revenue is typically comprised of a large number of low value transactions. Although there is little management judgement involved, there is a risk that manual topside adjustments could be posted which could result in revenue being overstated or not recorded. For Tenanted Inns there is also a risk that manual topside adjustments could be posted to revenue. Our application of materiality We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group and Company to be £1.68 million (2022: £1.27 million), which is 0.5% (2022: 0.5%) of Group revenue. We believe that Group revenue continues to an appropriate materiality basis due to its prominence in financial reporting to the Group’s equity and debt stakeholders in the context of the Group which has not returned to a normalised level of profit. 108 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 75% (2022: 75%) of our planning materiality, namely £1.26 million (2022: £0.95 million). We have set performance materiality at this percentage as we did not anticipate a significant level of audit differences following our FY2022 audit. Reporting threshold An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit and Risk Committee that we would report to them all uncorrected audit differences in excess of £84,000 (2022: £64,000), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. Other information The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. 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 course of 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 this gives rise to a material misstatement in the financial statements themselves. 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. Opinions on other matters prescribed by the Companies Act 2006 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 by exception In the light of the knowledge and understanding of the Group and the 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. 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 Company, or returns adequate for our audit have not been received from branches not visited by us; or • the 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 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C 109 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Independent Auditor’s Report to the members of Fuller, Smith & Turner P.L.C Continued Corporate Governance Statement We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group and Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing Rules. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit: • Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 120; • Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is appropriate set out on page 33; • Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liabilities set out on page 120; • Directors’ statement on fair, balanced and understandable set out on page 104; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 104; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 83; and • The section describing the work of the Audit and Risk Committee set out on page 82. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 104, 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 and 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 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. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company and management. • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and Company and determined that the most significant are Companies Act 2006, Health & Safety and food hygiene laws, Minimum Wage regulations, Money Laundering regulations and the UK Corporate Governance Code 2018. • We understood how the Company is complying with those frameworks by making inquiries of management, those charged with governance, those responsible for legal and compliance procedures and the Company Secretary. We corroborated our inquires through inspection of board minutes and correspondence with regulatory authorities and through attendance at Audit and Risk Committee meetings. • We assessed the susceptibility of the Group and Company’s financial statements to material misstatement, including how fraud might occur by making inquiries of management, those charged with governance and various other individuals within the financial reporting function. We corroborated these inquiries by inspecting board minutes, internal audit reports and findings, reports to the Group’s internal whistleblowing hotline and by understanding both the Group’s bonus scheme structure and the expectations of investors and analysts, to understand areas in which individuals may be incentivised to commit fraud. • Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved making inquiries as described above, inspecting minutes of all significant board and committee meetings, reading correspondence with regulatory authorities, testing manual journal entries with higher risk characteristics and testing unusual or non-standard transactions. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 110 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Other matters we are required to address • Following the recommendation from the Audit and Risk Committee, we were appointed by the Company on 27 January 2021 to audit the financial statements for the year ended 27 March 2021 and subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments is three years, covering the years ended 27 March 2021 to 01 April 2023. • The audit opinion is consistent with the additional report to the Audit and Risk 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. Rachel Savage (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 14 June 2023 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C 111 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 Group Income Statement for the 53 weeks ended 1 April 2023 Revenue Operating costs Operating profit Finance costs Profit on disposal of properties Profit before tax Tax Profit for the year Earnings per share per 40p ‘A’ and ‘C’ ordinary share Basic Diluted Earnings per share per 4p ‘B’ ordinary share Basic Diluted 53 weeks ended 1 April 2023 52 weeks ended 26 March 2022 Before separately disclosed items £m Separately disclosed items £m – (14.2) (14.2) – 11.8 (2.4) 0.5 (1.9) 336.6 (311.5) 25.1 (12.4) – 12.7 (2.9) 9.8 Pence 16.10 16.07 1.61 1.61 Note 3 4,5 5,6 5 7 8 8 8 8 Total £m 336.6 (325.7) 10.9 (12.4) 11.8 10.3 (2.4) 7.9 Pence 12.98 12.96 1.30 1.30 Before separately disclosed items £m Separately disclosed items £m – (2.0) (2.0) – 6.3 4.3 (3.2) 1.1 253.8 (235.3) 18.5 (11.3) – 7.2 (1.2) 6.0 Pence 9.79 9.73 0.98 0.97 Total £m 253.8 (237.3) 16.5 (11.3) 6.3 11.5 (4.4) 7.1 Pence 11.59 11.51 1.16 1.15 112 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Group Statement of Comprehensive Income for the 53 weeks ended 1 April 2023 Profit for the year Items that may be reclassified to profit or loss in subsequent years (net of tax) 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 in subsequent years (net of tax) Net actuarial (losses)/gains on pension schemes Tax related to items that will not be reclassified to profit or loss Other comprehensive (losses)/gains for the year, net of tax Total comprehensive income for the year, net of tax Note 25 7 22 7 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 7.9 0.1 – (2.5) 0.6 (1.8) 6.1 7.1 0.5 (0.1) 15.5 (3.8) 12.1 19.2 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 113 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Group Balance Sheet 1 April 2023 Non-current assets Intangible assets Property, plant and equipment Investment properties Retirement benefit obligations Right-of-use assets Other financial assets Total non-current assets Current assets Inventories Trade and other receivables Current tax receivable Cash and short-term deposits Total current assets Assets classified as held for sale Total assets Current liabilities Trade and other payables Provisions Borrowings Lease liabilities Other financial liabilities Total current liabilities Non-current liabilities Borrowings Lease liabilities Retirement benefit obligations Deferred tax liabilities 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 Approved by the Board and signed on 14 June 2023. M J Turner, FCA Chairman Registered Number: 241882 114 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Note 10 11 12 22 16 14 17 18 21 19 20 24 21 16 14 21 16 22 7 26 26 26 26 26 Group 2023 £m 29.0 583.3 1.5 16.1 66.4 0.1 696.4 4.2 10.2 0.7 14.1 29.2 7.0 732.6 (54.6) (0.5) (6.0) (4.8) – (65.9) (140.9) (67.0) (1.5) (14.7) (224.1) 442.6 25.4 53.2 3.7 (21.3) – 381.6 442.6 Group 2022 £m 29.5 592.7 1.6 16.2 73.8 – 713.8 3.6 10.7 0.6 15.6 30.5 5.4 749.7 (57.1) (0.5) (120.0) (6.8) (0.1) (184.5) (27.5) (73.9) (1.9) (12.7) (116.0) 449.2 25.4 53.2 3.7 (16.6) (0.1) 383.6 449.2 Company Balance Sheet 1 April 2023 Non-current assets Intangible assets Property, plant and equipment Investment properties Retirement benefit obligations Right-of-use assets Other financial assets Investments in subsidiaries Total non-current assets Current assets Inventories Trade and other receivables Current tax receivable Cash and short-term deposits Total current assets Assets classified as held for sale Total assets Current liabilities Trade and other payables Provisions Borrowings Lease liabilities Other financial liabilities Total current liabilities Non-current liabilities Borrowings Lease liabilities Retirement benefit obligations Deferred tax liabilities Total non-current liabilities Net assets Capital and reserves Share capital Share premium account Capital redemption reserve Own shares Hedging reserve Merger reserve Retained earnings Total equity Note Company 2023 £m Company 2022 £m 10 11 12 22 16 14 15 17 18 21 19 20 24 21 16 14 21 16 22 7 26 26 26 26 26 5.7 583.3 1.5 16.1 66.0 0.1 108.7 781.4 4.2 10.2 0.7 14.1 29.2 7.0 817.6 (197.7) (0.5) (6.0) (4.7) – (208.9) (140.9) (66.6) (1.5) (14.7) (223.7) 385.0 25.4 53.2 3.7 (21.3) – (1.6) 325.6 385.0 6.2 592.7 1.6 16.2 73.3 – 109.1 799.1 3.6 10.7 0.6 15.6 30.5 5.4 835.0 (193.8) (0.5) (120.0) (6.5) (0.1) (320.9) (27.5) (72.8) (1.9) (12.8) (115.0) 399.1 25.4 53.2 3.7 (16.6) (0.1) (1.6) 335.1 399.1 Profit attributable to ordinary shareholders and included in the financial statements of the Parent Company was £0.4 million (2022: £3.3 million). Approved by the Board and signed on 14 June 2023. M J Turner, FCA Chairman Registered Number: 241882 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 115 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Group Statement of Changes in Equity for the 53 weeks ended 1 April 2023 Group At 27 March 2021 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Issue of share capital (note 27) Shares released from ESOT and treasury Dividends (note 9) Share-based payment charges Tax credited directly to equity At 26 March 2022 Profit for the year Other comprehensive income 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 credits Tax credited directly to equity At 1 April 2023 Share premium account (note 26) £m Capital redemption reserve (note 26) £m Own shares (note 26) £m Hedging reserve £m Share capital (note 26) £m 22.8 – – – 4.2 – – – 2.6 49.0 – – – – – – – – 25.4 – 53.2 – – – – – – – – – – – – – – – 3.7 (17.0) – – – – – – – – 3.7 – – – – – – – – – – – 0.2 0.2 – – – (16.6) – – – (4.8) 0.1 – – – 25.4 53.2 3.7 (21.3) Retained earnings £m 366.3 7.1 11.7 18.8 – – (2.4) 0.8 0.1 Total £m 379.5 7.1 12.1 19.2 51.8 0.2 (2.4) 0.8 0.1 383.6 7.9 449.2 7.9 (1.9) 6.0 – – (7.4) (0.4) (0.2) (1.8) 6.1 (4.8) 0.1 (7.4) (0.4) (0.2) 381.6 442.6 (0.5) – 0.4 0.4 – – – – – (0.1) – 0.1 0.1 – – – – – – 116 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Company Statement of Changes in Equity for the 53 weeks ended 1 April 2023 Company At 27 March 2021 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Issue of share capital (note 27) Shares released from ESOT and treasury Dividends (note 9) Share-based payment charges Tax credited directly to equity At 26 March 2022 Profit for the year Other comprehensive income 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 credits Tax credited directly to equity At 1 April 2023 Share premium account (note 26) £m Capital redemption reserve (note 26) £m Own shares (note 26) £m Hedging reserve £m Merger reserve £m Retained earnings £m Total £m Share capital (note 26) £m 22.8 – – – 4.2 – – – 2.6 49.0 – – – – – – – – 3.7 (17.0) – – – – – – – – – – – 0.2 0.2 – – 25.4 – 53.2 – 3.7 – (16.6) – – – – – – – – – – – – – – – – – – – – – – – – (4.8) 0.1 – – – 25.4 53.2 3.7 (21.3) (0.5) – 0.4 0.4 – – – – – (0.1) – 0.1 0.1 – – – – – – (1.6) 321.6 333.2 3.3 