Adnams, the Suffolk brewer and pub operator, has reported that it made “steady progress” in the first half of the year, saying that its beer and pub business had a “good six months”.
The company reported a 5.1% rise in turnover to £25.7m and a 5.5% increase in operating to £857k. Pre-tax profit rose slightly from £700k to £745k.
The group said that its tenanted pub estate made good progress in 2011 and again showed an improved result in the first half of this year, though beer volumes have not kept up with last year.
It said that the poor weather had depressed sales particularly amongst pubs with gardens, which comprise an important part of its estate. The group said it was pleased to observe again that its estate had seen few changes amongst its licensees.
It sold one pub in the first six months, the Mustard Pot in Norwich where the profit on sale was £95k. The Star at Wenhaston was sold shortly after the half year and one other pub remains for sale.
The group’s bank debt at 30 June was £15.9m (30 June 2011: £13.2m). it said that increase from its year end debt levels of £15.4m was partly down to timing, with its capital expenditure in 2011 was heavily weighted towards the second half of the year. The group said that the plan on spending would be the opposite in 2012.
It also said that the settlement of the final costs of the Reydon building is still not resolved.
Jonathan Adnams, chairman, said: “We have continued to keep the maturity of our borrowings quite short. This requires regular renewal of our facilities, but we seek to ensure that our borrowings remain at a comfortable level. We are conscious that short-term interest rates are at an historic low and that we have benefitted from this fact.
“The expectation has to be that interest rates will at some point move upwards, however, timing remains very uncertain and we are not convinced that we ought to be paying the necessary premium to fix rates for a longer period.
“Shareholders will be used to the way in which changes in market values can cause substantial swings in the position of our closed defined benefit pension scheme. The small surplus at 30 June 2011, became a £5.3m deficit at 31 December and this has grown again to £6.7m (£5.1m after tax) at 30 June 2012. The key factor here is the rate at which future liabilities are discounted. This was 4.3% at 30 June 2012, 0.4% below the rate used six months earlier. UK monetary policy is putting constant downward pressure on this rate with the result that our pension liabilities have been increasing sharply. It is hard to know how long this effect may last, but we may be called upon to contribute more to the pension scheme in the short term at least.”
The company said that the balance of its beer business had continued to move towards sales to managed pub operators relative to the leased and tenanted sector, “though both remain very important to us”.
It said that its directly delivered free trade had also continued to perform well, though conditions have been tougher “partly as a result of some bigger customers being bought by our competitors”.
The group said that its take home beer business had continued the good growth that it reported last year and had grown volumes by a further 13%. The volumes of the group’s own beer sold increased by 5% and Bitburger Pilsner volumes grew 3%.
In the group’s hotel division, The Swan and Crown continued to find trading was tough in the prevailing economic circumstances and also given the weather in the second quarter. Overall the contribution from the group’s hotels was 3% behind last year.
It said it had made further investments in the infrastructure of its hotels and 10 of the bedrooms at the Crown were refurbished at the start of the year. It also said that the management of the Victoria Hotel at Holkham and Globe Inn at Wells, on behalf of the Holkham Estate, has continued to provide a “steady stream of income”.
The company said that its wine and shops business again showed “good turnover growth” assisted by the contribution from the new stores opened in the second half of 2011 and also by the new shop in Norwich which opened at the end of May.
Shop sales were 7.5% ahead of last year and on a like-for-like basis were 5.4% ahead. The bottom line was however slightly behind 2011, with the group saying that the cost of the new stores played a part in this.
The group said it had taken the difficult decision to scale back overheads and not to renew the lease on the shop that we opened in Spitalfields last year. It is not planning any further openings at the present time.
Adnams said: “At a time when there has been so much focus on the failings of company behaviour it is increasingly apparent that the way that things are done is a vital ingredient in long-term success. We feel that our positive values led approach has served us well and will continue to do so in the future. We were delighted to have this approach publically recognised when in April we heard that we had been awarded the Queen's Award for Enterprise: Sustainable Development.
“Making comments about the future seems particularly problematic in times such as these, but Adnams will continue to take a long-term view and seek to build the trust and confidence of its stakeholders.”
