Belfast Telegraph

Shepherd Neame warns of ‘unprecedented cost headwinds’ in year ahead

Shepherd Neame has posted strong annual results but warned of tougher times ahead.

Brewer Shepherd Neame has warned of “new challenges” in the year ahead amid “unprecedented cost headwinds” and rising inflation that is putting the squeeze on household spending.

The warning is in contrast to relatively strong annual results, which the Kent-based pub company celebrated for being “substantially ahead of the market”.

The brewer reported an 11.7% rise in revenue to £156.2 million for the year to June 24, compared to £139.9 million a year earlier, while like-for-like sales at its managed pubs rose 8.1% thanks to “investment, modernisation and premiumisation” across the business.

Statutory pre-tax profit dropped 18% to £11.8 million, but that was primarily due to higher comparatives in 2016 following profits from property disposals.

But the company – which brews the likes of Spitfire and Bishops Finger – said it faced a more difficult road ahead.

Chief executive Jonathan Neame said in his report: “We have good reason to be pleased with the strategic and financial performance this year. Our investments in recent years have helped to build a high-quality and sustainable platform for the future.

“But the next 12 months present new challenges given the unprecedented cost headwinds that the sector is facing and signs that consumer income is being squeezed.”

Spitfire bottled beer

Consumer price inflation reached 2.9% in August due to rising costs on the back of the Brexit-hit pound, which has made imports more expensive for British businesses.

Rising prices have subsequently put the squeeze on household finances, which have also suffered from slow wage growth that has failed to outstrip the pace of inflation.

Shepherd Neame, which dates back to 1698, also bemoaned rising alcohol tax for compounding financial challenges posed by rising business rates, the apprenticeship levy and national living wage.

“The company makes a substantial contribution to the local and national economy. In 2017 we have paid £28.7 million in excise duty alone.

“It is disappointing, therefore, after three years of successive excise cuts, that the Chancellor chose to increase duty on beer by 3p per pint in the last budget,” Shepherd Neame’s chairman, Miles Templeman, said in the report.

“These inflationary pressures come at a time of rising inflation in food and imported products, and provide cost challenges to all businesses in the sector at a time of great political uncertainty,” he added.

But rising costs have not dampened Shepherd Neame’s acquisition drive, having bought up 14 pubs for £24.8 million in the year to June, while selling 15 of its own for £5.9 million, as part of a strategy to “enhance the quality” of its portfolio.

It has also invested £10.7 million across its estate to give “unique character” to each of its pubs, and has revamped its branding.

Chief executive Mr Neame said: “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.”

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