Fuller’s was left rueing the damage done by rail strikes in its latest trading update, which saw like-for-like sales down 5% in the four week Christmas and New Year period.
The pub company identified a sales impact of £4m – and analysts at Numis estimate this as a £3.2m cut to EBITDA.
The company previously indicated that the earlier strikes in the Autumn presented a £1.4m revenue impact with c.70% margin impact.
Given the nature of festive sales (wet-led sales, with higher gross margin) Numis factored in an 80% drop-through.
Reducing its FY23 EBITDA by c.6%, left its FY24 estimates unchanged, contingent on no continuation of industrial action beyond March.
Its current assumption for FY24 is managed sales at 101% of FY20 levels, and the analyst said it was positive in the medium-term potential for Fullers to grow profits and create value from its high quality, freehold estate.
Meanwhile investment bank Stifel estimates a ~£3m profit impact for Fuller’s from rail strikes in H2.
With another strike scheduled for February, the bank suggested the market could expect a ~£4m profit impact in H2 compared to consensus profit before tax of £17.7m for FY23.
Nonetheless Stifel said the pub company’s balance sheet remains strong, with £1bn of freehold property at 11% loan-to-value and scope to grow the estate, including through acquisitions, without stretching leverage.
Langton Capital said the strikes had clearly taken the shine off its numbers, lamenting what would be a disappointment for the company to miss its market estimates.
Still, Fuller’s had been able to say that it had “the best momentum in the sector” and, Langton said there will be hopes that the company can return to that trajectory in due course.
While Fuller’s shares have been “battered” over the recent year, they had recently stabilised, and investors will be heartened by the continued Central London recovery, Langton added.
Liberum said though flagged during its interims, the strike impact was “significantly worse” than feared.
This brings year-to-date like-for-like for FY23E to -3% vs FY20, having been on par over the autumn.
Liberum warned challenging trading conditions remain, with cost inflation and higher interest rates squeezing profits alongside further strikes.
The result is 25% cut to FY23E profit before tax from £17.7m to £13.3m, and 17% cut in FY24E from £23.2m to £19.3m.
With 44% of its estate is within the M25, and half of this in the more urban areas, as a result, LFL sales recovery momentum has stalled and still lags the wider market.
The broker said Fuller’s performance in non-strike interrupted periods has been more encouraging, but conditions remain challenging.
However, Fullers is optimistic that FY24E will deliver sales growth, with a busy calendar of events and a further return of office workers and tourists into London.
This reflects the broader trend in the sector, as measured by the Coffer CGA tracker, which had started to see within-M25 sales recover to positive LFL growth vs 2019 following a slower post-pandemic recovery as compared to the rest of the UK, Liberum added.
Peel Hunt’s 2023E profit before tax forecast was in line with consensus, with a downgrade of c.35%.
The broker also downgraded its 2024E profit before tax by c.20% - partly reflecting higher interest costs (c.80% of the debt is at floating rates).
Peel Hunt suggested there is an element of structural change, with train volumes consistently down more than 10% over the last two-three years, reflecting behavioural change.
In addition, cost inflation is high, some of which (e.g. labour) will not reverse, its analysts added.
