The entire hospitality sector is going through a very difficult period but Fuller’s CEO Simon Emeny tells MCA he is confident its business model and the quality of its people we see it come through the challenges strongly.
The premium pub and hotel operator achieved a 45% increase in revenue in the 26 weeks to 24 September 2022, but more importantly, for Emeny, was that like-for-like sales in the most recent seven weeks, to 12 November – a period not overlapping restrictions – were up 13% year-on-year, “so that’s genuine growth as we’ve kept our price rises to a minimum in the business”.
The big influx in tourists, the return of events in London and the increasing number of people going back to their offices more regularly is really what’s driving growth, “and it’s very good for us to see that coming back strongly”.
While the comparison of those seven weeks to 2019 reveals only around a 1%, Emeny says the latest figures are a material chance from where it was a year ago, with London going back to normality.
For Emeny, the most difficult thing about the first six months of its financial year has been the impact of the rail strikes, which Fuller’s estimates reduced sales by £1.4 million in the first half of the year.
“We’ve seen this great growth in London despite the train and tube strikes and there’s no doubt that these strikes hurt businesses in the City disproportionately hard.
“I would hope that a settlement can be found because the country needs to have businesses performing well to generate the tax that it needs to pay down the amount of debt that we’ve taken on. We need a thriving economy to get the country’s finances fully repaired – and this is holding it back.”
Expanding the estate
Fuller’s has acquired several sites over the course of the half year, and one since, including The Queen’s Arms, landside at The Queen’s Terminal, Heathrow, The Rising Sun near New Milton in the New Forest. Post the period end, and De La Hayes in the Cotswold village of Bourton-on-the-Water, which will reopen as The Willow next spring.
“These are sites that we’ve been coveting for some time and it’s been a real pleasure to get them across the line because they enhance the quality of the estate,” Emeny said.
Commenting on the landscape of the property market, he said that over the past 12 months it had been inflated by some aggressive purchasing in the marketplace, but that there will be some recalibration of the market going forwards.
“As we look forwards, particularly post the Chancellor’s statement today, I think we’ve now got a very strong balance sheet and we are in a position to acquire going forwards.”
While it’s important to keep a keen eye on the existing estate, Emeny believes it’s also important for the business to develop and grow in scale.
“I’m very ambitious for the company and I’m very ambitious for us to continue to grow, but equally we have to grow in a measured way, and not chase acquisitions at any price, which could have been happening over the last year.
“So as a result, we’ve been very cash generative, net debt has come down. We’ve invested significantly in our own estate, and so that is now in outstanding condition. And so we look forward in the marketplace now to being in a strong position to take advantage of the right opportunities when they come up. But I think we’re really prepared to be patient over this.”
The business invested £12m in its existing estate in the first half of the year, and Emeny is keen that level of investment continues into the second half.
“I think it’s really important in these tougher times to make sure that the customer increasingly has a reason to come out and making sure that your pubs look fresh, vibrant and exciting is really important,” he says. “The winterisation program that we did last winter has worked really well, so we’re going to continue to invest in outdoor areas.”
Fuller’s also has a couple of big schemes that will begin in January, including the refurbishment of one of its most successful hotels in London, The Sanctuary House Hotel.
‘Our positioning in the marketplace will be a strength’
“During these challenging times we plan to maintain our investment in our own estates, maintain our investment and development of our people and maintain the investment in the customer experience.”
While there is no deny that consumers’ disposable income will be squeezed this winter, Emeny says Fuller’s hasn’t noticed any impact so far on customer spend. “We have a more affluent customer base and I think that customer base will still be able to afford to have treats like going to the pub.” That said, he says the business has been very careful not to price customers about of its pubs and has kept menu price rises to a minimum.
Notwithstanding any unscheduled shocks, the business is expecting a strong Christmas trading period with good levels of bookings, including a lot of big group bookings in the run up to Christmas. “We’re seeing very high levels of bookings on Christmas Day itself and New Year’s days as well.”
“There’s still a great deal of unknown about 2023 and how the consumer is going to react to six successive rises in interest rates, but I think that our positioning in the marketplace will be our strength,” he adds.
“We have invested very heavily over the last two years in our infrastructure, so I think the bedrock of Fuller’s is very, very solid and in a very good place. Our balance sheet is in excellent shape, we’ve improved the team quite significantly […] and sometimes we’re at our best in adversity.
“This is going to be a very, very difficult period for the sector, I’ve got no doubt about that, but I think that the business model at Fuller’s and the quality of our people will enable us to come through this strongly.”
