Shepherd Neame braces for energy price shock as Iran war drives up costs

Shepherd Neame has become the latest pub company to express concern over the spectre of rising energy costs after the war in Iran sent the price of oil soaring.

The Kent-based brewer, pub and hotel group, which is listed on the Aquis stock exchange, said its energy was “heavily hedged” into the next financial year with around 50 per cent of contracts hedged – meaning that the group could see a sharp hike to cost pressures should energy prices fail to stabilise before 2027.

“Like many operators we’ve been investing in new plant and equipment to reduce energy consumption…but there’s no doubt that it is a concern,” Shepherd Neame chief executive Jonathan Neame told Morning Wire.

“It was a major impact in the sector in the Ukraine war and most businesses need affordable, consistent energy, and an affordable level of labour costs in order to thrive.

“So we sincerely hope that the situation in the Middle East stabilises quickly.”

Neame’s remarks come after Wetherspoon boss Tim Martin appeared to be paving the way for potential hikes to pint prices at his own pubs when he told The Telegraph at the weekend that energy cost increases could end up inflating food and drink costs.

“Rising energy costs are bad news for pubs. As well as direct increases for gas and electricity, they make customers poorer and also push up the costs for suppliers,” he said.

This is despite Wetherspoon’s energy prices being fixed until 2029, years longer than some of its competitors, according to analysts at Peel Hunt.

Shepherd Neame gets in on stout craze

Shepherd Neame on Wednesday unveiled a 3.4 per cent hike in its dividend to 4.5p after reporting a 2.7 per cent rise in profit to £4.4m for the six months to end December.

Britain’s oldest brewer, which traces its roots back to 1698, saw turnover unchanged compared to the previous year after an improvement in demand across its hundreds of pubs was offset by a reduction revenue from its brewing division.

The company said its new stout line, known as Iron Wharf, had seen strong sales and was helping fuel demand for own beer across its pubs. 

“There’s no hiding from the fact that anyone from the beer supply market is finding life quite challenging at the moment,” Neame said, though he added that instability in the Middle East could trigger a rise in summer staycations in the UK as Brits swerve the higher costs of travelling abroad.

“We should be a major beneficiary of that if that were to be the case,” he said.