11.7 15.0 – – (2.4) 0.8 0.1 3.3 12.1 15.4 51.8 0.2 (2.4) 0.8 0.1 – – – – – – – (1.6) – 335.1 0.4 399.1 0.4 – – – – – – – (1.9) (1.5) – – (7.4) (0.4) (0.2) (1.8) (1.4) (4.8) 0.1 (7.4) (0.4) (0.2) (1.6) 325.6 385.0 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 117 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Group 53 weeks ended 1 April 2023 £m Note Group 52 weeks ended 26 March 2022 £m 6 5 4 22 4 5 26 26 9 9 21 21 16 21 21 21 10.3 12.4 2.4 26.7 51.8 (2.3) (0.4) 2.5 (0.6) (3.0) (0.5) 47.5 – 47.5 (30.7) 16.0 (14.7) (4.8) 0.1 (8.7) (0.1) (7.4) – – – (2.1) (9.8) (1.5) (34.3) (1.5) 15.6 14.1 11.5 11.3 (4.3) 25.8 44.3 (2.3) 0.8 0.5 (1.5) 28.8 (1.9) 68.7 2.5 71.2 (25.8) 10.0 (15.8) – 0.1 (7.2) (0.1) (2.4) 51.8 (100.0) 12.6 (1.9) (8.6) (1.2) (56.9) (1.5) 17.1 15.6 Group Cash Flow Statement for the 53 weeks ended 1 April 2023 Profit before tax for continuing operations Net finance costs before separately disclosed items Separately disclosed items Depreciation and amortisation Adjusted EBITDA Difference between pension charge and cash paid Share-based payment (credit)/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 received Net cash generated from operating activities Cash flow from investing activities Purchase of property, plant and equipment and intangibles Sale of property, plant and equipment, right-of-use assets and assets held for sale Net cash (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 Net proceeds from equity placing Repayment of CCFF Drawdown of bank loans Surrender of leases Principal and interest elements of lease payments Payment of loan arrangement fees Net cash (outflow) from financing activities Net movement in cash and cash equivalents Cash and cash equivalents at the start of the year Total cash and cash equivalents at the end of the year 118 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Company Cash Flow Statement for the 53 weeks ended 1 April 2023 Profit before tax for continuing operations Net finance costs before separately disclosed items Separately disclosed items Depreciation and amortisation Adjusted EBITDA Difference between pension charge and cash paid Share-based payment (credit)/ 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 received Net cash generated from operating activities Cash flow from investing activities Purchase of property, plant and equipment and intangibles Sale of property, plant and equipment, right-of-use assets and assets held for sale Net cash (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 Net proceeds of equity placing Repayment of CCFF Drawdown of bank loans Surrender of leases Principal and interest elements of lease payments Cost of refinancing Net cash outflow from financing activities Net movement in cash and cash equivalents Cash and cash equivalents at the start of the year Total cash and cash equivalents at the end of the year Company 53 weeks ended 1 April 2023 £m Note Company 52 weeks ended 26 March 2022 £m 3.1 18.8 3.2 26.7 51.8 (2.3) (0.4) (3.9) (0.6) 3.3 (0.5) 47.4 – 47.4 (30.7) 16.0 (14.7) (4.8) 0.1 (8.7) (0.1) (7.4) – – – (2.1) (9.7) (1.5) (34.2) (1.5) 15.6 14.1 7.6 14.9 (4.2) 25.7 44.0 (2.3) 0.8 0.5 (1.5) 29.0 (1.9) 68.6 2.5 71.1 (25.8) 10.0 (15.8) – 0.1 (7.2) (0.1) (2.4) 51.8 (100.0) 12.6 (1.9) (8.3) (1.2) (56.6) (1.3) 16.9 15.6 22 26 26 9 9 21 21 16 21 21 21 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 119 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 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 53 weeks ended 1 April 2023 were authorised for issue by the Board of Directors on 14 June 2023 and the Balance Sheet was 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 accounting standards in conformity with the requirements of the Companies Act 2006, and in accordance with UK adopted International Financial Reporting Standards, and applied to the financial statements of the Group and the Company for the 53 weeks ended 1 April 2023. 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 1 to 65. The financial position of the Company, its cash flows, net debt and borrowing facilities and the maturity of those facilities are set out above on pages 147 to 159. In addition, there are further details in the financial statements on the Group’s financial risk management, objectives and policies in note 27. At 1 April 2023, the Group Balance Sheet comprises of 92% of the estate being freehold properties and available headroom on facilities of £79.5 million and £14.1 million of cash and resulting net debt of £132.8 million. During the year, the Group secured a new facility of £200 million, split between a RCF of £110 million and a term loan of £90 million, for a tenure of four years to May 2026. Under the new agreement, the minimum liquidity covenant of £10 million tested monthly remained until November 2022. From December 2022 (and tested quarterly thereafter) the covenant suite consists of net debt to EBITDA (leverage) and EBITDA to net finance charges. See further details in Note 23. The Group has modelled financial projections for the going concern period, which is the period to 29 June 2024, based upon two scenarios, the ‘base case’ and the ‘downside case’. The base case is the Board approved FY2024 budget as well as the Q1 FY2025 plan which forms part of the Board approved three year plan. The base case assumes that sales will continue to recover, in particular in Central London. However, the budget remains cautious about the inflationary environment and also the impact on the consumer and therefore only assumes moderate levels of volume growth as well as continued pressure on margins. The base case scenario indicates that it will have sufficient resources to continue to settle its debts as they fall due and operate well within its covenants for the going concern assessment period. The Group has also modelled a ‘downside case’ which assumes that sales volume reduce by 10% from the ‘base case’ and costs across food, staff and interest continue to rise. This model also assumes train strikes are more frequent than experienced in FY2023. In this ‘downside case’, management would implement mitigating actions such as overhead cost reduction and restructuring of capital expenditure and other property spend to essential maintenance. Under this scenario, the Group would still have sufficient resources to settle liabilities as they fall due and headroom on its covenants through the duration of the period. The Group has also performed a ‘reverse stress case’ which shows that the Group could withstand a 24% reduction in volumes from those assessed in the ‘base case’ throughout the going concern period, as well as costs assumed to increase at a similar or higher rate than the downside scenario, before the covenant levels would be exceeded on 31 March 2024. The Directors consider this scenario to be remote as other than when the business was closed because of the pandemic, it has never seen volumes decline at anywhere close to that rate. Under both the base and downside scenarios modelled, the Group would have sufficient headroom on its facilities throughout the going concern assessment period. Additionally, under the downside scenario there are further mitigating actions which the Group has in its control to either improve EBITDA or reduce net debt, such as further reduction in capex spend to only essential maintenance and decision not to pay dividends and bonuses. Further mitigating actions would also include disposals of licensed and unlicensed properties. The Directors have also determined that, over the period of the going concern assessment, there is not expected to be a significant impact because of climate change. After due consideration of the matters set out above, the Directors are satisfied that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the going concern assessment period, being the period to 29 June 2024, and have therefore adopted the going concern basis in the preparation of these financial statements. 120 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 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 (“CGUs”) 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 those key assumptions. The Group reviews impairment of all property, plant and equipment and right-of-use assets at CGU 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 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 22. The areas of judgement which are considered to be significant in the preparation of the financial statements are as follows: 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 for further details. The Group has exercised significant accounting estimation and judgement in the recognition of deferred tax liabilities in respect of property, plant and equipment. Significant accounting estimates and judgements include those used to determine the amount of net book value of property, plant and equipment to which the initial recognition exemption applies, the calculation of the tax base on sale (which is subject to certain restrictions under tax law) and the offsetting of inherent losses against inherent gains where tax losses are expected to be utilised against future profits and gains. 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 53 weeks ended 1 April 2023 (2022: 52 weeks ended 26 March 2022). 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. Business combinations and goodwill 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. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments is measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in profit or loss. 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. For the purpose of impairment testing, goodwill is allocated to the related CGUs (or group of CGUs) monitored by management. Where the recoverable amount of the CGU 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 CGU is taken into account when determining the gain or loss on disposal of the CGU, or of an operation within it. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 121 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-1041. Authorisation of Financial Statements and Accounting Policies continued 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 and unlicensed property From 50 to 100 years Leasehold improvements Roofs The term of the lease From 10 to 50 years Plant, machinery and vehicles, fixtures and fittings From three years up to 25 years 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 attached 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. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. Coronavirus Job Retention Scheme (“CJRS”) In the prior year, HMRC reimbursed up to 80% of the wages of certain employees who had been asked to stop working, but who were being kept on the payroll (“furloughed”). The scheme was 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 with any difference taken to the merger reserve. Investment property The Group owns properties that are not used for the sale 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 and 100 years. Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the CGU level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. An intangible asset 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 upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss. Research and development costs Research costs are expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate: • The technical feasibility of completing the intangible asset so that the asset will be available for use or sale • Its intention to complete and its ability and intention to use or sell the asset • How the asset will generate future economic benefits • The availability of resources to complete the asset • The ability to measure reliably the expenditure during development. 122 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinuedFollowing initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use and will be amortised over the period of expected future benefit. Amortisation is recorded in operating costs. During the period of development, the asset is tested for impairment annually. Cloud Computing Arrangement costs Cloud computing arrangements are ones in which a customer does not have control of the underlying software and use the software on an as-needed basis. Costs associated with cloud computing arrangements can be recognised as an intangible asset when the Group can demonstrate ultimate control over the software, with the entity having the power to obtain sole future economic benefits from access to the software and restrict others’ access to those benefits. Where the above criteria cannot be demonstrated, then the right to access the software over the contract term in the future is a service contract. If the Group determines that a cloud computing arrangement is a service contract, then it recognises the related expenditure when it receives the service. 