M&C Report takes a closer look at Shepherd Neame’s full year results and talks to Jonathan Neame, chief executive, about taxation, food development, value, expansion, brewing and accommodation. Tax Neame told M&C Report that the Government had “morally run out of road” in regards to its position on tax in the sector. Shepherd Neame paid £32.1m in excise duty on own brewed beers compared to GBP19.5m in 2007. He said: “This is a misguided tax policy that impacts brewing and retailing margins and so reduces the capacity of the industry to invest and create jobs. The industry has made some great strides this year, especially with 100,000 people signing the beer duty escalator petition, but nothing will be achieved unless we can get every beer drinker and pub goers behind the campaign with one voice. Pubs are a valuable community asset, what would happen if they closed down, somewhere along the line people would campaign for a community asset and the Government would have to subsidise something new, it is a crazy situation.” Expansion Neame said that the company was “very determined” very determined to stay within its current geographical boundaries when it came to expansion opportunities. During the year, it acquired it acquired two hotels, The Bell Hotel, Sandwich and The Fayreness, Kingsgate and five pubs from Enterprise Inns: The Camden Arms, Pembury; The Kings Head, Deal; The Old City Bar, Canterbury; The Old Neptune, Whitstable; and The Zetland Arms, Kingsdown. Neame said that in terms of further deals on pubco sites that a “handful might come through” over the next year, but the group would continue to make “selective” acquisitions in line with its strategy of improving the “quality of its estate over quantity”. Since 2007, the company has invested £40.8m in new sites and realised combined proceeds of £21.3m. Over the period it has acquired 29 pubs and hotels and sold 52 predominantly small community tenanted pubs. Many of these new outlets are amongst our best performing businesses. Neame said the group would continue to “target outlets with a broad range of facilities, individual character and high profile locations”. The total investment in acquiring the seven outlets during the year was £15.6m. It disposed of 12 (2011: eight) small pubs and two parcels of land for £3.5m (2011: £2.5m). It anticipates a similar number of disposals during the current year. Value Neame said that the company continued to drive quality, value for money, presentation and choice of menu within it managed houses. He said: “Without raising prices our average food spend per visit moving to £11.23 (2011: £9.12) during the year, which highlighted that consumers even in this current climate are prepared to spend more for a quality offer priced correctly. In some places we have dropped prices. Consumers are dwelling longer in our sites and having more courses. Tenanted estate Neame said that the success of the group’s tenanted estate was down to focuses on the offer. He said: “As an industry we talk to much about the tie and beer duty, when it is all about the offer, the key is giving our tenants the tools/platform to deliver that offer.” Neame said that it was introducing a lot of findings from its managed estate, especially it award-winning food offer, into its tenanted division. He said: “We are focussed on improving the level of service and support to our tenanted licensees and, aside from the increased development spend, have also introduced enhanced purchasing deals on food and other items and a new incentive scheme. We have recruited two surveyors to strengthen the team and, since the year end, a development chef exclusively to support our tenanted operation. “The results in the tenanted business show that our strategy of increasing our investment to drive the offer is delivering better results and a robust platform to build on. We have enjoyed increased revenue and profitability, higher income per pub, lower licensee turnover and an improving recruitment trend.” During the year, the company carried out 26 successful refurbishments in the tenanted business. In all cases, it said it had provided a turnkey interior design and supported the re-opening with enhanced training and marketing support. Neame said: “The results to date have been very positive and give us the confidence to invest more in the coming year to enhance the offer through our tenanted businesses.” Brewing The group has concluded a new licence to brew, sell and market Samuel Adams from Boston Beer Company to address the growing interest in US Craft Beers in the UK. It said that the initial reaction to this new addition to its portfolio had been very encouraging. Neame said: “Our contract with United Breweries of India for the Kingfisher lager brand is due for renewal in the near future. We are currently in discussions about extending this important relationship and expect this to be concluded in the next year. During the year we ceased production of Holsten Export, as it no longer fitted our portfolio. “To reflect consumer shifts to digital marketing, we have made further enhancements to our website to improve usage via mobile handheld devices. We have grown the site and increased the number of features and functionality, including greater personalisation for users.” The company’s brewing team was enhanced during the year by the appointment of Richard Frost as head brewer. Neame said: “Richard brings with him a wealth of experience gained during his time at the Wolverhampton Brewery”. Accommodation The two new hotel acquisitions added 66 letting rooms and The Camden Arms and Kings Head a further 22 to the business. This brings the total number of letting rooms in group’s overall pub estate to 476 at the year end. It operates 246 accommodation rooms in its managed estate (2011: 180) and a further 230 in its tenanted estate (2011: 204). Neame said this reflected a “positive step forward in our strategy to develop an enviable collection of 3-star hotels and 4-star inns that provide high quality rooms with individual character”. In the last year, the group has carried out an upgrade at the Dog and Bear, Lenham and commenced phase 1 of a major re-development of the Marine Hotel, Tankerton with 15 rooms upgraded. In the coming year, it will complete the remainder of this project at an estimated total cost over two years of £1.6m.