London pubs carry Shepherd Neame's profit growth in first half

Shepherd Neame Ltd on Wednesday announced its pubs traded well across the country, fuelling growing profits in its half-year results, despite a slight revenue decline caused by the Brewing and Brands division.

The Faversham, England-based brewer and pub owner hailed a ‘strong period for our pubs, with an exceptional performance from our London Retail pubs in particular’.

It reported revenue of £84.7 million in the half-year to December 27, a 0.4% decline from £85.0 million it reported for the same period 12 months prior.

The Retail division grew revenue by 0.1% to £42.3 million from 12 months prior, while Tenanted pubs grew their revenue by 4.8% to £19.0 million from £18.2 million. The Brewing and Brands division, which includes its own range of brands, reported a 4.7% decline in revenue to £22.7 million from £23.8 a year prior.

Pretax profit instead grew by 2.7% to £4.4 million from £4.3 million a year prior.

The company increased its interim dividend by 3.4% to 4.50 pence per share from 4.35 pence per share 12 months prior amid the trading activity and the improved terms it secured by refinancing its bank debt.

Shepherd Neame can now count on a new £15 million term loan facility in addition to a £30 million revolving credit facility which, coupled with existing £55 million from private placement funding brings total available facilities to £100 million.

The pub owner, which operates 285 pubs of which it directly manages 223, said that total retail like-for-like sales grew by 4.5% year on year, while like-for-like net tenanted pub income was up 3.1%. That is despite a 6.6% drop in total beer volume, and a 12% drop in own beer volume.

Shepherd Neame said it hiked prices to absorb a £1.2 million increase in labour costs, which affected the entire hospitality sector, and £0.8 million in higher logistics costs, specific to them.

It also highlighted how like-for-like sales for its retail division in London grew by 11%, while in the rest of the country growth stopped at 1.4%.

In his outlook, Shepherd Neame Chair Richard Oldfield said the company intends to grow final and interim dividends above the increase in the consumer price index, and that it wants to carry out a £1 million buyback programme in the next financial year.

Chief Executive Johnathan Neame noted that ‘trade is becoming more seasonal and more reliant on occasions and we look forward to a strong spring and summer’, and that resilient demand and easing cost pressures are cause for optimism.

Shepherd Neame shares were flat at 440.00 pence each on Wednesday afternoon in London on the Aquis Exchange.

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