Shepherd Neame says sales boom proves drinkers and diners are returning to pubs
Turnover for the 52 weeks was up 2.8% to £138.7m, while pre-tax profit stood at £7.7m, up 8.7% on the previous year. Operating profit before exceptionals was up 5.5% at £13.4m (2013: £12.7m) and earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 4.3% to a record level of £20.5m.
Performance in its managed estate was driven by an 8% increase in drink sales, food was up 10.4% and accommodation up 9.7%. Average EBITDA per managed pub was up 13.9% during the year.
The company said that like-for-like tenanted EBITDA climbed 4.4% during the period, with average per tenanted pub up 5.9%.
Core own and licensed beer brand volumes (excluding contract brewing) increased 6.1% in the year: with strong growth from Bishops Finger, Whitstable Bay and Samuel Adams Boston Lager.
For the 10 weeks to 6 September 2014 like-for-like managed sales were up by 4.1% (2013: 10.2%). Like for like EBITDA in the tenanted estate to 30 August 2014 was up 2.6% (2013: +1.7%).
Beer volume
It said that total beer volume was down -13.5% but that this was against a very buoyant period in the prior year (2013: +9.3%) and in part reflects the phasing out of its Kingfisher contract. The group said it expects this volume trend to flatten out as the year progresses.
In the last year, in particular, the company said that competition for new sites and price levels have vindicated its decision to make several substantial single site acquisitions, at attractive prices, during the economic downturn, even if this meant operating at “higher leverage levels during this time”.
It acquired one new outlet during the year by taking the lease of The George, Wardour Street, London. It raised gross proceeds of £2.2m (2013: £2.7m) from the disposal of four pubs (2013: six pubs), three unlicensed properties (2013: one unlicensed property), one piece of land and other assets. This realised a profit of £0.2m (2013: £0.3m). It also transferred one tenanted pub to its retail estate.
Total investment in its estate was £7.4m (2013: £9.9m) of which £0.3m was invested in acquisitions £5.1m on development and maintenance capex and a further £2.0m expended as repairs and decorations.
Confidence
Jonathan Neame, chief executive, said: “Our marketplace has improved in the last 12 months, with greater consumer confidence, improved weather conditions, and lower taxation on beer. As a consequence, after many years of decline, the beer market has grown, with total UK beer volume increasing by +3.8% (2013: -5.0%) for the 12 months to the end of June 2014.
“Within this market the consumer is increasingly motivated by a wider flavour profile, new styles of beer and renewed interest in craft and local production. The market for pubs has also improved as drinkers and diners are returning to pubs that offer a great atmosphere, interesting product range, great fresh food and so provide a memorable experience. This year, after many years of continuous investment, we have enjoyed a particularly good performance from our pub business, with trading figures comparing favourably with the strongest competition in the market.
“We have achieved a step-up in profit contribution from our retail pubs and hotels and a very strong return to growth from the tenanted trade, our largest business division. Within the beer business, growth in core own brewed and licensed brands, excluding contract volumes of Kingfisher, is well ahead of the market. Once again we have increased the investment in property repairs, marketing and brand support.
“This has been a significant year for the company with good strategic progress and the implementation of a challenging reorganisation. For the second year in a row we have taken decisive steps to strengthen the pub and beer portfolio and the quality and efficiency of our operations.
“The trading performance has been strong and the cost savings arising from the business reorganisation partly reinvested into improving the pub experience for our customers and brand marketing activity, as well as offsetting the cost inflation from the water recovery plant. This has resulted in higher returns, strong cash flow and reduced leverage.
Framework
“We believe we have the right strategic framework, the suitable skills within the business to exploit new opportunities and a good pipeline of product innovation and pub developments to continue this year’s good progress and to exploit the opportunities of this ever-changing market.”
Shepherd Neame sold 281,000 brewers’ barrels of beer (81.1 million pints) including 245,000 brewers’ barrels of own brewed beer (70.5 million pints) in the last year. The majority of these sales were made in the UK although the Company also exports to more than 35 countries including Sweden, Italy, Ireland, the United States and Canada.
At the year end, the company operated 347 pubs in the South East, of which 299 were tenanted or leased and 48 managed. The pub estate ranges from mainstream city centre pubs to food destination houses, from hotels to historic coaching inns and traditional community ‘locals’.
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