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 CGUs 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 CGUs 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. 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 21). Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 123 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-1041. Authorisation of Financial Statements and Accounting Policies continued 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 19. 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 “Average Weighted Cost” method. 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. 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 profit or loss (“FVPL”): Assets that do not meet the criteria for amortised cost or FVOCI 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. 124 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued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, derivative financial instruments and lease liabilities. 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. 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 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 125 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-1041. Authorisation of Financial Statements and Accounting Policies continued 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 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). Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item. If cash flow hedge accounting is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or loss as a reclassification adjustment. When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, but the risk management objective remains the same, the hedge ratio is adjusted so that it meets the qualifying criteria again. 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 25, 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. 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 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. The Group also earns revenue through selling drink to the Tenanted Inns division which is supplied to Fuller’s by Asahi under the Long-Term Supply Agreement (“LTSA”). Revenue is recognised as though the Group is the principal as it has primary responsibility over the product and also bears the inventory risk. 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. 126 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued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. 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 127 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-1041. Authorisation of Financial Statements and Accounting Policies continued 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 cost is recognised as an expense at the earlier of the date when a plan amendment or curtailment occurs and the date when an entity recognises any termination benefits, or related restructuring costs under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. 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 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 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. 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). 128 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued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 International Accounting Standards Board and International Financial Reporting Interpretations Committee have issued the following standards and interpretations with an effective date for periods starting on or before the date on which these financial statements start: • Amendments to IAS 1: Classification of Liabilities as Current and Non-current (effected 1 January 2023) • Reference to the Conceptual Framework – Amendments to IFRS 3 (effected 1 January 2022) • Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 (effected 1 January 2022) • IFRS 17 Insurance Contracts (effected 1 January 2023) • Onerous Contract – Costs of Fulfilling a Contract – Amendments to IAS 37 (effected 1 January 2022) • Definition of Accounting Estimates – Amendments to IAS 8 (effected 1 January 2022) • Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 (effected 1 January 2022) • Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 (effected 1 January 2022) • IFRS 9 Financial Instruments – Fees in the “10 per cent” test for derecognition of financial liabilities (effected 1 January 2022). The adoption of the above standards have not lead to material effect in the financial statements. Other new standards and interpretations in issue but not yet effective are not applicable to the Company and therefore are not expected to have material impact on the Group’s financial position and results. 2. Segmental Analysis Operating Segments For management purposes, the Group’s operating segments are: • Managed Pubs and Hotels, which comprises managed pubs, managed hotels, 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 tax, adjusted for separately disclosed items. The operating segments are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic operating unit. The Managed Pubs and Hotels operating segments have been aggregated to one reportable segment on the basis they have similar economic characteristics. Economic indicators assessed in determining that the aggregated operating segments share similar characteristics include expected future financial performance, operating and competitive risks, and return on 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 1 to 65 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 129 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-1042. Segmental Analysis continued 53 weeks ended 1 April 2023 Revenue Sale of goods and services Accommodation income Total revenue from contracts with customers Rental income Revenue Segment result Operating separately disclosed items Operating profit Profit on disposal of properties Net finance costs Profit before tax Managed Pubs and Hotels £m Tenanted Inns £m Unallocated1 £m Total continuing operations £m 271.6 33.7 305.3 1.5 306.8 30.0 21.2 – 21.2 8.6 29.8 13.2 – – – – – (18.1) 292.8 33.7 326.5 10.1 336.6 25.1 (14.2) 10.9 11.8 (12.4) 10.3 30.0 26.7 14.3 Other segment information Additions to property, plant and equipment and intangible assets Depreciation and amortisation Impairment of property, right-of-use assets and assets classified as held for sale 25.2 23.4 12.5 4.7 2.3 1.8 0.1 1.0 – 52 weeks ended 26 March 2022 Revenue Sale of goods and services Accommodation income Total revenue from contracts with customers Rental income Revenue 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 and equipment and intangible assets Depreciation and amortisation Impairment of property Managed Pubs and Hotels £m Tenanted Inns £m Unallocated1 £m Total continuing operations £m 205.1 21.9 227.0 1.8 228.8 24.7 20.2 23.3 3.0 17.9 – 17.9 7.1 25.0 11.1 2.3 1.8 0.3 – – – – – (17.3) 2.6 0.7 – 223.0 21.9 244.9 8.9 253.8 18.5 (2.0) 16.5 6.3 (11.3) 11.5 25.1 25.8 3.3 1 Unallocated expenses represent primarily the salaries and costs of central management. Unallocated capital expenditure relates to additions to the head office and additions to IT development costs. 130 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued3. Revenue Geographical Information All of the Group’s business is within the UK and therefore the Group only has one distinct geographical market. Revenue disclosed in the Income Statement is analysed as follows: Sale of goods and services Accommodation income Total revenue from contracts with customers Rental income Revenue 4. Operating Costs Production costs and cost of goods used in retailing Staff costs Repairs and maintenance Depreciation of property, plant and equipment and amortisation of intangible assets Depreciation of right-of-use assets Rental expense relating to short-term and low value leases Variable lease payments1 Property costs Utilities Separately disclosed items (note 5) Grant income2 Other operating costs 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 292.8 33.7 326.5 10.1 336.6 53 weeks ended 1 April 2023 £m 72.2 119.1 8.5 19.6 7.1 0.2 3.5 18.0 19.6 14.2 – 43.7 325.7 223.0 21.9 244.9 8.9 253.8 52 weeks ended 26 March 2022 £m 57.9 96.2 8.5 18.1 7.7 0.4 1.4 14.4 12.1 2.0 (5.4) 24.0 237.3 1 Variable lease payments are dependent on turnover levels. 2 Grant income is amounts received from the Government to support businesses throughout the pandemic that were eligible depending on their rateable value. 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: – Related to the audit of the Group and Company 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 0.5 0.5 0.4 0.4 Other audit related services of £5,000 (2022: £5,000) for covenant reporting and £45,000 (2022: £35,000) for interim review were also incurred in the period. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 131 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-1044. Operating Costs continued b) Employee Benefit Expenses1 Wages and salaries2,3 Social security costs Pension benefits Other staff costs 4 Includes Executive Directors. Includes share-based credit of £0.4 million (2022: debit £0.8 million). 1 2 3 Prior year staff costs are stated net of £4.3 million claimed from the Government through the CJRS. 4 Includes temporary staff costs of £5.0 million. c) Average Number of Employees1 The average monthly number of persons employed by the Group (including part-time staff) was as follows: Pub, hotel and restaurant teams Support office2 Includes Executive Directors. 1 2 Support office includes Finance, People Team, IT and other central functions. d) Directors’ Emoluments Full details are provided in the Directors’ Remuneration Report and tables on pages 86 to 100. 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 102.6 8.7 2.2 5.6 119.1 2023 Number 5,138 109 5,247 84.8 7.0 1.9 2.5 96.2 2022 Number 4,118 122 4,240 5. Separately Disclosed Items The Group presents separately disclosed items on the face of the Income Statement for 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: Reorganisation costs Impairment of properties, right-of-use assets and assets classified as held for sale (note 13) Insurance claim VAT provision release Adjustment related to settlement of the Beer Business Total separately disclosed items included in operating profit Profit on disposal of properties Separately disclosed finance credits: Finance credit on net pension liabilities Finance charge on the write down of arrangement fees Total separately disclosed finance credits Total separately disclosed items before tax Exceptional tax: Profit on disposal of properties Change in tax rate Other items Total separately disclosed tax Total separately disclosed items 132 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m (0.5) (14.3) (0.2) 0.8 – (14.2) 11.8 0.5 (0.5) – (2.4) (1.0) 0.5 1.0 0.5 (1.9) (0.8) (3.3) – – 2.1 (2.0) 6.3 – – – 4.3 (1.3) (3.3) 1.4 (3.2) 1.1 Notes to the Financial StatementsContinued The reorganisation costs comprise £0.5 million in relation to corporate restructure during the 53 weeks ended 1 April 2023 (26 March 2022: £0.8 million). The impairment charge of £14.3 million (26 March 2022: £3.3 million) relates to the write down of 22 properties to their recoverable value (26 March 2022: six properties). The insurance claim of £0.2 million is the write off of property, plant and equipment and the cost of the rectification work (£2.7 million) net of insurance monies claimed (£2.5 million). The VAT provision release to a VAT adjustment of £0.8 million. In the prior year, £2.1 million credit is the release of the provision, net of the final settlement amount on the sale of the Fuller’s Beer Business. The profit on disposal of properties of £11.8 million during the 53 weeks ended 1 April 2023 (26 March 2022: £6.3 million) relates to the disposal of nine licensed and unlicensed properties (26 March 2022: 12 properties). The cash impact of operating separately disclosed items before tax for the 53 weeks ended 1 April 2023 was £0.5 million cash outflow (26 March 2022: £1.9 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 Net finance costs before separately disclosed items Finance credit on net pension liabilities (note 5) Finance charge on the write down of arrangement fees Net 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 profit 