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Copper House Gin helps drive record annual sales at Southwold-based Adnams

PUBLISHED: 09:50 23 March 2017 | UPDATED: 13:11 23 March 2017

Adnams chairman Jonathan Adnams at the distillery in Southwold.
Picture: James Bass

Adnams chairman Jonathan Adnams at the distillery in Southwold. Picture: James Bass

Archant Norfolk © 2014

Brewing, distilling and leisure retail company Adnams today reported record annual sales and strong growth in bottom-line profits.

Copper House Gin at the Adnams store in Felixstowe.
Picture: Jason Bye Copper House Gin at the Adnams store in Felixstowe. Picture: Jason Bye

The Southwold-based firm said turnover for the year to December 31 came in at £70.265m, up 7% from £65.698m in 2015.

Sales of its own beers topped 100,000 barrels for the first time in its history, representing 9% growth over the previous 12 months, while sales of its sprits jumped by 66% year-on-year.

Operating profits dipped by 3.8% compared with 2015, from £4.093m to £3.937m, which Adnams said largely reflected an impact from the fall in the value of the pound during the second half of the year, with the company having substantial euro and US dollar costs relating to wine and hop purchases.

However, profit on ordinary activities before interest and taxation grew by 13.8%, from £4.718m to £5.367m, due to a one-off profit on Adnams’ sale of the UK distribution rights to Lagunitas beer, which also had the effect of reducing operating profits during the second half of the year.

And reduced interest and pension finance charges compared with 2015 left the bottom-line pre-tax profit 23% higher at £5.020m, against £4.068m.

The Adnams brewery in Southwold. The Adnams brewery in Southwold.

Despite the impact on costs from the post-Brexit vote fall in the value of sterling, Adnams said there had been no sign of the UK’s decision to leave the European Union having any wide impact on trade.

Company chairman Jonathan Adnams said: “2016 was a momentous year for the UK with the vote to leave the European Union and there were many predictions of economic downturn.

“So far at least, these have not been borne out. The economy has been reasonably robust, though the overall beer market has continued its long downward trend and pubs continue to close.”

He continued: “We have witnessed some substantial changes in our business over a short period as beer consumers have changed where they buy and what they buy.

“The long-term shift towards beer being bought from supermarkets and other shops, with less being sold in pubs, has continued and the taste for high quality products from small producers has also grown. We have been closely watching these trends and adapting our business accordingly.

Inside the Adnams distillery in Southwold. Inside the Adnams distillery in Southwold.

“Whilst we are, and remain, committed to being, a major cask ale producer, it was the sale of beer in kegs, bottles and cans that drove our increased production in the last year.

“These changes emphasise the importance of the new investments in our brewery. This project will be complete by the middle of 2017. We will have spent about £7m on extensions and improvements that will give us beer conditioning and filtration capacity, enhanced cooling and an automated kegging line.”

Ghost Ship had been the star performer, said Mr Adnams, overtaking Southwold Bitter during the year to become Adnams’ biggest selling brand.

He continued: “Our spirits business had a particularly good 2016 with very strong growth across all channels including supermarkets, pubs and our own shops. Our key product, Adnams Copper House Gin, continues to grow its reputation as one of the best drinks of its type.

“The tripling of capacity that we put in place at the start of 2016 came just in time to allow us to fulfil the demand that we have seen. The fact that we can produce high quality alcohol, that we then distil, means that we can deliver a true ‘grain to glass’ drink, which sets us apart in a market that largely comprises distillers who buy alcohol from bulk producers.”

Jonathan Adnams, chairman of Southwold-based Adnams, at the company's distillery. Jonathan Adnams, chairman of Southwold-based Adnams, at the company's distillery.

Mr Adnams said the reduction in size of its leased and tenanted pub estate in recent years had slowed as the quality of the remaining estate improved, although one further pub had been sold last year. “The performance of the balance of our estate was good with like-for-like income up by 2.6%,” he said.

He added: “The retail business continued to perform well in 2016, though its results were affected by the mid-year depreciation of sterling, as imported wine forms a major part of its sales. We opened a new shop in Felixstowe during the year and towards the end of the year we converted what had been a café in the Bury St Edmund’s shop into a “make your own gin” experience centre, modelled on the existing facility in Southwold.

“The Adnams shops have come into their own in recent years. They have been a powerful boost to our brand, they have spread our name more widely, they have reached different demographics and they have given us an appeal that resonates equally with both genders.”

Mr Adnams said that the current closure of the Swan in Southwold for refurbishment was seen as a “once in a generation” opportunity to transform the hotel and create “a gateway to the Adnams brand in the heart of Southwold”. “The Cygnets building behind the hotel, will be transformed into a hub for our brewery and sistillery rours and will welcome approximately 16,000 visitors each year,” he said.

However, he added: “The closure will have a material impact on our 2017 results as we will miss income from this property during the refurbishment work.”

Mr Adnams concluded: “I observed earlier that the economic climate in 2016 was better than many expected. There are, at the start of 2017, similar concerned voices and a worry that inflation induced by currency depreciation will outrun wage growth, leading to a squeeze in living standards and reduced consumer spending.

“It remains to be seen what happens when the UK leaves the EU, however our focus will continue to be on the longer term and we are investing accordingly, notably in the brewery and the Swan Hotel.”

The board is recommeding a 4.2% increase in the final dividend, representing an increase of 6p per B share.

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