Sheherd Neame sees 'encouraging trends' across its tenanted pubs

As it revealed the extent of first half trading Kent brewer Shepherd Neame reported seeing what it called "encouraging trends" across its tenanted pub estate.

Announcing its results for the six months to December 26, 2010, the group said average earnings before interest, depreciation, tax, depreciation and amortisation (EBITDA) per tenanted pub dipped 0.6 per cent, versus a four per cent increase at the same point last year.

Its core tenanted estate, excluding those pubs identified for disposal, saw per pub like-for-like EBITDA down 2.8 per cent, against a 2.9 per cent decline in the previous year.

Sheps said it had held wholesale prices for the past two years and had adjusted rent downwards "where appropriate to support our pubs". The group warned that it was concerned about what it called "a recent spike" in cereal and utility prices", which it believed would put pressure on costs in the second half and into 2012.

The brewer said it was reducing its exposure to the smaller, wet-led community pub market in low-income areas and anticipated its disposal programme would continue.

However it said it believed tenancies offered "an excellent business partnership with a strong future" and it would look for more tenanted pubs "to improve the overall quality of the estate".

Meanwhile Sheps' managed pub estate saw like-for-like sales up 3.6 per cent, with food sales up more than six per cent and liquor up 2.3 per cent.

The group said retail margins remained stable. "This is a very strong performance and we are particularly encouraged with the development of our food offer," it added.

In its brewery, Sheps said total beer volumes grew 0.6 per cent, with own-beer volumes down 0.7 per cent. Volumes of Spitfire grew 1.4 per cent, while its Asahi brand saw volumes rise 25.5 per cent.

Recent trading had seen like-for-like sales in its managed pubs up 11.4 per cent.

Total group turnover for the six months came in at £61.7m, up 1.6 per cent. Operating profit dipped 0.6 per cent to £6.4m, while pre-tax profits, which included profits on property sales, fell 5.1 per cent to £6.85m.

Basic earnings per share rose four per cent, and the group announced an interim dividend of 4.8p a share, up 1.1 per cent.