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 deferred tax on prior periods Total deferred tax expense Total tax charged in the Income Statement Analysed as: Before separately disclosed items Separately disclosed items 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 0.2 (9.6) (0.1) (2.9) (12.4) 0.5 (0.5) (12.4) – (8.1) (0.1) (3.1) (11.3) – – (11.3) 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m – – – 3.6 – (1.2) 2.4 2.4 2.9 (0.5) 2.4 0.2 0.6 0.8 2.2 3.3 (1.9) 3.6 4.4 1.2 3.2 4.4 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 133 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-1047. Taxation continued Reconciliation of the Total Tax Charge The tax expense in the Income Statement for the year is higher (2022: tax credit is higher) than the standard rate of corporation tax in the UK of 19% (2022: 19%). The differences are reconciled below: Profit before income tax expense Accounting profit multiplied by the UK standard rate of corporation tax of 19% (2021: 19%) Items not deductible/(taxable) for tax purposes Current and deferred tax (over) provided in previous years Net movements in respect of property Change in corporation tax rate Total tax charged in the Income Statement Deferred tax relating to items charged/(credited) to the Income Statement Deferred tax depreciation Unrealised capital gains (on PP&E) Retirement benefit obligations Tax losses Other Corporate interest restriction Deferred tax in the Income Statement Tax relating to items (credited)/charged to the Statement of Comprehensive Income Deferred tax: Valuation gains on financial liabilities Net actuarial (losses)/gains on pension scheme Total tax (credited)/charged in the Statement of Comprehensive Income Tax relating to items charged/(credited) directly to equity Deferred tax: Share-based payments Total tax charged/(credited) to equity 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 10.3 2.0 0.2 (1.2) 1.4 – 2.4 1.5 1.7 1.8 0.7 (3.4) 0.1 2.4 – (0.6) (0.6) 0.2 0.2 11.5 2.2 (0.3) (1.3) 0.5 3.3 4.4 (0.8) 5.2 1.6 (2.8) (0.7) 1.1 3.6 0.1 3.8 3.9 (0.1) (0.1) 134 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinuedDeferred Tax Provision The deferred tax included in the Balance Sheet is as follows: Deferred tax Group Balances at 27 March 2021 (Charge)/credit to Income Statement (Charge) to other comprehensive income Credit taken directly to equity Recategorisation Balances at 26 March 2022 (Charge)/credit to Income Statement Credit to other comprehensive income (Charge) taken directly to equity Retirement benefit obligations £m Tax losses carried forward £m Employee share schemes £m Financial (liabilities)/ assets £m Decelerated tax depreciation £m Unrealised capital gains (on PP&E) £m Pension spreading £m Deferred tax asset/(liability) 0.7 (0.4) (3.8) – – (3.5) (0.8) 0.6 – 7.8 2.8 – – – 10.6 (0.7) – – 0.1 0.1 – 0.1 – 0.3 (0.1) – (0.2) – 0.1 – (0.1) – – – – – – – 4.1 0.8 – – – 4.9 (1.5) – – (22.3) (5.2) – – 0.4 (27.1) (1.7) – – 3.4 (28.8) 2.3 (1.2) – – – 1.1 (1.0) – – 0.1 Balances at 1 April 2023 (3.7) 9.9 1 Includes £4.3 million of timing difference between tax and accounting treatment of capital disposals Deferred tax assets Deferred tax liabilities Company Balances at 27 March 2021 (Charge)/credit to Income Statement (Charge)/credit to other comprehensive income Credit taken directly to equity Recategorisation Balances at 26 March 2022 (Charge)/credit to Income Statement Credit to other comprehensive income Credit taken directly to equity Balances at 1 April 2023 Retirement benefit obligations £m Tax losses carried forward £m Employee share schemes £m Financial (liabilities)/ assets £m Decelerated tax depreciation £m Unrealised capital gains (on PP&E) £m Pension spreading £m Deferred tax asset/(liability) 0.7 (0.4) (3.8) – – (3.5) (0.8) 0.6 – (3.7) 7.7 2.8 – – – 10.5 (0.7) – – 9.9 0.1 0.1 0.1 – 0.3 (0.1) – (0.2) – 0.1 – (0.1) – – – – – – – 4.1 0.8 – – – 4.9 (1.7) – – 3.4 (22.3) (5.2) – – 0.4 (27.1) (0.7) – – (28.8) 2.3 (1.2) – – – 1.1 (1.0) – – 0.1 1 Includes £4.3 million of timing difference between tax and accounting treatment of capital disposals Deferred tax assets Deferred tax liabilities Other1 £m 1.9 (0.5) – – (0.4) 1.0 3.4 – – 4.4 2023 £m 17.8 (32.5) (14.7) Other1 £m 1.9 (0.5) – – (0.4) 1.0 3.4 – – 4.4 2023 £m 17.8 (32.5) (14.7) Total £m (5.3) (3.6) (3.9) 0.1 – (12.7) (2.4) 0.6 (0.2) (14.7) 2022 £m 18.5 (31.2) (12.7) Total £m (5.4) (3.6) (3.9) 0.1 – (12.8) (2.4) 0.6 (0.2) (14.7) 2022 £m 18.4 (31.2) (12.8) Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 135 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104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 53 weeks ended 1 April 2023 £m 7.9 1.9 9.8 52 weeks ended 26 March 2022 £m 7.1 (1.1) 6.0 60,875,000 90,000 60,965,000 61,264,000 413,000 61,677,000 Pence 12.98 12.96 16.10 16.07 Pence 1.30 1.30 1.61 1.61 Pence 11.59 11.51 9.79 9.73 Pence 1.16 1.15 0.98 0.97 For the purposes of calculating the number of shares to be used above, ‘B’ shares have been treated as one-tenth of an ‘A’ or ‘C’ share. 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 2,134,152 (2022: 1,744,564). Diluted earnings per share amounts are 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 options into ordinary shares. Adjusted earnings per share are calculated on profit after tax excluding separately disclosed items and on the same weighted average ordinary share capital as for the basic and diluted earnings per share. Adjusted earnings per share measures have been included as the Directors consider that these measures better reflect the underlying earnings of the Group. 9. Dividends Declared and paid during the year Equity dividends on ordinary shares: Final dividend for 2022: 7.41p (2021: 0p) Interim dividend for 2023: 4.68p (2022: 3.90p) Equity dividends paid Dividends on cumulative preference shares (note 6) Proposed for approval at the Annual General Meeting Final dividend for 2023: 10.0p (2022: 7.41p) 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 4.6 2.8 7.4 0.1 6.1 – 2.4 2.4 0.1 4.6 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. 136 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued10. Intangible Assets Cost At 27 March 2021 Additions At 26 March 2022 At 1 April 2023 Amortisation and impairment At 27 March 2021 Provided during the year At 26 March 2022 Provided during the year At 1 April 2023 Net book value at 1 April 2023 Net book value at 26 March 2022 Net book value at 27 March 2021 Group and Company Goodwill £m IT Development costs £m 31.8 – 31.8 31.8 5.1 – 5.1 – 5.1 26.7 26.7 26.7 0.6 2.4 3.0 3.0 – 0.2 0.2 0.5 0.7 2.3 2.8 0.6 Group Total £m 32.4 2.4 34.8 34.8 5.1 0.2 5.3 0.5 5.8 29.0 29.5 27.3 Company Total £m 4.2 2.4 6.6 6.6 0.2 0.2 0.4 0.5 0.9 5.7 6.2 4.0 IT Development costs Costs are capitalised as IT development costs where it is deemed that the Group has control of the underlying asset. IT development costs relate to the implementation of a new finance system and are made up of consulting time and internal employee costs. Amortisation is recognised over the useful life of the asset of five years. Goodwill Goodwill is allocated to CGUs as follows: Gales estate Jacomb Guinness estate Bel & The Dragon Cotswold Inns & Hotels Managed £m 9.1 0.6 1.0 2.4 13.1 2023 Tenanted £m 13.6 – – – 13.6 2022 £m 22.7 0.6 1.0 2.4 26.7 Total £m 22.7 0.6 1.0 2.4 26.7 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 137 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104  187.2 801.5 1.7 118.0 Total £m 768.4 22.7 (3.2) (1.9) 3.0 789.0 30.0 (8.3) (9.2) 178.2 17.9 (3.2) 3.3 (0.4) 0.5 196.3 19.1 (7.1) 13.4 (3.5) 171.6 9.6 (1.9) (0.4) 0.6 179.5 15.7 (6.6) (1.4) 13.1 (1.9) – (0.3) 0.5 129.4 13.3 (6.3) – (1.2) 135.2 218.2 52.0 50.1 53.6 583.3 592.7 590.2 6.3 – – – – 6.3 – – – 6.3 – – – – – 1.7 – – – – 1.7 4.6 4.6 4.6 11. Property, Plant and Equipment Group Cost At 27 March 2021 Additions Disposals Transfer to assets held for sale (note 19) Transfer from assets held for sale (note 19) At 26 March 2022 Additions Disposals Transfer to assets held for sale (note 19) Land & buildings – owned & used £m Land & buildings – owned & acting as lessor £m Plant, machinery & vehicles £m Fixtures & fittings £m 482.7 11.3 (1.3) (1.5) 2.4 493.6 12.0 (1.4) (7.8) 107.8 1.8 – – – 109.6 2.3 (0.3) – At 1 April 2023 496.4 111.6 Depreciation and impairment At 27 March 2021 Provided during the year Disposals Impairment loss Transfer to assets held for sale (note 19) Transfer from assets held for sale (note 19) At 26 March 2022 Provided during the year Disposals Impairment loss (note 13) Transfer to assets held for sale (note 19) At 1 April 2023 Net book value at 1 April 2023 Net book value at 26 March 2022 Net book value at 27 March 2021 48.8 4.2 (1.3) 3.3 (0.1) – 54.9 4.8 (0.8) 13.4 (2.3) 70.0 9.7 0.6 – – – – 10.3 1.0 – – – 11.3 426.4 438.7 433.9 100.3 99.3 98.1 138 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinuedCompany Cost At 27 March 2021 Additions Disposals Transfer to assets held for sale (note 19) Transfer from assets held for sale (note 19) At 26 March 2022 Additions Disposals Transfer to assets held for sale (note 19) Land & buildings – owned & used £m Land & buildings – owned & acting as lessor £m Plant, machinery & vehicles £m Fixtures & fittings £m 479.2 11.3 (1.3) (1.5) 2.4 490.1 12.0 (1.4) (7.8) 107.8 1.8 – – – 109.6 2.3 (0.3) – 186.8 796.1 2.5 116.0 Total £m 763.0 22.7 (3.2) (1.9) 3.0 783.6 30.0 (8.3) (9.2) 172.8 17.9 (3.2) 3.3 (0.4) 0.5 190.9 19.1 (7.1) 13.4 (3.5) 171.2 9.6 (1.9) (0.4) 0.6 179.1 15.7 (6.6) (1.4) 13.1 (1.9) – (0.3) 0.5 127.4 13.3 (6.3) – (1.2) 133.2 212.8 53.6 51.7 55.2 583.3 592.7 590.2 4.8 – – – – 4.8 – – – 4.8 – – – – – 2.5 – – – – 2.5 2.3 2.3 2.3 At 1 April 2023 492.9 111.6 Depreciation and impairment At 27 March 2021 Provided during the year Disposals Impairment loss Transfer to assets held for sale (note 19) Transfer from asset held for sale At 26 March 2022 Provided during the year Disposals Impairment loss Transfer to assets held for sale (note 19) At 1 April 2023 Net book value at 1 April 2023 Net book value at 26 March 2022 Net book value at 27 March 2021 44.6 4.2 (1.3) 3.3 (0.1) – 50.7 4.8 (0.8) 13.4 (2.3) 65.8 9.7 0.6 – – – – 10.3 1.0 – – – 11.3 427.1 439.4 434.6 100.3 99.3 98.1 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 139 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 12. Investment Properties Cost at 27 March 2021 Transfer to assets held for sale Disposals Cost at 26 March 2022 Disposals At 1 April 2023 Depreciation and impairment at 27 March 2021 Provided during the year Transfer to asset held for sale At 26 March 2022 Provided during the year At 1 April 2023 Net book value at 1 April 2023 Net book value at 26 March 2022 Net book value at 27 March 2021 Fair value at 1 April 2023 Fair value at 26 March 2022 Fair value at 27 March 2021 Group and Company Freehold and leasehold properties £m 3.3 (1.5) (0.1) 1.7 (0.1) 1.6 0.2 – (0.1) 0.1 – 0.1 1.5 1.6 3.1 6.7 8.4 15.0 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. Impairment The Group considers each trading outlet to be a 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 and its value in use. During the 53 weeks ended 1 April 2023, the Group did not impair any investment properties (2022: £nil). Management have determined that the highest and best use of the property is its current use. 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 All direct operating expenses relate to properties that generate rental income. 