The Kent-based brewer and pub operator said rises to the National Living Wage and National Insurance Contributions would cost the business £2.6m, with incremental costs commencing in April and impacting the final quarter of the 2025 financial year.
Shepherd Neame said it would “adapt accordingly” and remains optimistic about the future.
The company has 10 sites under review for transfer from retail to tenancy over the next 12 months to improve returns, and is reviewing its annual core capex spend.
The regional family brewer reported profit growth for the for the 26 weeks ended 28 December 2024, particular in its managed and London estate.
Notable contrast
However trading outside London and in its tenanted estate was respectively modest and flat, while beer sales saw a continued decline.
While trading in pubs was up overall, the company saw an overall decline in revenue during the period to £85m (H1 2024: £89m), due to an ongoing decrease in sales from bottled ales.
However underlying profit before tax grew by +9.9% to £4.2m (H1 2024: £3.8m).
The company continued to invest, with £8.8m of capital expenditure, including £3.9m on a freehold acquisition.
There was a noticeable contrast between Shepherd Neame’s retail pubs, where like-for-like sales were +4.4%, and tenanted pub income, which was almost flat at +0.3%.
Total beer volume (-12.6%) and own beer volume (-13.9%) both saw considerable declines.
Pubs within the M25 saw the strongest growth, with retail like-for-like sales +9.0%, comparted to +2.3% outside the M25, showing a stark geographical divide.
Flexible model
Drink (+5.5%) performed better than food (+2.4%) in the retail estate.
In brewing, the company said it was shifting its focus away from low priced off-trade volume towards local on-trade.
Over the next few months Shepherd Neame will introduce new beer brands, including Iron Wharf Stout, a refresh of its Whitstable Bay range and a roll out for First Drop Session IPA.
In more recent numbers, in the 35 weeks to 1 March, the patterns remain similar, with LFL tenanted pub income +0.5%, retail LFL sales +3.2% and total beer volumes -11.0%.
Jonathan Neame, CEO of Shepherd Neame, said: “We have delivered a strong H1 in a challenging market.
“The additional costs imposed on our sector are most unwelcome but the business model is flexible and we can adapt to the new circumstances.
“We have an excellent pub estate and our beer business is evolving to meet current consumer tastes and trends.”
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