Fulham Shore (FUL) – AGM

Today I had the pleasure to attend this morning’s Fulham Shore AGM at a relatively new Franco Manca restaurant in Birmingham.

First impressions

The restaurant itself was in a near-prime, well located, well known street in Birmingham amongst other established restaurants and pubs. The building had recently been converted from a branch of Nationwide and in the stripping-out some original features were uncovered and a proportionate amount of money spent in their limited restoration. As such it is an interesting example of how the high-street is changing and leisure businesses can successfully repurpose buildings. It was my first time in a Franco Manca and I can confirm that they have successfully created a great atmosphere with relatively hard-wearing materials. I’m not sure how long I would like to sit on the seats for, but perhaps this is all to their benefit.

Also of note is that there was scaffolding outside as the landlord was working on the roof, and this completely obscured the fascia sign making it hard to find. The company said that they are currently paying reduced / no rent on the site and that in their experience it is very common for a landlord to work on the building soon after cashflow re-starts from re-letting, which is why they always include a clause in the lease for such eventualities. This, and other little discussions, emphasised the level of experience within the team, for example the executive chairman, David Page, is ex-PizzaExpress and later Gourmet Burger Kitchen.

The meeting

The meeting itself was uneventful, as such things usually are. The AGM statement had already been RNSed at 7am and didn’t say much of interest, except pointing out the well established effect of the weather on The Real Greek. There were no public questions.

One to one questions

Both before and after the formal meeting I asked various questions about the business, costs, depreciation policy, lease lengths, market landscape, Debenhams subletting, Real Greek strength, Salina franchise, impact of food delivery apps, and various other matters. I heard nothing significant of concern, gained confidence that management were on top of the business and as usual learnt a lot.

The one issue I did notice was Brexit with them importing some fresh food directly from Italy. This is also covered in the last Annual Report.

Networking

As usual I took the opportunity to converse about various non-company matters relevant to others present.

I believe that there were only two other private investors there, and they arrived late and left before I had a chance to introduce myself. To me sort of thing rather misses the point of attending.

To do

I will be looking into the independent non-executive director given the Executive Chairman setup and close-knit nature of the team.

They do not publish like-for-like figures and although I believe I know the reason for this, I will be asking them about it anyway as this can be a red-flag.

I should visit one of their more established restaurants to form a view whether repair and maintenance expenditure is up to date.

I really need to try one of their pizzas!

Conclusion

There is much documented over-supply in the casual dining sector, but it is relatively clear that Fulham Shore are outperforming and outcompeting. As an investor I had hoped to see more “blood on the streets” in the form of a reduction in supply before getting seriously involved with the sector, however so far I have only really seen a long term trend of increased demand continuing against a slower increase in supply. It feels a little too early to be making this a full-sized position at this stage.

If you have any questions then please comment below and I shall endeavour to answer them.