2023 £m 0.3 – 2022 £m 0.4 (0.1) 140 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued13. Impairment During the year, impairment losses of £14.3 million (2022: £3.3 million) were recognised within separately disclosed items: Group Impairment losses Property, plant and equipment Right-of-use assets Assets held for sale Total net impairment charge Company Impairment losses Property, plant and equipment Right-of-use assets Assets held for sale Investments in subsidiaries1 Total net impairment charge 2023 £m 13.4 0.5 0.4 14.3 2023 £m 13.4 0.5 0.4 – 14.3 2022 £m 3.3 – – 3.3 2022 £m 3.3 – – 0.2 3.5 1 Investment of Cotswold Inns & Hotels was impaired by £0.4 million as the majority of the trade and assets have been hived up into the Parent Company (2022: £0.2 million). Property, Plant and Equipment and Right-of-use Assets The Group considers each trading outlet to be a 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 have used a discounted cash flow approach. The calculations use cash flow projections based on the following plans covering a three year period. The Group uses a range of methods for estimating FVLCS which include applying a market multiple to the CGU EBITDA and, for leasehold sites, present value techniques using a discounted cash flow method. The Group has also obtained valuations for a subset of these CGUs from a third party property valuation expert. Both FVLCS methods rely on inputs not normally observable by market participants and are therefore Level 3 measurements in the fair value hierarchy. The key assumptions used by management in setting the Board approved financial budgets for the initial three year period were as follows: • Trading volumes and forecast growth rates: the forecasts make assumptions on trading volumes by site based on the FY2023 results, assumptions around the UK economic recovery and the on-going impact on consumer confidence • Operating profits: the forecast are based on historical experience of operating margins, adjusted for the impact of inflation most notably food, utilities, and wage inflation. The forecast assumes some of these cost pressures to abate as we move through FY2024 and into FY2025 • Local factors impacting the site in the current year or expected to impact the site in future years. Key assumptions include the future potential of recently invested sites and the impact of increasing or reducing market supply in the local area. Other assumptions used: • A long-term growth rate of 2.0% (2022: 2.0%) was used for cash flows subsequent to the three year approved budget/forecast period. • An EBITDA multiple is estimated based on a normalised trading basis and market data obtained from external sources. An average multiple of 10.5x (freehold 11.8x) is used for the managed estate and 10.9x on the Tenanted estate. • The discount rate is based on the Group’s weighted average cost of capital, which is used across all CGUs due to their similar characteristics. The pre tax discount rate is 10.3% (2022: 8.6%). 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 53 weeks ended 1 April 2023, the Group recognised an impairment loss of £13.4 million (FY2022: £3.3 million) on property, plant and equipment and  £0.5 million (FY2022: £nil million) of impairment on right-of-use assets in respect of the write down of twenty two licensed properties where their asset values exceeded the higher of FVLCS or their value in use. The impairment losses were driven principally by changes in the local competitive environment in which the pubs are situated. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 141 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 13. Impairment continued Sensitivity to Changes in Assumptions 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. The key assumptions above have their assigned values based on management knowledge and historical information. The value in use calculations are sensitive to the assumptions used. The Directors consider a movement of 1.5% 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 1.5% Decrease discount rate by 1.5% Increase growth rate by 0.5% Decrease growth rate by 0.5% 2023 £m 24.7 (15.8) (5.3) 6.7 2022 £m 11.1 (4.4) (1.5) 3.3 The value in use calculation is also sensitive to variations in the budgeted cash flows, which represents the rate of recovery from the pandemic, the inflationary environment and the consumer behaviour as a result of it. The CGUs represented by the “impact on impairment of assets at risk” would have their FVLCS determined in order to conclude 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. In the current year, a decrease of 5% in the FVLCS would have led to an additional impairment of £1.9 million for the CGUs where recoverable amount has been assessed on FVLCS. Goodwill Goodwill acquired through business combinations has been allocated for impairment testing on an estate and divisional CGU 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 same cash flows as discussed under property, plant and equipment. 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. Sensitivity to Changes in Assumptions Management have considered reasonable changes in key assumptions used in their calculations of value in use. An increase of 1.5% in the discount rate or decrease in the growth of 0.5% would not result in an impairment. Investment Property The Group considers each trading outlet to be a CGU and each CGU is reviewed annually for indicators of impairment. During the 53 weeks ended 1April 2023, the Group did not impair any investment properties (2022: £nil). Refer to note 12. 14. Other Financial Assets and Liabilities Group and Company Interest rate cap and collar Interest rate swaps Total financial assets/(liabilities) within non-current assets/(liabilities) Details of the interest rate cap and collar and interest rate swaps are provided in note 25c (i). Group 2023 £m 0.1 – 0.1 Group 2022 £m – (0.1) (0.1) Company 2023 £m 0.1 – 0.1 Company 2022 £m – (0.1) (0.1) 142 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued15. Investments in Subsidiaries Company At 27 March 2021 Impairment At 26 March 2022 Impairment At 1 April 2023 Principal subsidiary undertakings Griffin Catering Services Limited George Gale and Company Limited F.S.T. Trustee Limited Fuller Smith & Turner Estates Limited Ringwoods Limited Griffin Inns LTD. 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 Cost £m 120.8 – 120.8 – 120.8 Provision £m Net book value £m (11.5) (0.2) (11.7) (0.4) (12.1) 109.3 (0.2) 109.1 (0.4) 108.7 Proportion held 100% (indirect) Nature of business Managed houses service company Holding £1 ordinary shares £1 ordinary shares 25p ‘A’ ordinary shares £10 preference 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 £1 ordinary shares £1 ordinary shares 100% 100% 100% 100% 100% 100% 100% 100% 100% (indirect) 100% (indirect) 100% 100% 100% (indirect) 100% (indirect) 100% (indirect) 100% (indirect) 100% (indirect) 100% (indirect) £1 ordinary shares 100% Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Holding company Holding company Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Non-trading subsidiary Holding company Cotswold Inns and Hotels Limited £1 ordinary shares 100% (indirect) Non-trading subsidiary 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 143 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10416. Leases This note provides information for leases where the Group is a lessee. For leases where the Group is a lessor, see note 28. a) Amounts Recognised in the Balance Sheet Group and Company Right-of-use assets Properties Equipment Vehicles Lease liabilities Current Non-current Group 2023 £m 66.2 0.2 – 66.4 4.8 67.0 71.8 Group 2022 £m 73.1 0.6 0.1 73.8 6.8 73.9 80.7 Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: Company 2023 £m Company 2022 £m 65.8 0.2 – 66.0 4.7 66.6 71.3 Group Net carrying value at 27 March 2021 Lease amendments- rent concessions Lease amendments1 Depreciation Net carrying value as at 26 March 2022 Disposals Lease amendments1 Depreciation Impairment Net carrying value as at 1 April 2023 Company Net carrying value at 27 March 2021 Lease amendments- rent concessions Lease amendments1 Depreciation Net carrying value as at 26 March 2022 Disposals Lease amendments1 Depreciation Impairment Net carrying value as at 1 April 2023 Property £m Equipment £m Vehicles £m 81.3 (2.6) 1.3 (6.9) 73.1 (1.0) 1.3 (6.7) (0.5) 66.2 Property £m 80.8 (2.6) 1.3 (6.9) 72.6 (1.0) 1.3 (6.6) (0.5) 65.8 0.2 – 1.1 (0.7) 0.6 – – (0.4) – 0.2 0.4 – (0.2) (0.1) 0.1 – (0.1) – – – Equipment £m Vehicles £m 0.2 – 1.1 (0.7) 0.6 – – (0.4) – 0.2 0.4 – (0.2) (0.1) 0.1 – (0.1) – – – 1 Lease amendments include lease terminations, modifications, reassessments and extensions to existing lease agreements. 144 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 72.6 0.6 0.1 73.3 6.5 72.8 79.3 Total £m 81.9 (2.6) 2.2 (7.7) 73.8 (1.0) 1.2 (7.1) (0.5) 66.4 Total £m 81.4 (2.6) 2.2 (7.7) 73.3 (1.0) 1.2 (7.0) (0.5) 66.0 Notes to the Financial StatementsContinuedSet out below are the carrying amounts of lease liabilities (included under interest bearing loans and borrowings) and the movements during the period: Net carrying value at 27 March 2021 Disposals Lease amendments- rent concessions Lease amendments1 Accretion of interest Payments Net carrying value as at 26 March 2022 Disposal Lease amendments1 Accretion of interest Payments2 Net carrying value as at 1 April 2023 1 Lease amendments include lease terminations, modifications, reassessments and extensions to existing lease agreements. 2 £1.5 million of the payments were payments in advance for FY2024. A maturity analysis of gross lease liability payments is included within note 25. b) Amounts Recognised in the Income Statement Group Depreciation charge on right-of-use assets Properties Equipment Vehicles Interest expense (included in finance cost) Expense relating to short-term leases and low value assets (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 The Group’s total cash outflow in relation to leases in 2023 was £9.9 million (2022: £8.6 million). Group £m 89.9 (3.1) (2.6) 2.2 3.1 (8.8) 80.7 (3.1) 1.2 2.9 (9.9) 71.8 Company £m 88.3 (3.1) (2.6) 2.2 3.0 (8.5) 79.3 (2.3) 1.2 2.9 (9.8) 71.3 53 weeks ended 01 April 2023 £m 52 weeks ended 27 March 2022 £m 6.7 0.4 – 7.1 2.9 0.2 3.5 0.5 (0.2) 6.9 6.9 0.7 0.1 7.7 3.1 0.4 1.4 – (0.2) 4.7 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. Variable lease payments recognised in the Income Statement in the year ended 1 April 2023 were £3.5 million (2022: £1.4 million). 17. Inventories Group and Company Stock at trading outlets Group 2023 £m 4.2 Group 2022 £m 3.6 Company 2023 £m 4.2 Company 2022 £m 3.6 Amounts recognised in profit or loss Inventories recognised as an expense during the year ended 1 April 2023 amounted to £73.6 million (2022: £53.2 million). These were included in operating costs. Inventory is stated net of a provision for obsolete stock of £0.2 million (2022: £0.2 million). Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 145 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10418. Trade and Other Receivables Group Trade receivables Other receivables Prepayments and accrued income Company Trade receivables Other receivables Prepayments and accrued income 2023 £m 1.6 1.4 7.2 10.2 2023 £m 1.6 1.4 7.2 10.2 2022 £m 1.6 4.8 4.3 10.7 2022 £m 1.6 4.8 4.3 10.7 At 1 April 2023, the Group has included in other receivables £0.3 million (2022: £0.6 million) in relation to lease receivable for subleases. The trade receivables balance above is shown net of the loss allowance. The Group and Company provide against trade receivables based on an expected credit loss model, calculated from the probability of default for the remaining life of the asset. 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 according 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 affecting the customer’s ability to settle the amount outstanding. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. The movements on the loss allowance during the year are summarised below: Group and Company Opening balance (Decrease) in loss allowance recognised in profit and loss Amounts released for balances written off during the year Closing balance 2023 £m 0.9 – (0.1) 0.8 2022 £m 1.0 (0.1) – 0.9 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 between 60 and 90 days Overdue more than 90 days Trade receivables before loss allowance Less provision Trade receivables net of loss allowance Group 2023 £m 1.1 0.5 0.1 – 0.7 2.4 (0.8) 1.6 Group 2022 £m 1.1 0.5 0.1 – 0.8 2.5 (0.9) 1.6 Company 2023 £m Company 2022 £m 1.1 0.5 0.1 – 0.7 2.4 (0.8) 1.6 1.1 0.5 0.1 – 0.8 2.5 (0.9) 1.6 146 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued19. Assets Held for Sale Assets held for sale as at 26 March 2022 Assets disposed of during the year Assets transferred from property, plant and equipment Impairment (note 13) Assets held for sale as at 1 April 2023 Group £m 5.4 (3.7) 5.7 (0.4) 7.0 Company £m 5.4 (3.7) 5.7 (0.4) 7.0 At 1 April 2023, seven properties have been classified as held for sale (2022: 19 properties). These properties were reclassified predominantly from property, plant and equipment as the carrying amounts of the properties identified are to be recovered principally through sale transactions rather than through continuing use. Sale is expected within 12 months from the reporting date. An impairment charge of £0.4 million was recognised on reclassifying the property to held for sale (2022: £nil). Valuations performed are based on observations of transactions involving properties of a similar nature, location and condition. Since this valuation was performed using a significant non-observable input, the fair value measurement can be categorised as a Level 3. 