Leading analyst Anna Barnfather, of Panmure Gordon, has said Shepherd Neame is “gathering momentum”.

Barnfather said that the Kent-based family company, which reports on its full-year next week, was nearing completion of its “orderly” exit from contract brewing and was seeing the benefits of renewed investment in its estate.

Barnfather said: “We believe that the group’s solid balance sheet and freehold portfolio put it in a strong position to finance future growth and add to its pub numbers and room stock. Continuing strong trading (lfl +4.6%) and recent acquisitions are evidence of this. We maintain our Buy recommendation and price target of 1450p.

She added: “Staff costs account for an estimated £25m annually, equivalent to 18% of turnover, below the sector average reflecting lower labour intensity of traditional wet led pubs and brewing operations. However, operating profit margin of 10.1% is towards the lower end of its peers (reflecting smaller scale and lower margin brewing operations) make Shepherd Neame only moderately exposure to wage inflation. Rental lease costs are also low.”

She concluded: “While we expect 2016 to be in line with expectations, we already believe that there is upgrade potential for 2017 and beyond, not least to reflect recent acquisitions and estate expansion.”

 

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