Margins impacted at Shep Neame but strong demand continues

The Kent brewer and pub operator of 301 sites in Kent and the south-east, said its Brewing and Brands division had been challenged during the H1 (first half of its financial year) period yet its investment programme has now resumed “with many projects that are essential for the future development of the company”.

This time last year, the board restored the dividend for the first time post-pandemic and has increased it again.

It said it had made record revenue in H1 despite economic headwinds. Revenue was £85.3m (H1 2022: £78.7m, H1 2020 restated: £79m), an increase of 8.4%; statutory profit before tax was £5.5m (H1 2022: £5.4m, H1 2020 restated: £5.3m), an increase of 1.8%.

Profit before tax up

Meanwhile, underlying profit before tax was £3.5m (H1 2022: £3m, H1 2020 restated: £6m), an increase of 15.5% and cashflow remained robust: net debt, excluding lease liabilities, is level at £82.8m (H1 2022: £82.4m, H1 2020 restated: £85.4m).

Other statistics on H1 2023 v H1 2022 include like-for-like (lfl) sales rising by 11.9% and lfl tenanted income up 7.1%.

Revenue at its Retail Pubs and Hotels (67 pubs) grew by 18%. At Tenanted Pubs (229 pubs) trade remained resilient with income up 7.1% v the same period a year before.

Shepherd Neame said sales were maintained but margins impacted by exceptional inflationary pressures for its Brewing and Brands, as total beer volumes dropped by 0.9% while own beer volumes rose by 12.7%. Divisional revenue was maintained at £30.3m (H1 2022: £30.6m), with an operating loss of £0.4m (H1 2022: £0.0m).

Beer volume drops

For the 12 weeks to 18 March, retail lfl sales were up by 2.8% vs 2022, lfl tenanted pub income for the nine weeks to 25 February rose 4.9% but total beer volume for the 12 weeks to 18 March dropped by 5.5% and own beer volume fell by 3.0%.

It added: “Fundamentals of the business remain strong and the business is in good shape. Demand is encouraging but we expect further cost inflation in the second half and into next financial year.

“Measures announced in the budget to reduce alcohol duty on beer in pubs, are most welcome.”

Shepherd Neame chief executive Jonathan Neame said: “We have an excellent pub estate with considerable potential, well established brands, a loyal customer base, and a high profile within the individual communities we serve.

“All these factors will stand us in good stead as the cost-of-living crisis eases and the economy returns to growth.”