20. 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 2023 £m 19.0 4.7 7.6 19.9 3.4 54.6 2023 £m 19.0 143.1 4.7 7.6 19.9 3.4 197.7 2022 £m 24.4 4.3 7.2 18.2 3.0 57.1 2022 £m 24.4 136.7 4.3 7.2 18.2 3.0 193.8 Company amounts due to subsidiary undertakings of £143.1 million (2022: £136.7 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. The balance will unwind and be recognised as revenue in the following financial year. 21. Cash, Borrowings and Net Debt Cash and Short-Term Deposits Cash at bank and in hand Group 2023 £m 14.1 Group 2022 £m 15.6 Company 2023 £m 14.1 Company 2022 £m 15.6 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 147 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10421. Cash, Borrowings and Net Debt continued Borrowings Bank loans Debenture stock Preference shares Total borrowings Analysed as: Borrowings within current liabilities Borrowings within non-current liabilities Group 2023 £m 119.4 25.9 1.6 146.9 6.0 140.9 146.9 Group 2022 £m 120.0 25.9 1.6 147.5 120.0 27.5 147.5 Company 2023 £m 119.4 25.9 1.6 146.9 6.0 140.9 146.9 Company 2022 £m 120.0 25.9 1.6 147.5 120.0 27.5 147.5 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 25. Bank Loans Group and Company On 27 May 2022, the Group secured a new facility of £200 million, split between a revolving credit facility of £110 million and a term loan of £90 million, for a tenure of four years to May 2026. The new facilities bear an interest rate margin dependent on leverage covenant plus SONIA. Under the new agreement, there was a minimum liquidity requirement of £10 million until November 2022. From December 2022, there is a covenant suite which consists of net debt to EBITDA (leverage) and EBITDA to net finance charges to be tested quarterly. At 1 April 2023, £79.5 million (2022: £71.2 million) of the total of £200 million (2022: £191.7 million) committed bank facility was available and undrawn. The bank loans are repayable as follows: On demand or within one year Less: bank loan arrangement fees Current liabilities In the third to fifth year inclusive Less: bank loan arrangement fees Non-current liabilities Debenture Stock The debenture stocks are secured on specified fixed and floating assets of the Company and are redeemable on maturity. Debenture stocks are repayable as follows: On demand or within one year – 10.70% 1st Mortgage Debenture Stock 2023 Current liabilities In the first to second year inclusive – 10.70% 1st Mortgage Debenture Stock 2023 In greater than five years – 6.875% Debenture Stock 2028 (1st floating charge) Less: discount on issue Non-current liabilities 2023 £m – – – 120.5 (1.1) 119.4 2023 £m 6.0 6.0 – 20.0 (0.1) 19.9 2022 £m 120.6 (0.6) 120.0 – – – 2022 £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 23 for further details of the preference shares. 148 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinuedAnalysis of Net Debt Group 53 weeks ended 1 April 2023 Cash and cash equivalents: Cash and short-term deposits Financial liabilities: Lease liabilities Debt: Bank loans2 Debenture stock Preference shares Total borrowings Net debt 52 weeks ended 26 March 2022 Cash and cash equivalents: Cash and short-term deposits Financial liabilities: Lease liabilities Debt: Bank loans2 CCFF Debenture stock Preference shares Total borrowings Net debt At 26 March 2022 £m 15.6 15.6 (80.7) (80.7) (120.0) (25.9) (1.6) (147.5) (212.6) At 27 March 2021 £m 17.1 17.1 (89.9) (89.9) (107.9) (99.8) (25.9) (1.6) (235.2) (308.0) Cash flows £m Non-cash1 £m (1.5) (1.5) 11.9 11.9 1.5 – – 1.5 11.9 – – (3.0) (3.0) (0.9) – – (0.9) (3.9) Cash flows £m Non-cash1 £m (1.5) (1.5) 10.5 10.5 (11.4) 100.0 – – 88.6 97.6 – – (1.3) (1.3) (0.7) (0.2) – – (0.9) (2.2) At 1 April 2023 £m 14.1 14.1 (71.8) (71.8) (119.4) (25.9) (1.6) (146.9) (204.6) At 26 March 2022 £m 15.6 15.6 (80.7) (80.7) (120.0) – (25.9) (1.6) (147.5) (212.6) 1 Non-cash movements relate to the amortisation of arrangement fees, arrangement fees accrued and movements in lease liabilities. 2 Bank loans are net of arrangement fees and cash flows include the payment of arrangement fees. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 149 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10421. Cash, Borrowings and Net Debt continued Company 53 weeks ended 1 April 2023 Cash and cash equivalents: Cash and short-term deposits Financial liabilities: Lease liabilities Debt: Bank loans2 Debenture stock Preference shares Total borrowings Net debt 52 weeks ended 26 March 2022 Cash and cash equivalents: Cash and short-term deposits Financial liabilities: Lease liabilities Debt: Bank loans2 CCFF Debenture stock Preference shares Total borrowings Net debt At 26 March 2022 £m 15.6 15.6 (79.3) (79.3) (120.0) (25.9) (1.6) (147.5) (211.2) At 27 March 2021 £m 16.9 16.9 (88.3) (88.3) (107.9) (99.8) (25.9) (1.6) (235.2) (306.6) Cash flows £m Non-cash1 £m (1.5) (1.5) 11.4 11.4 1.5 – – 1.5 11.4 – – (3.4) (3.4) (0.9) – – (0.9) (4.3) Cash flows £m Non-cash1 £m (1.3) (1.3) 10.2 10.2 (11.4) 100.0 – – 88.6 97.5 – – (1.2) (1.2) (0.7) (0.2) – – (0.9) (2.1) At 1 April 2023 £m 14.1 14.1 (71.3) (71.3) (119.4) (25.9) (1.6) (146.9) (204.1) At 26 March 2022 £m 15.6 15.6 (79.3) (79.3) (120.0) – (25.9) (1.6) (147.5) (211.2) 1 Non-cash movements relate to the amortisation of arrangement fees, arrangement fees accrued and movements in lease liabilities. 2 Bank loans are net of arrangement fees and cash flows include the payment of arrangement fees. 22. 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 an 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 future accrual. The Group also operates a 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 Group offers workplace pensions to all employees who are not members of the defined contribution stakeholder pension plan. The Group offers these pensions through the National Employment Savings Trust (“NEST”). 150 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued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 (Credited)/charged to Income Statement: Defined benefit scheme – net finance credit – separately disclosed items Defined contribution schemes and NEST – total operating charge Charge/(Credit) to equity: Defined benefit schemes – net actuarial loss/(gains) Total pension charge/(credit) 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m (0.5) 2.2 1.7 2.5 4.2 – 1.9 1.9 (15.5) (13.6) 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. In April 2023, the 2022 triennial valuation was concluded, and the Company has agreed to continue to pay contributions into the Plan in line with the existing recovery plan. Under this plan, deficit reduction contributions started at £2.2 million per annum in July 2022. These are payable in equal monthly instalments and increase each January in line with CPI. As of January 2023, the deficit reduction contributions have increased to £2.4 million. Fixed security over certain Company’s freehold properties (with a net book value of £29.8 million at 1 April 2023) has been provided to the Plan as additional security, the value of which will be reviewed at each triennial valuation. The next triennial valuation is due on 30 July 2025. 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 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 2023 Years 22.0 24.2 23.3 25.7 2022 Years 22.2 24.5 23.6 25.9 The Scheme is now closed to future accrual. The average age of the members who were active at closure is 58 for males and 55 for females. The average age of all non-pensioners is 57. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 151 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10422. Pensions continued 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 (pre 2030/post 2030) 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 2023 3.20% 4.75% 3.20% 2022 3.75% 3.00% 3.80% 2.3%/3.2% 2.9%/3.8% 2023 £m (1.2) 0.1 3.9 2022 £m (2.1) 1.3 6.2 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 Index linked debt instruments Overseas equities Alternatives1 Cash Annuities Total market value of assets 1 Alternatives is composed of holdings in diversified growth investment funds. Fair value of Scheme assets Present value of Scheme liabilities Surplus in the Scheme At 1 April 2023 £m At 26 March 2022 £m 56.4 28.7 6.6 19.0 0.3 2.4 113.4 2023 £m 113.4 (98.8) 14.6 25.0 26.0 31.5 56.5 1.6 3.3 143.9 2022 £m 143.9 (129.6) 14.3 Included within the total present value of Group and Company Scheme liabilities of £98.8 million (2021: £129.6 million) are liabilities of £1.5 million (2022: £1.9 million) which are entirely unfunded. These have been shown separately on the Balance Sheet as there is no right to offset the assets of the funded Scheme against the unfunded Scheme. 152 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinuedBalance at beginning of the year Included in profit and loss Net interest credit Included in other comprehensive Income Actuarial (losses)/gain relating to: Actual return less expected return on Scheme’s assets Experience gains arising on Scheme liabilities Other Employer contributions Benefits paid Balance at end of the year Defined benefit obligation Fair value of Scheme assets Net defined benefit surplus 2023 £m (129.6) (3.9) (3.9) – 29.5 29.5 – 5.2 5.2 (98.8) 2022 £m (147.3) (2.8) (2.8) – 14.9 14.9 – 5.6 5.6 (129.6) 2023 £m 143.9 4.4 4.4 (32.0) – (32.0) 2.3 (5.2) (2.9) 113.4 2022 £m 143.8 2.8 2.8 0.6 – 0.6 2.3 (5.6) (3.3) 143.9 2023 £m 14.3 0.5 0.5 (32.0) 29.5 (2.5) 2.3 – 2.3 14.6 2022 £m (3.5) – – 0.6 14.9 15.5 2.3 – 2.3 14.3 The weighted average duration of the Scheme’s liabilities at the end of the period is 17 years (2022: 17 years). The total contributions to the Scheme in the next financial year are expected to be £2.4 million for the Group and Company. Following the conclusion of the 2022 triennial valuation in April 2023, it was agreed that the Company would continue to pay contributions in line with the deficit recovery plan. Under this plan, deficit reduction contributions started at £2.2 million per annum in July 2022. These are payable in equal monthly instalments and increase each January in line with CPI. As of January 2023, the deficit reduction contributions have increased to £2.4 million. The recovery deficit plan will be reviewed at the next triennial valuation, which is due on 30 July 2025. No further payments are made as the Scheme is now closed to future accrual. 23. Preference Share Capital Group and Company Authorised, issued and fully paid share capital Number authorised and in issue: At 1 April 2023 and 26 March 2022 Monetary amount: At 1 April 2023 and 26 March 2022 First 6% cumulative preference share of £1 each Number 000s Second 8% cumulative preference share of £1 each Number 000s 400 1,200 £m 0.4 £m 1.2 Total Number 000s 1,600 £m 1.6 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 153 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10424. Provisions Group and Company Balance at the beginning of the year Utilised Released Balance at the end of the year Analysed as: Due within one year Due in more than one year 25. 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 33. 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 Merger reserve Retained earnings Preference shares Legal claim 2023 £m 0.5 – – 0.5 2023 £m 0.5 – 0.5 2023 £m 25.4 53.2 3.7 – 381.6 1.6 465.5 2023 £m 25.4 53.2 3.7 – (1.6) 325.6 1.6 407.9 2022 £m 4.0 (1.4) (2.1) 0.5 2022 £m 0.5 – 0.5 2022 £m 25.4 53.2 3.7 (0.1) 383.6 1.6 467.4 2022 £m 25.4 53.2 3.7 (0.1) (1.6) 335.1 1.6 417.3 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, investment requirements and comply with lending covenants. As a minimum, the Board reviews the Group’s dividend policy twice yearly and reviews the treasury position at every Board meeting. 