The changing face of the pub

Fuller's pubs serve breakfast in the morning and wine and cheese in the evening. It's proved a profitable strategy.

Revellers at pubs owned by Fuller, Smith & Turner are passing up on beer in favour of wine and cheese, the company has reported, unveiling its full-year figures. The Chiswick-based brewer has revealed record revenue for the last 12 months of £351m, up 8%, generating record profits of £32m. Beer volumes slipped, but were amply offsetby booming orders in food and wine. CEO Simon Emeny called it "another outstanding" performance and the company upped its dividend for the sixth year running.

Fuller's latest figures reflect "an industry-wide shift away from the traditional boozer", says Paul McClean in the Financial Times. Its coffee sales rose 17% to 1.4 million cups and it is now targeting two million cups, while sales of New Zealand sauvignon blanc rose 49%. The firm has even launched its own range of ice cream and has begun opening its pubs for breakfast, mimicking McDonald's, eking out higher returns from its existing outlets.

Fuller's performance was flattered by a late Easter last year and the Rugby World Cup in the autumn. The government's hike to the minimum wage also "has to be paid for", Simon Emeny said, costing the company an extra £2m each year. But an upcoming summer of sport, including Euro 2016, plus longer opening hours last weekend to celebrate the Queen's 90th birthday, will flow straight into Fuller's tills. "If England does well it gives us a boost and gets everybody outinto the pub."

London-based pub groups are a buy-and-hold investment, according to Nick Train at fund manager Lindsell Train, which has more than tripled its money in Fuller's. One-off sporting events are not a reason to buy the shares. They just make it harder for companies to match sales the following year. But London-based pubs are a cash-generative play on the city's property market. Fuller's has 191 pubs across London, with another 200 tenanted. It also spent £11m last year buying five new ones, expanding into London's suburbs, encompassing Lewisham and Hornsey.

That could cause short-term pain. London's property market is highly correlated to sterling, which has taken a thumping as the Brexit vote has edged ahead in the polls. Fuller's shares have taken a hit, falling 13% this year. Neptune's fund manager Mark Martin says he has trimmed his stake because of the risk of a Brexit vote, while Fuller's management has admitted that the referendum "can't come soon enough".

If Britain votes to leave the EU and England is booted out of Euro 2016 early (neither of which would be a big surprise), Fuller's could crash to the floor. It would be a valuable buying opportunity.