Speaking after the Kent-based family brewer revealed an underlying operating loss of £3.6m during the six months to 26 December 2020, Neame told The Morning Advertiser (MA) that trade levels since more than 200 of the firm’s pub gardens reopened on 12 April have “exceeded expectations”.
“I think we were expecting a slightly more gentle trajectory – not at least because it was snowing,” Neame reflected on the outdoor reopening sites during a surprising April cold snap which saw customers return in ski jackets and hats. After events of the past year, who can blame Shepherd Neame for missing a red sky warning?
“The initial response suggests that consumers are more willing to come back straightaway,” he continued. “They feel more confident, I think – and that's because of the great success of the vaccine programme – but also they know the rules, they know what to expect, whereas before I think there was a lot of anxiety and apprehension about how one behaves and how one operates in a socially distance environment like a pub.
“The majority of outlets are in line with or ahead of the comparable period in 2019, and we shouldn't forget that in 2019 this period was the Easter week – which is always a very good trading week – and that was a particularly good Easter. To have any outlets exceeding that is most encouraging indeed.”
‘Very, very demoralising’ period
However, Neame highlighted that the group has found it particularly challenging getting staff back up to speed after experiencing longer pandemic enforced closures than most.
Towards the end of 2020, the 322-year-old company’s Kent heartland became the eye of the Covid pandemic storm with the emergence of the more virulent “Kent variant”.
As such, the county was subject to sterner restrictions throughout the festive period before entering a then unprecedented fourth tier of restrictions on 19 December and joining the rest of England in a third national lockdown in early January.
“I think that period in early December, when the rest of the country was opening up again and we remained on lockdown was very, very demoralising,” Neame explained. “It was very tough on the teams, and then we went into another round of stop-start policies.
“I don't think anybody knew where we were at that stage – it was exhausting, it was stressful and very difficult to plan for the future. Of course, by the end of December, the whole country was locked down again.”
What’s more, prior to the onset of England’s second national lockdown in November, the operator of more than 300 sites across London and the south east announced that it would be cutting 10% of its workforce.
“Re-mobilising the teams has been an awful lot of work for people,” Neame continued. “But I think the principal point is that people are thrilled to be back working – there's a real sense of joy both in customers and staff in the outlets and I'd say there's a very high degree of goodwill.
“There's a real sense of wanting to support your local, support your community and I would say that the pent-up demand for socialising with friends and family in an environment like a pub or restaurant is very high.”
‘Very strong’ balance sheet
While Neame described the period between his firm’s sites closing on 5 November and reopening for outdoor trade on 12 April as “long” and “drawn out”, he added that it gave Shepherd Neame a rare opportunity to assess where its strengths and weaknesses lie and cut its pandemic cloth accordingly.
He told The MA that the company’s estimated £1.5m monthly cash burn has “not been as great as expected” largely due to the brewery continuing to post enviable bottled beer sales figures of 25.7% volume growth during the second half of 2020, and that debt levels have remained steady.
“We've paid off our deferred liabilities and our debt levels are consistent with where they were at the end of the last period,” Neame added.
“I think as a result of that, the banks can still see that the company's balance sheet is very strong – in spite of the various hits that we've had – which means that they've been able to support us with a new financing package – a key milestone in our recovery. We've got very light touch covenants and normal covenant waivers through to September 2022.”
Positivity and optimism
The balance of Shepherd Neame’s portfolio between freehold, leasehold, community, rural, coastal and town or city centre sites has also been key in the firm’s recovery from its Covid symptoms thus far according to its CEO.
“That balance means that we, I think, will have a very good summer and that we will come out of this quickly,” Neame added. “The level of optimism and positivity in the business, after a very, very challenging period, is sky high at the moment.”
While Neame agrees that current market conditions present opportunities for the finalist in the 2021 Publican Awards' Best Tenanted and Leased Pub Company category to expand its pub portfolio, focus – at least for the moment – remains firmly on steadying the family ship.
He adds that over the next three months the operator will resume its site maintenance, external decoration and signage programmes, as well as look to resign between 30 and 35 pubs.
“I think there will be opportunities, but our whole focus at the moment is to stabilise the business, pay off the debts that we have picked up in this period and get back to as strong a position as we can in the next 12 months,” he says. “But there's no question after that, we think the company will be very well positioned to grow.
“However, our number one priority is to restore the business and just hope against hope that we did not go backwards into further restrictions.”
