Chestnut Group is keen to drive forward its acquisition strategy in East Anglia and has a strengthened senior team ready to take on larger transactions, founder and chief executive Philip Turner told MCA.
The business has grown to 17-sites since it was founded nine years ago, with five acquired during the pandemic, but in order to ready itself for the next phase of growth “it was clear we needed to create some deeper expertise within finance”.
In light of this, the group recently announced the appointments of Garrath Fulford as its new chief financial officer and Ted Child as head of finance. “Finance should be a partner for our ops division, not just a finance function that processes numbers,” he said.
Turner said Chestnut was sending “a fairly clear message” about its growth ambitions, and that while it has continued to grow since the business was founded, he saw the strengthened team as enabling it to have “more optionality now to the extent that we could probably take on bigger transactions”.
It is currently in discussions on two acquisition opportunities in the region and has multiple projects lined up to enlarge and develop its existing properties.
It is currently building seven lodges at The Weeping Willow in Barrow and has a planning application in for another eight bedrooms and to enlarge The Packhorse in Moulton. It has also received planning permission to reconfigure The Lawns in Holt so that it gains another five bedrooms.
It has also just announced the completion of a deal to acquire a new 12-bedroom site in Wells-Next-The-Sea called Arch House, which will bring total bedrooms at The Globe Inn to 31. And has a tender document out for its build at The Maltings in Weybourne, which is a 34-bedroom extensive food and beverage project.
The business has a very supportive shareholder base and has never had an issue getting hold of equity capital, said Turner, and it may look to do a formal raise in the near future in order to fund some additional growth.
“Our constraints for growth are more along the lines of having very specific requirements about what we want: freehold destination properties,” he explained.
“If you look at a map of East Anglia, our portfolio comprises most of the destination freehold assets that you would want in the region. But there are definitely more out there.”
Turner said its focus on its people, capital investment in its properties and desire to retain the individual characteristics of its pubs means that it is regularly approached by people who would like to sell to them because they believe Chestnut will be a good custodian of their business.
While he doesn’t feel the business has exhausted the opportunities in East Anglia, it has looked at a couple of smaller groups outside the region. “If we were going to go out of East Anglia we wouldn’t do a single asset, it would be a group acquisition – so we continue to look at that.”
The business has been performing strongly in terms of sales growth, seeing like-for-likes in December up 23% on a VAT adjusted basis (17% on a non-adjusted basis), and total sales up 38%.
Total group turnover for the nine months to 31 December 2022 was £17.2m, with the company on target to deliver £21.2m in the full year to March 2023 – equivalent to 18% growth year-on-year.
“We are almost at budget for the revenue we set ourselves for this year, which is great,” Turner said. “Wet sales are ahead of where we thought they were going to be and food sales are marginally ahead too. The only area that has probably fallen slightly short is on the accommodation side, but in the last few weeks we have been turning that around.”
In terms of his outlook for the year he said he was conservative about the performance of the staycation market this summer. “I don’t necessarily think there will be a downturn in demand, but I predict that some operators might have to be a little bit more conservative about their aspirations for room rates,” he said, given the upturn in foreign travel.
Chestnut appointed Charley O’Toole as its head of people just over a year ago, promoting her to people director last September, and has since launched the Chestnut Hub, which is a central arena for all things people. It is also relaunching the Chestnut Academy – a program it set up a few years ago – which comprises all of its training and apprenticeship work.
“There’s a massive amount of stuff that we’re doing around people and we have some fairly aggressive targets around retention, so that’s a really big focus for us.”
