Brewer, distiller and leisure retailer Adnams has reported a fall in annual profits following a year of significant investment, including a lengthy closure of the Swan Hotel in Southwold for refurbishment.
Turnover for the 12 months to December 31 grew by 6.4%, from £70.265m in 2016 to £74.765, but underlying operating profit came in 45.1% lower at £2.159m against £3.937m.
And bottom line pre-tax profits were 69% down, at £1.549m against £5.020m in 2016, with last year’s total also affected by increased interest and pension charges.
Company chairman Jonathan Adnams said the fall in profit had been well flagged to shareholders in advance, including the impact of a delay in reopening the Swan due to the discovery of asbestos during the refurbishment work which was the biggest factor in one-off costs which reduced actual operating profit to £1.438m.
Investment across the Adnams business totalled £9.3m last year. Besides the work at the Swan, which reopened last October, this included the completion of a three-year investment in the brewery and the start of an IT systems upgrade which will continue until the second half of this year.
Adnams’ beer volumes grew by 9.1%, with continued diversification of its product range, and ‒ as a result of investment in new equipment ‒ this will continue in May with the launch of an alcohol-free version of its top-selling ale Ghost Ship.
Last year also saw another strong performance for the company’s distilling operation, with Copper House Gin now among the UK’s top 25 best selling gins.
Within the company’s pub and hotel estate, two more properties were transferred from tenancy to direct management, bringing the total to seven, and this trend was likely to continue in the next few years, Mr Adnams said.
Adnams was also continuing to sell some smaller village pubs which, in the current market, it now felt were better suited to individual or community ownership, he added, such as the current talks in relation to the King’s Head (also known as the Low House) in Laxfield.
On the retail side, the company’s shops remained a valuable outlet for Adnams products, said Mr Adnams, but the company was responding to the changing nature of the market by developing its online order business while moving its bricks and mortar presence more towards providing customer experience.
Mr Adnams said: “2017 was a year of huge investment. We saw some inevitable disruption, but we delivered substantial change.
“We continue to focus on what matters most: to deliver a service and product which allows us to stand out from the crowd; to grow the business when and where appropriate, answering increasing market demand; and, above all, to delight our new and loyal customers in everything we do.”
Looking ahead, he added: “Our turnover is growing strongly, Ghost Ship continues its rise, Copper House Gin is cementing its position as a premium product, The Swan is looking at its very best and we believe that we are well positioned to take advantage of the investments that we have made.”
The board is recommending an unchanged final dividend of £1.50 per B-share to make a total for the year of £2.28, up 0.9% from £2.26 for 2016.
Fiona Cincotta, senior market analyst at www.cityindex.co.uk, said: “Despite Adnams reporting pre-tax profits 69% lower than in 2016, at £1.549m, its results were by no means all bad news.
“A 6.4% increase in revenue, with beer revenue up 9% thanks to increased diversification, in addition to the runaway success of Copper House Gin and the reopening of the Swan Hotel puts Adnams on a solid footing for the year ahead.”
She added: “This coming year Adnams will be well positioned to reap the rewards of the eye watering levels of investment from the previous year.
“Good timely communication from management to shareholders over the weaker bottom line has meant that the share price hasn’t suffered any heavy sell off today and in fact is trading over 2.5% higher.”
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