154 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued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 Derivative financial instruments used for hedging Total current assets Current assets Trade and other receivables in scope of IFRS 9 Total current assets Total financial assets Current liabilities Financial liabilities at amortised cost: Trade and other payables in scope of IFRS 9 Lease liabilities Loans Total carried at amortised cost Derivative financial instruments used for hedging Total current liabilities Non-current liabilities Derivative financial instruments used for hedging Financial liabilities at amortised cost: Lease liabilities Loans and debenture stock Preference shares Total carried at amortised cost Total non-current liabilities Total financial liabilities 2023 £m 0.1 0.1 1.6 1.6 1.7 22.9 4.8 6.0 33.7 – 33.7 – 67.0 139.3 1.6 207.9 207.9 241.6 2022 £m – – 1.6 1.6 1.6 27.9 6.8 120.0 154.7 0.1 154.8 – 73.9 25.9 1.6 101.4 101.4 256.2 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 155 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10425. Financial Instruments continued Company Non-current assets Derivative financial instruments used for hedging Total non-current assets Current assets Trade and other receivables in scope of IFRS 9 Total current assets Total financial assets Current liabilities Financial liabilities at amortised cost: Trade and other payables in scope of IFRS 9 Lease liabilities Loans Total carried at amortised cost Derivative financial instruments used for hedging Total current liabilities Non-current liabilities Derivative financial instruments used for hedging Financial liabilities at amortised cost: Lease liabilities Loans and debenture stock Preference shares Total carried at amortised cost Total non-current liabilities Total financial liabilities 2023 £m 0.1 0.1 1.6 1.6 1.7 166.0 4.7 6.0 176.7 – 176.7 – 66.6 139.3 1.6 207.5 207.5 384.2 2022 £m – – 1.6 1.6 1.6 164.6 6.5 120.0 291.1 0.1 291.2 – 72.8 25.9 1.6 100.3 100.3 391.4 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 swaps. 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. 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 (2022: £25.9 million), net of interest paid in advance, are at fixed rates. The bank loans totalling £200 million (2022: £120 million), net of arrangement fees, are at floating rates. At the year end, after taking account of the interest rate collar, 50% interest rate swaps 2022: 17%) of the Group’s bank loans and 60% (2022: 32%) of gross borrowings were at fixed rates or hedged. Interest rate collar The Group has entered into interest rate collar agreement, where the Group sold a floor and bought a cap, in order to hedge the risk in interest cash flows on its borrowings going higher than the cap. At the Balance Sheet date, £60 million of the Group’s and Company’s borrowings were hedged by interest rate collar at floor and cap rate of 3.10% and 5.00% respectively. At 26 March 2022, £20 million of the Group’s and Company’s borrowings were hedged by interest rate swaps at a blended fixed rate of 2.34%. The swap active at 26 March 2022 expired in August 2022. The interest rate collar is expected to impact the Income Statement in line with the liquidity risk table shown in section (iii) below. The interest rate collar cash flow hedge in effect at 1 April 2023 was assessed as being highly effective. Net unrealised gain of £0.1 million (2022: £0.5 million) has been recorded in other comprehensive income. 156 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinuedSensitivity – Group and Company The Group borrows in Sterling at market rates. Three month Sterling SONIA rate during the 53 weeks ended 1 April 2023 ranged between 0.69% and 4.17%. 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 20). Group 2023 £m 0.8 (1.5) 2022 £m 0.5 (1.0) Company1 2023 £m 1.3 (3.6) 2022 £m 1.0 (2.1) ii. Credit risk The risk of financial loss due to a counter party’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 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 18. 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: 1% (2022: 15%) of the Group’s borrowings are repayable after more than five years, 95% (2022: 4%) within the first to fifth years and 4% (2022: 81%) within one year. The tables on the following page summarise the maturity profile of the Group’s financial liabilities at 1 April 2023 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 1 April 2023 Interest bearing loans and borrowings1 Preference shares2 Trade and other payables Lease liabilities On demand £m – – 19.0 – Less than 3 months £m 2.7 – 3.4 2.0 3 to 12 months £m 14.1 0.1 0.5 6.1 1 to 5 years £m 144.1 0.5 – 29.3 6 to 10 years £m – – – 29.5 1 Bank loans are included after taking account of the following cash flows in relation to the interest rate collar held in respect of these borrowings: Group at 26 March 2022 Interest bearing loans and borrowings1 Preference shares2 Trade and other payables Lease liabilities On demand £m – – 24.4 – Less than 3 months £m 1.9 – 3.0 2.3 3 to 12 months £m 125.4 0.1 0.5 6.8 1 to 5 years £m 12.0 0.5 – 27.3 6 to 10 years £m – – – 26.0 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 – 0.1 0.1 – More than 10 years £m 20.1 3.4 – 32.3 More than 10 years £m 21.5 3.4 – 39.4 – Total £m 181.0 4.0 22.9 99.2 Total £m 160.9 4.0 27.9 101.8 0.2 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 157 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10425. Financial Instruments continued The Company figures are as for the Group, except as follows: Company at 1 April 2023 Amounts due to subsidiary undertakings3 Trade and other payables Lease liabilities Company at 26 March 2022 Amounts due to subsidiary undertakings3 Trade and other payables Lease liabilities On demand £m 143.1 19.0 – 136.6 24.4 – Less than 3 months £m 3 to 12 months £m – 3.4 1.9 – 3.0 2.2 – 0.5 6.0 – 0.5 6.6 1 to 5 years £m – – 28.9 – – 26.2 6 to 10 years £m – – 29.5 – – 25.9 More than 10 years £m – – 32.3 – – 39.2 Total £m 143.1 22.9 98.6 136.6 27.9 100.1 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 £10.7 million (2022: £10.5 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. The Group has secured a new facility of £200 million, split between a RCF of £110 million and a term loan of £90 million, for a tenure of four years to May 2026. Under the new agreement, there is a covenant suite which consist of net debt to adjusted EBITDA (leverage) and adjusted EBITDA to net finance charges. See further details in note 21. d) Fair Value Group Financial assets Interest rate collar Financial liabilities Lease liabilities Fixed rate borrowings Floating rate borrowings Preference shares Interest rate swaps The Company figures are as for the Group above except for: Company Financial liabilities Lease liabilities Book value Fair value 2023 £m 0.1 (71.8) (25.9) (119.3) (1.6) – Book value 2023 £m (71.3) 2022 £m – (80.7) (25.9) (120.0) (1.6) (0.1) 2022 £m (79.3) 2023 £m 0.1 (71.8) (29.2) (119.3) (1.6) – Fair value 2023 £m (71.3) 2022 £m – (80.7) (32.0) (120.0) (1.6) (0.1) 2022 £m (88.3) Fair value Level 3 3 3 3 3 2 Fair value Level 3 158 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinued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, who 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. Interest rates for borrowings range from 1.5% to 10.7%. The fair values of preference shares have been calculated using the market interest rates. Management assessed that the fair values of cash and short-term deposits, trade receivables and other receivables, and trade and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments. There were no transfers between levels in the fair value hierarchy as at 1 April 2023 and 26 March 2022. 26. Share Capital and Reserves a) Share Capital Authorised, issued and fully paid Number in issue At 26 March 2022 At 1 April 2023 Proportion of total equity shares at 01 April 2023 Monetary amount At 26 March 2022 At 1 April 2023 ‘A’ ordinary shares of 40p each Number 000s ‘C’ ordinary shares of 40p each Number 000s ‘B’ ordinary shares of 4p each Number 000s 41,082 41,082 28.6% £m 16.4 16.4 13,466 13,466 9.4% £m 5.4 5.4 89,052 89,052 62.0% £m 3.6 3.6 Total Number 000s 143,600 143,600 £m 25.4 25.4 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 23). 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). 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 159 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Total Own shares 000s 6,169 (241) 5,928 1,000 (11) 6,917 £m 17.0 (0.4) 16.6 4.8 (0.1) 6 – 6 – – 6 £m 0.1 – 0.1 – – 26. Share Capital and Reserves continued 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 options 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 ‘A’ ordinary 40p shares 000s ‘B’ ordinary 4p 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 At 1 April 2023 2,252 4,328 326 1,274 (11) 1,263 1,000 (11) 4,558 (230) 4,328 – – 326 – 326 – – £m 11.9 (0.1) 11.8 4.8 (0.1) 16.5 £m 4.6 (0.3) 4.3 – – 4.3 £m 0.3 – 0.3 – – 6 – 6 – – 6 £m 0.1 – 0.1 – – 5 – 5 – – 5 £m 0.1 – 0.1 – – 1,279 (11) 1,268 1,000 (11) 4,884 (230) 4,654 – – 2,257 4,654 £m 12.0 (0.1) 11.9 4.8 (0.1) £m 4.9 (0.3) 4.6 – – 4.6 Number At 27 March 2021 Shares released At 26 March 2022 Share Purchased Shares released Monetary amount At 27 March 2021 Shares released At 26 March 2022 Share Purchased Shares released At 1 April 2023 Market value at 1 April 2023 0.3 0.1 0.1 16.6 0.1 21.3 10.5 2.0 0.2 – – 10.5 2.2 – 12.7 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. Capital redemption reserve The capital redemption reserve balance arises from the buy-back of the Company’s own equity share capital. Hedging reserve The hedging reserve contains the effective portion of the cash flow hedge relationships incurred at the Balance Sheet date, net of tax. Merger reserve The merger reserve balance arises from the hive up of Bel & The Dragon. 27. Share Options and Share Schemes The key points of each of the Group’s share schemes for grants up to 1 April 2023 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 pre-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. Executive Share Option Scheme This is an approved Executive Share Option Scheme. For grants up to the year ended 28 March 2020 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. For grants made during the year ended 27 March 2021 options vest if a set EBITDA target is achieved. For grants made during the year ended 26 March 2022 onwards, the options vest if a set pre-tax Adjusted EPS target is achieved. The options must then be exercised within seven years after the end of the performance period. 160 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Notes to the Financial StatementsContinuedLTIP This plan grants conditional share awards. Up until the LTIP granted during the year ended 28 March 2020 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, with vesting levels on a sliding scale from 40% up to 100%, if growth in Adjusted EPS exceeds growth in RPI by 24% or more. From the LTIP granted during the year ended 27 March 2021 vesting is conditional upon pre-tax Adjusted EPS targets, with vesting levels on a sliding scale from 25% up to 100% dependent on the level of EPS achieved. An independent firm of advisors verifies the vesting level each year. The initial vesting period is three years and, for Executive Directors, is followed by a two year holding period. After this time the shares may be passed to the plan participants, as long as vesting conditions are met. A one-off Recovery LTIP was granted during the year ended 26 March 2022. Vesting is conditional upon Group EBITDA (excluding IFRS 16) targets, with vesting levels on a sliding scale from 25% up to 100% dependent on the level of EBITDA achieved. The initial vesting period is three years and is followed by a two year holding period. 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 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 53 weeks ended 1 April 2023 is £0.4 million credit (2022: £0.8 million expense). The whole of that expense arises from equity-settled share-based payment transactions. Market value The market value of the shares at 1 April 2023 was £4.65 (2022: £6.20). 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. 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 2022 WAEP £4.79 £5.43 £5.43 £7.66 £4.70 £7.70 2023 Number 000s 474 131 (130) (5) 470 – £4.79 2.0 years £5.14 £1.98 £4.19 £8.12 2023 WAEP £4.70 £4.29 £4.78 £4.35 £4.49 n/a 2022 Number 000s 460 130 (105) (11) 474 4 £7.35 2.7 years £6.40 £0.77 £4.35 £8.12 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 161 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10427. Share Options and Share Schemes continued Outstanding share options granted to employees under the SAYE scheme are as follows: Exercisable at September 2021 September 2022 September 2023 November 2023 December 2024 November 2025 December 2025 December 2026 December 2027 Exercise price 40p shares £ Number of ‘A’ ordinary shares under option 2023 000s Number of ‘A’ ordinary shares under option 2022 000s 7.70 8.12 7.70 4.35 5.43 4.35 4.19 5.43 4.19 – – – 149 51 112 99 27 32 470 4 2 2 187 76 149 – 54 – 474 2022 WAEP £7.46 – £9.00 – £7.23 £9.17 b) Share Option Schemes Executive Share Option Scheme 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 2023 Number 000s 184 41 (35) (5) 185 12 £6.02 7.61 years £6.30 £1.65 £6.00 £10.90 2023 WAEP £7.23 £6.92 £10.24 £5.78 £7.46 £9.03 2022 Number 000s 212 – (28) – 184 25 n/a 8.84 years n/a n/a £6.92 £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 2015 and 2022 2016 and 2023 2017 and 2024 2018 and 2025 2021 and 2028 2022 and 2029 2024 and 2031 2025 and 2032 162 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Executive Approved Scheme Number of ‘A’ ordinary shares under option 2023 000s Number of ‘A’ ordinary shares under option 2022 000s Exercise price 40p shares £ 7.05 9.10 9.65 10.90 9.46 9.61 6.92 6.00 – 7 5 – – – 137 36 185 5 9 5 5 1 – 159 – 184 Notes to the Financial StatementsContinuedc) LTIP Shares Outstanding at the beginning of the year Granted Lapsed Outstanding at the end of the year Weighted average share price for shares vested in the year For shares outstanding at the year end, the weighted average contractual life remaining is Weighted average share price for shares granted in the year Weighted average fair value of shares granted during the year All LTIPs have a vesting price of £nil. LTIP shares do not receive dividends until vested. 