Fighting fit
The family feud atShepherd Neame has failed to dent the Kent-basedcompany's performance.
The dramas of last October's civil war did nothing to destabilise operations at Shepherd Neame in the run-up to Christmas, strong half-year results out last week showed. Turnover in the six months to 27 December was up 8.3%, and operating profits, before exceptional items, rose 8.9%. Profit before tax was up 9.4%, and earnings per share increased by 2p to 25.4p. The performance allowed a confident Jonathan Neame, chief executive since November, to assert: "The company is thriving, despite all that happened. Spitfire continues to do very well, as does the tenanted estate."
Successful trading was always the best riposte Shepherd Neame could make to the claims of under-performance and over-investment sensationally levelled by its former deputy chairman six months ago. But tensions between the company and Stuart Neame remain unresolved, with lawyers for both sides still locked in acrimonious dispute over departure terms. To date, Shepherd Neame has incurred hefty fees of £185,000 in resisting Stuart Neame's contractual claims and expects the legal bill to rise before the episode is closed. It has also had to set aside £430,000 to fund his pension at his retirement age of 62.
Neither side would reveal how much distance still remains between them. Though not commenting on any aspect of the bitter family rift, Jonathan Neame is clearly determined to relegate the affair to sideshow status and demonstrate the current business model is far more efficient than Stuart Neame implied. He talks enthusiastically of a "virtuous circle" that begins with low-cost, high-quality brewing, backed by low-cost, high-impact advertising. This helps sell higher volumes of beer into a well-invested estate, which creates more value, which in turn drives down the unit-costs of production.
It's a model that Stuart Neame sought to re-shape by introducing more accounting transparency between the brewing and property divisions, and less investment in ads and managed houses. But until the wheels start to fall off and there are clearly no signs at present then his ambitions for the company are no more than pipedreams and his talk of fomenting shareholder revolt amongst the wider family, just that. Shepherd Neame's weakest area at present would seem to be the Mulberry Inns division within its 73-strong managed house estate. The nine food-led pubs that comprise this high-quality group have failed to meet profit expectations. Says Jonathan Neame: "Sales are satisfactory, but like everyone else in the industry, we're finding it hard to get the profits from low-turnover managed houses."
One of the Mulberrys is in the process of being converted to tenancy, and five other managed pubs have just gone or are going down the same route, taking that estate to just short of 300. The new distribution centre at neighbouring Oare is already delivering major benefits, as is the new kegging plant. The sale of a local warehouse for residential development should mean that the £3.3m invested in state-of-the-art facilities is achieved for a net £1.5m.
Chief executive Neame says he is "hugely encouraged" by the industry's current beer initiatives. He says Shepherd Neame is developing far wider ranges of beer in many of its new developments.
