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MARKET REPORT: Fuller's sinks as it serves up fresh profit warning

Earnings warning: Pub chain Fuller's was on the verge of a full recovery after the pandemic, but just six months later the business is back in the doldrums

With no end in sight to the rail strikes that have crippled the country, Fuller, Smith & Turner boss Simon Emeny is a man on edge.

The pub chain was on the verge of a full recovery after the Covid pandemic, telling investors in June it was delighted to see the return of workers and tourists to central London.

But just six months later, the company is back in the doldrums and issuing another profit warning.

Earnings warning: Pub chain Fuller's was on the verge of a full recovery after the pandemic, but just six months later the business is back in the doldrums

Earnings warning: Pub chain Fuller’s was on the verge of a full recovery after the pandemic, but just six months later the business is back in the doldrums

“Frustrating” is how the weary general manager described the situation. “Since early October we estimate that the industrial action has reduced our sales by around £4m and the impact on profitability means that we now expect to report earnings below market expectations for the whole of the year.”

Before the warning, sales were expected to rise by 29% to £327m, not far off the £333m turnover reported in 2019-20 before Covid hit.

The results are a blow and highlight the dire state the hospitality sector finds itself in, with experts warning that rail’s militant action has cost bars, pubs and restaurants at least £1.5billion. pounds sterling in December.

Fuller’s is particularly vulnerable because 40% of its 400 pubs are in London.

The business relies on the after-work trade – those who come in for a pint around 6pm before catching the train home – as well as shoppers and theatergoers in the West End.

Shares in the 178-year-old company fell 3.9%, or 19p, to 475p.

And there could be worse to come, with new strikes planned for February 1 and 3 by members of Aslef, the train drivers’ union.

AJ Bell analyst Russ Mould said: “With more train strikes on the cards, there’s not much Fuller can do but hope. There is a chance to make up some lost revenue later this year.

Stock Watch – Saga

Saga is in talks to sell the underwriting arm of its insurance division to help pay off its debts.

The 50-plus-year-old vacation and financial services company said it was in talks about a possible sale of Acromas Insurance Company, which underwrites about 25-30% of its insurance business.

Saga is looking for buyers to offload its in-house insurance business to raise up to £90m to help pay off some of its £721m debt. The shares gained 1.3%, or 1.9p, to 152.4p.

The King’s coronation in May will add another public holiday to the calendar and give the public a reason to get out of the house and celebrate with friends and family.

Rivals Young fell 1.4%, or 16p, to 1100p, Revolution Bars fell 1.7%, or 0.1p, to 5.9p and Mitchells & Butlers fell 1.6%, or 2.7p , at 168.6p.

Among blue chips, Scottish Mortgage Investment Trust was up ahead of a big week for U.S. tech earnings, with Tesla and Microsoft reporting in the coming days.

Scottish Mortgage is a backer of Tesla and expects fourth quarter results to hold up.

The electric carmaker has had a rough year, between production delays in China, a backlash over chief executive Elon Musk’s acquisition of Twitter and his offloading tens of billions of dollars of his own Tesla stock.

Confidence rose 1.7%, or 12.6p, to 746.6p, helping the FTSE 100 gain 0.2%, or 14.08 points, to 7784.67 points. The FTSE 250, meanwhile, rose 0.5%, or 99.06 points, to 19801.69.

Coral owner Entain was also a mover, adding 1.2%, or 18.5p, to 1,526.5p, after the Mail on Sunday reported that US media giant MGM was considering a new bid for the game company.

But St James’s Place was down as the lackluster start to the year for actively managed municipal fund shares continued.

The downfall of one of the UK’s biggest wealth managers came after HSBC analysts dropped their “buy” rating on the stock.

At the same time, Barclays reduced its price target on St James’s Place to 1507p from 1509p. The shares lost 2.2%, or 27p, to 1,208p.

Apart from the elite, National Express was in charge after the company revealed that its German rail transport arm had won an £800million contract to operate two Rhein-Ruhr-Express lines in Germany until in 2033.

Shares added 1%, or 1.3p, to 138.8p.

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