2023 ‘A’ shares Number 000s 2023 ‘B’ shares Number 000s 2022 ‘A’ shares Number 000s 2022 ‘B’ shares Number 000s 782 248 (104) 926 1,954 620 (261) 2,313 n/a n/a 404 533 (155) 782 n/a 1,009 1,332 (388) 1,953 n/a 1.52 years 1.52 years £6.30 £5.60 £0.63 £0.56 2.12 years 2.12 years £7.40 £7.16 £0.74 £0.72 d) SIP Outstanding at the beginning of the year Released1 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 1 Shares have been issued from treasury shares. 2023 Number 000s 73 (32) 41 £5.18 0.77 years n/a n/a 2022 Number 000s 112 (39) 73 £7.17 1.32 years n/a n/a 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 53 weeks ended 1 April 2023 and 52 weeks ended 26 March 2022, 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 (%) Expected life of option/award (years) Model used LTIP scheme SAYE Executive Share Option Scheme 2023 1.9% n/a 1.8% 2022 1.1% n/a 0.5% 3 years Black Scholes 3 years Black Scholes 2023 2.2% 41.2%–45.6% 3.3% 3 to 5 years Black Scholes 2022 1.3% 2.3–2.7% (0.1%) 3 to 5 years Black Scholes 2023 1.9% 45.1% 1.8% 4 years Black Scholes 2022 n/a n/a n/a n/a n/a 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. Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 163 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-10428. Guarantees and 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 1 April 2023, future minimum rentals receivable are as follows: Group Within one year One to two years Two to three years Three to four years Four to five years After five years Company Within one year One to two years Two to three years Three to four years Four to five years After five years Investment properties Property, plant and equipment 2023 £m 0.3 0.2 0.2 0.1 0.1 0.5 1.4 0.3 0.2 0.2 0.1 0.1 0.5 1.4 2022 £m 0.3 0.2 0.2 0.2 0.1 0.6 1.6 0.3 0.2 0.2 0.2 0.1 0.6 1.6 2023 £m 5.7 1.5 1.3 0.4 0.1 0.5 9.5 5.7 1.5 1.3 0.4 0.1 0.5 9.5 2022 £m 5.7 2.0 1.5 0.6 0.1 0.6 10.5 5.7 2.0 1.5 0.6 0.1 0.6 10.5 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 1 April 2023, future minimum rentals receivable under non-cancellable subleases included in the figures above were £1.2 million (2022: £2.0 million). b) Other Commitments Group and Company Capital commitments – authorised, contracted but not provided for 2023 £m 1.0 2022 £m 2.2 29. 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 £304,000 (2022: £394,000) 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 164 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 53 weeks ended 1 April 2023 £m 52 weeks ended 26 March 2022 £m 4.1 0.1 0.3 4.5 3.1 – 0.3 3.4 Notes to the Financial StatementsContinuedCompany Only During the year, the Company entered into the following related party transactions: 53 weeks ended 01 April 2023 Subsidiaries 52 weeks ended 26 March 2022 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 – 64.9 6.4 – (143.1) – 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 – 61.1 – 3.7 (136.7) – 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 also incurred rental expenses from subsidiaries of £0.1 million (2022: £0.3 million). 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 2023 for the period ended 1 April 2023 under Section 479A of the Companies Act 2006, all of which are fully consolidated in these financial statements: Company Griffin Catering Services Limited Jacomb Guinness Limited George Gale and Company 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 (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 Company Number 01577632 02934979 00026330 04279254 04271734 07292333 08029280 07320065 08377459 07309587 07320245 08392963 08975762 12035987 03309179 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 Ltd. Ringwoods Limited F.S.T. Trustee Limited Fuller Smith & Turner Estates Limited Company Number 00495934 00178536 03163480 01831674 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 165 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104Additional Information Directors, Advisors and Corporate Information Chairman Michael Turner, FCA, Non-Executive Chairman President Anthony Fuller, CBE Executive Directors Simon Emeny, Chief Executive Neil Smith, Finance Director, ACA Fred Turner, Retail Director, ACA Non-Executive Directors Juliette Stacey, ACA* Sir James Fuller, Bt Richard Fuller Helen Jones* Robin Rowland, OBE* * Independent 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 Rachel Spencer Pier House 86-93 Strand-on-the-Green London W4 3NN Tel: 020 8996 2105 Email: company.secretariat@fullers.co.uk Registered Number 241882 Auditors Ernst & Young LLP 1 More London Place London SE1 2AF 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 Email via website: www.investorcentre.co.uk/contactus Shareholder Information Registrars Any enquiries relating to shareholdings on the share register (for example, change of address, bank mandates, communication preferences) should be sent to the Company’s Registrars, Computershare. You can also manage your shareholding online at www.computershare.com/ investor/uk. Shareholders may at any time choose to receive notification of the availability of corporate communications on Fuller’s website by email or choose to receive them in printed form. To receive notifications of the availability of a corporate communication by email, or revoke or amend an instruction to receive such notifications by email go to www.computershare.com/ investor/uk or contact Computershare, quoting your shareholder reference number. Shareholder Privileges Individual shareholders with at least 1,000 ‘A’ or ‘C’ ordinary shares or 10,000 ‘B’ ordinary shares are eligible to receive a Shareholder Inndulgence Card. For any individual issued with a Card prior to 1 April 2022, continued eligibility will be based on the eligibility criteria at the time of issue, being at least 500 ‘A’ or ‘C’ ordinary shares or 5,000 ‘B’ ordinary shares. 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. Financial Calendar and Key Dates 20 July 2023 Annual General Meeting (11am) 16 November 2023 FY2024 Half year results announcement June 2024 FY2024 Full year results announcement Card holders are entitled to a 15% discount on food and drinks in any of our Managed Pubs and Hotels, including Bel & The Dragon and Cotswold Inns & Hotels. It also offers a 15% discount on the Best Flexible Rate or Standard Flexible B&B Rate for Beautiful Bedrooms by Fuller’s and Bel & The Dragon accommodation. There is currently no accommodation discount available with the Card at any of the Cotswold Inns & Hotel sites. Further information is available from the Company Secretariat. Redesignation of ‘C’ Shares ‘C’ ordinary shares can be redesignated as ‘A’ ordinary shares within 30 days of the full year 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. 166 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Glossary Adjusted earnings per share (“EPS”) measure provides useful information for shareholders as to the performance of the Group. – this is earnings per share, adjusted for separately disclosed items. The Directors believe that this Adjusted profits – this is profit before tax and before separately disclosed items. – this is an HM Treasury and Bank of England lending facility. CCFF – this is a claim for 80% of employees’ wages plus any employer National Insurance and pension contributions for staff on furlough through CJRS the Government’s Coronavirus Job Retention Scheme. – Customer Relationship Management. CRM Drinks, food and accommodation like for like sales growth like for like sales growth”. – this is measured on the same basis as “Managed Pubs and Hotels invested – this is the earnings before interest, tax, depreciation, profit on disposal of plant and equipment, and amortisation, adjusted for EBITDA separately disclosed items. – Executive Share Option Scheme. ESOS – Long-Term Incentive Plan. LTIP - Long term supply agreement LTSA Managed Pubs and Hotels invested like for like sales growth 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. – this is the sales growth calculated to exclude those pubs which have not – only the Company’s 40p ‘A’ ordinary shares are listed. The Company calculates its market capitalisation as the total of Market capitalisation 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, CCFF, debenture stock, preference shares and lease liabilities. – Net Promoter Score, a metric used to measure customer satisfaction. NPS Operating profit – this is profit before finance costs and tax and profit on disposal of properties. – Power purchase agreement is a contract that secures the long term supply of renewable energy. PPA – Savings Related Share Option Scheme. SAYE – Share Incentive Plan. SIP – Task Force on Climate-related Financial Disclosures, a framework developed by the Financial Stability Board for companies to report on TCFD how climate change will affect their business. Total annual dividend dividend proposed for approval by shareholders at the Annual General Meeting after the completion of the financial year. – the total annual dividend for a financial year comprises interim dividends paid during the financial year and the final – Unnecessary plastic lead to unintended environmental consequences by its removal, such as increased waste or carbon emissions. eliminating all plastic which is used instantaneously but is unnecessary for food safety purposes and its removal will not Working capital – calculated as current assets (trade receivables and inventory) less current liabilities (trade and other payables). Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. 167 FINANCIAL STATEMENTS105-165OVERVIEW0-03STRATEGIC REPORT04-65ADDITIONAL INFORMATION166-186GOVERNANCE66-104 2022 £m 253.8 18.5 (11.3) 7.2 4.3 11.5 (4.4) 7.1 – 7.1 44.3 2021 £m 73.4 (40.3) (8.4) (48.7) (10.5) (59.2) 9.6 Restated 2020 £m 319.7 27.0 (7.6) 19.4 146.8 166.2 (5.3) (49.6) 160.9 – (49.6) (13.1) – 160.9 53.9 Restated 2019 £m 324.7 40.0 (6.9) 33.1 (8.4) 24.7 (5.2) 19.5 (0.2) 19.3 59.5 713.8 702.5 757.1 595.3 3.6 11.3 5.4 15.6 749.7 (120.0) (64.5) 565.2 (27.5) (88.5) 2.1 15.5 9.6 17.1 746.8 (207.7) (39.4) 499.7 (27.5) (92.7) 449.2 379.5 4.0 18.6 2.6 20.3 802.6 (171.7) (50.7) 580.2 (27.5) (122.9) 429.8 5.0 8.4 87.0 11.0 706.7 (50.0) (62.9) 593.8 (206.2) (49.1) 338.5 2022 2021 2020 2019 11.59p 11.31p £7.27 9.79p (73.00)p 20.50p (89.84)p 291.89p – 132.80p £6.87 (212.6) (308.0) 25.8 4,240 16.5 4,219 £7.80 (291.8) 84.5 5,166 62.78p 35.12p 20.15p £6.16 (245.2) 58.6 5,399 2023 £m 336.6 25.1 (12.4) 12.7 (2.4) 10.3 (2.4) 7.9 – 7.9 51.8 696.4 4.2 10.9 7.0 14.1 732.6 (6.0) (59.9) 666.7 (140.9) (83.2) 442.6 2023 16.10p 12.98p 14.68p £7.27 (204.6) 30.7 5,247 Five Years’ Progress Group Income Statement Revenue and other income 1 Operating profit before separately disclosed items Finance costs before separately disclosed items Adjusted profit/(loss) before income tax Exceptional items and discontinued operations Profit/(loss) before income tax Taxation Profit/(loss) after income tax Non-controlling interest Profit/(loss) attributable to equity shareholders of the Parent Company EBITDA 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)3 Gross capital expenditure (£ million) Average number of employees 2 2020 includes ‘D’ share dividend. 3 Net debt from FY20 onwards includes amounts relating to leases under IFRS 16. 168 Annual Report and Accounts 2023 Fuller, Smith & Turner P.L.C. Design and production www.luminous.co.uk 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 Email: fullers@fullers.co.uk www.fullers.co.uk 

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