Shepherd Neame’s exceptional costs take fizz out of profits
Brewer and pub group Shepherd Neame posted a modest rise in profit before tax for the six months to the end of December, despite being hit by refinancing and contract losses.
The figures
Underlying profit before tax rose 1.4 per cent to £5.9m in the 26 weeks to 29 December 2018.
Like-for-like sales in the group’s managed pubs division jumped 4.1 per cent over the period.
Revenue fell by 9.1 per cent to £76.5m.
Statutory loss before tax hit £4.1m due to one-off exceptional charges.
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Why it’s interesting
Britain’s oldest brewer will be pleased with the boost in pre-tax profits, driven by strong sale growth in its pubs division thanks to the warm summer and England’s strong World Cup performance.
The group also benefited from buoyant Christmas trading, with like-for-like pub sales up 7.1 per cent in December.
But a hefty debt restructuring process and contract losses have taken the fizz out of the firm’s figures.
Shepherd Neame, which operates 322 pubs in Kent and the south east, was hit by a one-off cost of £10.8m linked to the refinancing of the business and the termination of its contracts with Asahi and Lidl.
The contract losses meant total volume of brewed beer fell 30.8 per cent over the period, leading to a 31.4 per cent decline in turnover to £22.2m.
The costs meant the firm, which owns brands such as Spitfire and Whitstable Bay, fell to a pre-tax statutory loss of £4.1m, compared to a £5.5m profit the year before.
But Shepherd Neame said the refinancing, which it announced in October, provides £107.5m of funding for long-term investment.
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What Shepherd Neame said:
Chief executive Jonathan Neame said: “The business derives its long-term strength and resilience from its three operating divisions. The managed pub performance has been strong, offset by lower brewing and brands volumes. The tenanted pubs have continued their robust underlying performance.
“Our managed pubs are the principal area of investment and of growth. The quality of this part of the business continues to rise with recent acquisitions and developments. The tenanted division is a well-balanced and high quality business that continues to attract great operators for us to partner.
“Brewing and brands is still in a period of transition and we are pursuing a number of good opportunities for future growth.
“The new financing package gives us the platform to capitalise on the significant infrastructure and population growth that is planned in our Kent heartland over the next decade.
“In spite of the risks associated with imminent departure from the EU, we remain confident that our long-term strategy positions the company well for the future.”