Emeny: ‘We are evaluating M&A activity’

Fuller’s is considering M&A activity following the sale of its Beer Business to Asahi for £250m, earlier this year, chief executive Simon Emeny has told MCA.

Speaking on the back of the company’s full year results yesterday, which saw total revenue up 7% to £43.1m, with +4.9% like-for-like sales growth seen in its Managed Pubs & Hotels arm and +1% within its Tenanted Inns division.

The Asahi deal, which completed post year-end, in April, leaves Fuller’s with a sizeable war chest for acquisitions if it chooses. “We are in an absolutely outstanding financial position having completed the sale of the business. We are evaluating M&A activity. Clearly with the proceeds we have something that, for the long-term, is going to be important to us – but it is very much around the long-term,” he said.

“The remainder of this year will be quite a transitional period for us,” he said. Alongside its organic capital investment programme, it is still running aspects of the beer company on behalf of Asahi, has a new trading agreement to bed in with them, will be moving head office and are transitioning to a new executive team, he noted.

Commenting on the proposed acquisition of Ei Group by Stonegate, he said that, “importantly, it’s an endorsement of the long-term appeal of this sector to investors, and I think that’s very good to see”. “For us, it’s a further endorsement of the managed and tenanted model alongside each other. Clearly Stonegate, a managed operator, see a value in having a tenanted business alongside, so I think there are a lot of positives,” he added.

Emeny said that Fuller’s would continue to make individual site acquisitions and has two new builds planned in to open at some point this year at Liverpool Street Station and the Royal Docks.

Boom in bedrooms

The year to 30 March 2019, saw Fuller’s acquire Bel & The Dragon, giving it an additional 50 bedrooms, and it has added rooms at The Counting House and The Blackbird, with 93 bedrooms added to the estate in total last year.

“We have organic plans to add more bedrooms this year and next year, which will bring us closer to 1,000 rooms,” said Emeny. Fuller’s currently has 817 across its estate.

“It is a business that we have carefully and selectively been growing over the last five or six years. I have to say it’s a business I am incredibly proud of and very positive about going forwards,” he said. “I think we are giving customers something they love but also something that’s hard to get in a conventional chain hotel.” He said it was unlikely it would add as many as 93 this year, but said the business continue to move forwards which is the most important thing.

In the first 16 weeks of the current financial year, its Managed Pubs and Hotels arm achieved a total sales uplift of 2.3%, however Tenanted Inns saw lfl profits down 3%. Emeny said he thought they were “a very pleasing set of numbers considering the comparables we were up against”.

“In particular in April, May and June last year where we had sustained excellent summer weather and England’s fantastic run in the World Cup, so I think to still be positive yet again on the back of strong growth a year ago, and even stronger growth two years ago is a great achievement for the business,” he added.

The year ahead

Looking ahead to the remainder of the 2019/20 financial year, he said that Fuller’s see things that are under its control very positively. “The estate is very well invested. We have made some very good acquisitions over the past 18 months, and our people are doing a fantastic job and are highly motivated,” he said. “We also continue to get very strong lfl growth on food in a market which has had some challenges.”

“Clearly where we are politically and economically as a country is out of our control but actually we take the view that if you continue to run well invested, well located pubs giving excellent standards and experiences to customers, these are the things in a way that our customers want to go to get away from the everyday life of politics and everything that goes with it,” he said.

Commenting on whether the appointment of Boris Johnson as Prime Minister will be good for the pub sector, Emeny said we just need to give him a chance to see what can actually deliver. “Everyone will have a view on someone like him. Now he has been made Prime Minster, we need to see what he can actually do.”