What's gone wrong at Shepherd Neame?

Breaking up like Brakspear is not what former vice-chairman Stuart Neame wants for his old company.

Instead, three years ago at a Shepherd Neame away day, he submitted a "kite flying" paper which suggested splitting the company into a property arm and a trading arm.

The property company would then lease its assets to the trading at open market rents, and proper commercial decisions about future strategy could evolve.

The idea went away until it came back with a vengeance last month when Stuart Neame resurrected it in a confidential paper to the board.

He freely admits he should have been more persistent.

"I am ashamed I wasn't more aware of the property value of the company ­ but I'm no property expert."

Though now out, Stuart Neame believes it's vital the board still considers his idea of separating the freehold assets from the brewing and pubs business.

"All of us want the company to survive, but the present structure makes the brewery a sitting duck for an asset-stripper to buy the company for its pubs and close the brewery.

I would not want that, but it would happen if the shareholders felt the directors were running the company as a plaything and losing them money that could be boosting their dividends.

"It only takes one shareholder with more than 5% of the votes to instruct the company to seek offers for their shares ­ and then shareholders would see offers at double the present price."

Rebutting the charge that he said the company was in poor financial health, Stuart Neame said: "The company is never going to experience any financial crisis: it's as rich as Croseus.

But I think we are heading towards the icebergs, and there are shareholders who may feel their shares do not reflect their true value.

By resigning, I hope to alert shareholders to the problems."

According to Stuart Neame, one of the problems at Sheps is that no one knows for sure whether pubs or brewing are making a profit.

"Shepherd Neame charges its beer to the pubs and sales side at the price it costs to make it, so it doesn't make a profit or a loss.

The other divisions then sell it.

But the huge overhead costs of nearly £3m are taken as a central cost, rather than reallocated.

This makes it impossible from the accounts to see if brewing or pubs make a profit."

Discussion of these issues became impossible, Stuart Neame claims, after he raised objections to the chairman staying on beyond his 70th birthday.

He felt that the changes needed required a fresh chairman, such as Miles Temple-man, a non-exec at Sheps since March 2002, though he had not discussed this with him.

However, the board backed Bobby Neame's decision to stay on until October 2005, and after a clash with senior non-executive Martin Bunting, a former managing director of Courage, Stuart Neame felt obliged to resign.

"Serious problems need a united board to tackle them, so I felt I had to go.