No room for mediocre pubs, says Shepherd Neame boss

By Nicholas Robinson contact

- Last updated on GMT

Positive outlook: chief executive Jonathan Neame
Positive outlook: chief executive Jonathan Neame
Shepherd Neame’s focus on revitalising its managed pub estate through investment and acquisition has provided great profits for the Kent-based operator, but that does not signal the demise of the independents.

Speaking to The Morning Advertiser ​(MA​) at the release of the pubco’s full-year results today (20 September), chief executive Jonathan Neame said the bulk of Shepherd Neame’s revenue and profit was as a result of investment in its managed estate.

“The main turnover growth is in the managed houses and there has been quite a shift in the size of our managed estate this year, which has been building its profile for a long time,” he told MA.

“We’ve got 60 managed houses now and are a serious retailer with some great pubs.”

Turnover rose by 11.7% to £156.2m for the 52 weeks ending 24 June 2017, with underlying profit before tax up 8% to £11.2m, according to Shepherd Neame’s results.

Pubcos moving tenanted operations into a managed model has been an ongoing, long-term trend, he added.

“The market is consolidating into fewer and higher quality outlets, because the consumer wants a better experience that requires more investment and higher levels of service [from pubcos],” he added.

Deep pockets

When asked whether pubs could only be successful through financial backing provided by pubcos with deep pockets, Neame said: “There’s still a very good market for independent operators.

“But, everyone needs to have a point of difference [in today’s market], there’s no room for the mediocre.”

Shepherd Neame’s tenanted model, which had been the focus of significant investment this year, was performing well, he claimed and pointed out three of those sites were in the Estrella Damm Top 50 Gastropubs this year.

Investment in the maintenance and upgrade of the pubco’s sites, including tenanted, reached £10.7m over the past 12 months.

Neame gave a positive spin on recent stats from banks and analysts predicting a grim future for the pub trade.

“I think the market goes through a period of consolidation from time to time, but the strong businesses will remain strong,” he explained.

“Pubs that offer customers a genuine, good quality experience have stuck around.

“Those good, strong businesses will also stand well in any consumer downturn, and that’s certainly always been our philosophy.”

Despite negative reports from financial analysis of the pub trade, Neame maintained the only thing that has affected his business was poor summer weather this year.

‘Major impact on our business’

“I can historically say that [the weather] is the only major impact on our business,” he said and added warm weather over the recent bank holiday resulted in a sales uptick.

Other highlights from Shepherd Neame’s full-year results include a growth in beer volume sales of 3.9%, as well as the acquisition of 14 new pubs at a cost of £24.8m.

Occupancy rates in the group’s inns grew by 1% to 79% in the past 12 months.

In a statement accompanying the group’s financial results, Neame said: “This has been a good year for the company with strong underlying performance and some great acquisitions that add real value to the company.

“We are pleased with the strategic and operational progress made in all areas of our business.

“We are mindful of the political and economic backdrop, but our strategic focus on investing for the long term, innovating and consistently delivering great pub environments and outstanding service for our customers will stand us in good stead.

"We remain confident that the actions that have been taken and our relentless pursuit of excellence will continue to deliver good long-term returns for our shareholders.”

Related topics: Beer, Other operators

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