SA Brain, the Cardiff-based brewer and pub operator, has blamed the slow economic recovery and poor summer weather for causing its results to fall behind target for the year to 25 September 2010.
Profit after tax but before dividend was £1.5m, down from £6.4m in 2009, although Brains said the previous year's results benefited from the sale of its free trade division to Heineken in 2009.
The company said its restructuring process after the sale caused turnover to fall £3.8m to £99.3m. When free trade sales are removed, turnover on a comparative basis increased by over £8m (9%), according to accounts filed at Companies House.
Own-ale volumes fell 13%, against Brains’ estimate of a 10% decline across Wales as a whole and 8.9% across Britain. Brains cited “challenges in the free trade sector and the smooth ale market in general”.
The period also saw a reduction in profit contribution from its managed and tenanted/leased pub divisions.
Managed pub like-for-like sales were up 1.5%, or around £400,000, with growth driven by food sales at investments in 16 sites. The figure would have been +2% if trade hadn’t dropped in the last quarter, Brains said. There have been a “number of major redevelopments” in Q1 2011, “which are generally performing well”.
Profit contribution was flat against other divisions because of greater investment in consumer marketing.
Rental income in the tenanted/leased division, which was “particularly affected by the slowdown in consumer spending”, fell by around 5% and tenants have been supported by a “range of measures, including increased discounts”.
These factors, along with “significant investment in building repairs”, caused a “sizeable reduction in contribution” from the division. Brains is targeting flat volumes and profit improvement for the year, “mainly driven by transfers of smaller managed houses into the estate”. Eight tenanted pubs were sold in the year.
Volumes in its on-trade national sales division were in growth. But Heineken’s free trade division remains in a “difficult” position after a “disappointing” period for the free trade market in Wales, which is declining at more than 10%. Take-home volumes were up 12%.
Brains said it’s “now starting to refocus our attention on very selective acquisitions” of pubs and has made several unsuccessful bids over the past few months.
Chief executive Scott Waddington said the company was “encouraged by our performance up until the end of June, but the combination of poor summer weather and the slower than expected recovery of the economy resulted in a slowdown in trading during the final quarter, leaving our year-end outcome slightly behind our target”.
Waddington was “cautious” about trading in 2011, particularly in the first six months, so Brains will “continue to focus on controlling costs within the business and only make capital investments after careful consideration and when it is prudent to do so”.
The company proposed a final and interim dividend for the year of £1.66, unchanged from 2009.
