Profit might not be the most important metric for success for Jonathan Neame at the moment. The next 12 months is all about getting the business firing again, getting the teams back and welcoming customers back.
But it will have no doubt come as a great relief that cash at the family pub operator and brewer has been “less extreme” than expected.
“That’s partly because our brewery has done so well during this time, and that’s kept some cash coming in, but also the additional round of grants early in the year has meant that our overall indebtedness is not quite as high as we expected,” he told MCA.
“That’s meant that the banks have been able to give us further, very welcome, support which means we have got a have got ample liquidity through to Sept 2022, and that in our view is more than long enough for us to recover the business,” added Neame.
Speaking on the back of the family brewer and operator’s interim results yesterday (21 April), Neame told MCA that alongside a clear roadmap, one of its most important focuses has been shoring up its financing position. The business saw turnover fall from £79m to £55.3m for the six months to 26 December 2020, with statutory loss before tax at £7.2m – compared to a profit of £5.4m in H1 2020.
In yesterday’s results statement the business announced that it had agreed new waivers with lenders this week, with relaxed covenant tests relaxed until September next year. Neame said the finance package that was put in place last year – “which gave us extra debt facilities, including the CLBIL – which we have not utilised yet but it’s a safety net for the business – has been renewed”.
In July last year the business announced it had strengthened its financial position by securing a borrowing facility through the Coronavirus Large Business Interruption Loan Scheme, with its lender Lloyds and Santander agreeing to a £25m revolving credit facility.
“Unless we go backwards into a severe lockdown, hopefully that will be ample liquidity for the company to restore its balance sheet, pay off any of the liabilities that we have picked up in this time, and get back to where we were,” he said.
Neame said the past 12 months has made it reassess its priorities, and “clearly capex and our developments will be much reduced next year”, but he said its plans for expansion had not been derailed – “it’s more a question of a hiatus”.
“We’ve done great things in terms of our digital and social media and the requirements for that going forward will be far greater. But the whole focus for the next 12 months is to bed in the recovery, get to a sense of terraferma and then we can reassess the timings of our plans,” he added.
Shepherd Neame has reopened 200 of its pubs for outdoor service and, while it’s early days, the indications are that trading has been above expectations, he said, adding that the business was lucky that it had many large pub gardens and community pubs. “The majority of those pubs are trading in line with, or above, their 2019 level,” he added.
Neame said that forward bookings for its hotels were very strong, and there was every expectation of a staycation summer.
Shepherd Neame: Cash burn ‘less extreme’ as brewery picks up slack
Profit might not be the most important metric for success for Jonathan Neame at the moment. The next 12 months is all about getting the business firing again, retraining teams and welcoming customers back. But it will have come as a great relief that cash burn at the family pub operator has been “less extreme” than expected, partially offset by a strong brewing performance.