Shepherd Neame kickstarts beer division review as volumes fall

(Sharecast News) - Aquis-listed Shepherd Neame reported modest growth in underlying profits for the year to 27 June despite lower revenues, as strong pub trading offset continued weakness in its Brewing and Brands division.

The Kent-based brewer and pub operator said revenue fell 1.1% to £162.6m, while underlying EBITDA rose 0.8% to £25.6m and underlying pre-tax profit increased 1.8% to £7.8m, in line with market expectations.

Pub trading was the main driver of growth, with retail like-for-like sales up 3.8% and tenanted pub income ahead 2.7%. London was particularly strong, with retail like-for-like sales inside the M25 rising 10.1%.

By contrast, total beer volumes fell 5.4% and own-brand volumes dropped 9.6%. Brewing and Brands revenue declined 4.6% to £42.8m, while divisional underlying operating profit fell to £0.1m from £1.0m as the business was hit by declining volumes and higher logistics costs. A strategic review of the division is now underway.

Statutory pre-tax profit dropped 43% to £3.6m, however, reflecting impairment charges on 15 properties. Nevetheless, the full-year dividend was lifted 3% to 22.15p per share.

Current trading has been stronger, with retail like-for-like sales up 6.7% in the 13 weeks to 26 September and total beer volumes up 1.8%.

Chief executive Jonathan Neame, who is set to succeed Richard Oldfield as executive chairman next month, said the company had enjoyed a "good summer", but remained cautious about rising inflation, interest rates and the potential impact of a tourism tax.

"The improving trends we saw toward the year end continued into the new financial year, with growth in beer volume. We have also seen a significant step forward in accommodation sales," he said.