Suffolk-based brewer and pub operator Adnams has reported a “variable” first half of 2011 with operating profits at a similar level to 2010 — 2% down at £812,000, writes Ewan Turney.
Adnams said it had witnessed a “rollercoaster” in consumer confidence with good weather in April.
Turnover was up 6% to £24.5m while profit before tax is slightly ahead — 9% at £700,000 — of last year but the company said it was “justified” in expressing caution to shareholders in May. It will pay an unchanged dividend of 65p per B share and 16.25p per A share.
It said it had suffered as a result of acquisitions of small pub groups by other brewers — namely Geronimo Inns to Young’s and Realpubs and Capital to Greene King, which meant Adnams is locked out of selling beer to those pubs.
But its off-trade sales recovered from a tough 2010 to grow volumes by 17%. Overall own beer volumes grew 2.5% and Bitburger lager by 4.4%.
“The reality of the beer business in the UK is that consumption has been falling year by year and producer numbers have increased, with a continuing influx of tax-subsidised small brewers,” said chairman Jonathan Adnams.
“Pressure on margins is an inevitable consequence. We have certainly felt this, but have fought to retain our premium position.”
Adnams said its tenanted estate had enjoyed a better 2011 than last year with own beer volumes up 4.5% and fewer changes of licensee.
It sold just one pub in the period — the Dragon at Colchester.
“The pub industry continues to be subject to Government scrutiny with further meetings of the Business Innovation and Skills Committee,” he said.
“Adnams has a new code of practice in place. This sets out the ways in which we will act in relation to our licensees and seeks to ensure that these are fair.
“Whilst a strong and clear code is important, we hope and believe that the good relations that we enjoy with our licensees is the best testimony to our acting in the right way.”
Its Swan and Crown hotel experinced “quite changeable trading” in the first six months with a strong April followed by a tough May and June but sales were flat on the same period last year.
The management of Fritton House, the Victoria Hotel at Holkham and Globe Inn at Wells continues to create a steady stream of income.
Sales at its Cellar & Kitchen stores were 22% up on last year and 14% ahead on a like-for-like basis.
However, profit was slightly down on last year due to increased staff numbers in preparation for expansion of the brand. It continues to seek new sites but did not acquire any in the first half.
Its bank debt on 30 June stood at £13.2m (30th June 2010: £12.1m).
“We have continued to keep the maturity of our borrowings quite short,” said Adnams. “This requires regular renewal of our facilities, but we seek to ensure that our borrowings remain at a level with which our bankers, Barclays, are happy.
“We are conscious that short-term interest rates are at an historic low and that we have benefitted from this fact. Whilst for now the Bank of England seems in no hurry to change their current policy, we are aware that the next interest rate move is likely to be an increase.
“We do not consider ourselves to be any more knowledgeable than anyone else as to when this move might take place and so our policy has been to accept prevailing interest rates and not seek to fix a longer-term rate.”
Its long running tax dispute over allowances at its Reydon distribution centre has finally come to an end but has still been denied allowances on the majority of building costs involved.
“We continue to believe that Government policy in this area is misconceived,” said Adnams.
“The granting of allowances for energy-intensive plant and the denial of allowances for buildings which replace the need for such plant cannot be a sensible policy for a government which claims to have a green agenda. Settlement of the final costs of the Reydon building remains unresolved.”
He added: “Volatile consumer sentiment is a worry for any business when planning for the future. Currently we sense consumer concern and a reluctance to commit, particularly for larger spends. Whether and for how long this will continue is not something that we can easily judge.
"We do however have the view that Adnams is here for the long term and we will act and invest on that basis.”
