Shepherd Neame warns recovery will take longer than expected
>
Britain’s oldest brewer Shepherd Neame warns rising energy costs will delay return to pre-pandemic profit levels
- Energy shortages have partly driven costs at the Kent-based company much higher
- Shepherd Neame bounced back to £6.3m annual profit in the 12 months to June
- The company’s visitor numbers outside London and in coastal areas are doing relatively better
<!–
<!–
<!–<!–
<!–
<!–
<!–
Shepherd Neam has returned to profits, but warned that a full recovery would “take longer than originally expected” due to high inflationary pressures.
Britain’s oldest brewer doesn’t expect to reach pre-pandemic profitability until 2024/25, given the impact of rising gas and electricity prices on consumers.
Energy shortages have partly pushed up costs at the Kent-based company, as did the imposition of higher rates on national insurance and minimum wages and the end of a reduced VAT rate for the hospitality industry in April.
Warning: Britain’s oldest brewer doesn’t expect to reach pre-pandemic profitability until 2024/25, given the impact of rising gas and electricity prices on consumers
This didn’t stop it from rebounding to a profit of £6.3m in the year to June, down from a £17.8m loss in the previous 12 months, when lockdown restrictions forced pubs to make the most of of the time to remain closed.
Trading was boosted by healthy sales in the rented pubs and locations off the M25, both of which saw total income rise just above pre-pandemic volumes and more than double last year on a comparable basis.
Visitor numbers outside London and in coastal areas remained relatively optimistic amid the growth of remote working and the taking of domestic holidays by Brits.
Demand in the capital has also been hurt by rigid cross-border travel regulations that hamper inbound tourism and the rise of the Omicron variant that discourages people from traveling to their office.
Shepherd Neame revealed retail sales in pubs within the M25 were 30 percent lower than in 2019, despite an annual increase of 263%.
Its chief executive, Jonathan Neame, said trade in city center shops will take a little longer to return to pre-Covid levels, while international tourism is not expected to recover until 2024.
Recovery: Jonathan Neame, CEO of Shepherd Neame (pictured) said trade in city center shops needs a little more time to return to pre-Covid levels
Neam warned ahead of winter that sales are likely to decline as consumers’ disposable incomes come under pressure from higher energy and fuel prices.
These factors will also cause the company to pay more for goods such as glass and carbon dioxide, which are often used to keep beer from going stale.
Still, Neame expressed confidence that the company would be able to “address these issues as they arise.”
He added: “While the road to full recovery may take a little longer than originally anticipated due to inflationary pressures, the coming years could also present some great long-term opportunities for the company, so we look to the future with confidence.
In a widely criticized ‘mini-budget’ last week, Chancellor Kwasi Kwarteng said planned increases in alcohol excise tax rates would be scrapped, a measure that could save drinkers about 7 cents on a pint of beer.
This came shortly after the UK government announced that energy prices for businesses would be capped for six months from early October at a possible cost of up to £150bn to taxpayers.
Hospitality bosses generally welcomed both measures, but still said more help would be needed to tackle costs and ensure the sector thrives in the long run.
Responding to the mini-budget, Kate Nicholls, chief executive of UKHospitality, urged the government to cut VAT rates for domestic customers and find an alternative to the corporate rate system or risk thousands of job losses.