Southwold: Strong second half delivers a lift for Adnams
PUBLISHED: 09:17 26 March 2014 | UPDATED: 11:02 26 March 2014
Southwold-based Adnams today reported a strong second-half recovery as it posted an operating profit of £3.3million for 2013.
The brewing, distilling, pubs, hotels and retail company reported annual sales of £60.5m, an increase of 6.3% compared with £56.9m in 2013.
Although the operating profit represents a fall of 2.0% compared with £3.4m the previous year, it marks a significant rebound during the final six months of 2013 with the figure having been 22% lower at the half-year stage.
Pre-tax profits were nearly 30% higher, at £4.1m against £3.2m, with last year’s bottom line figure benefiting from one-off profits on property sales and reduced interest charges, with net debt falling by £3m to £10.8m at the year-end.
Adnams chairman, Jonathan Adnams, said: “It was pleasing to see what was a relatively unexpected revival in the UK’s economic fortunes in the second half of 2013. We obviously hope that this progress will be maintained, though some caution must be inevitable with unresolved challenges in the eurozone and debt levels remaining high.
“The beer, pubs, hotels and retail markets that are key to Adnams all remain very challenging. Beer consumption continues to decline and pubs continue to close.”
However, Mr Adnams added: “Despite a difficult start to 2013 due to adverse weather conditions and poor consumer confidence, we saw a much-improved second half to the year as the economy, and the weather, started to pick up.”
The company’s brewing and brands business, including distilling, made a profit of £1.9m, an increase of 8% on the previous year, benefiting from an increase in beer volumes, cost savings and the success of the distillery which launched its first whiskies shortly before Christmas.
Adnams’ beer volumes grew by 1.2% overall, including a 20% increase in the take-home market, against the background of industry data showing a 1.9% decline in the total cask beer market and a continuation of the long-term trend towards home consumption which was 3.2% higher last year.
Mr Adnams said: “Despite the challenges of the UK beer market, we have continued to take a long-term view and invest in our brewery to ensure that we have industry leading equipment and capability.
“As bottled and canned beers become a larger proportion of our business we will need to invest further in new tanks and filtration capacity. This is currently in the planning stage and we will provide further details as these plans develop.”
Mr Adnams said it had been a more difficult year for the company’s pubs business while trading conditions for its hotels had remained challenging.
“After two strong years, our pubs business had a tough 2013,” he said. “Economic pressure remains very strong on pubs with 28 outlets closing each week. Much of our estate traded well, but we had a number of pubs that ran into difficulties in the first half of the year and some were moved into temporary management.
“We sold four pubs in the year and another pub shortly after the year end. We also sold a former pub property more recently used as accommodation for our hotel staff.
“All the pubs that we have sold have been sold as going concerns, but we noted last year that there are inevitably some circumstances in which a pub is genuinely unviable and it would run counter to our values to encourage licensees to invest in a pub which offers no realistic chance of a profitable livelihood.”
He added: “The market for regional hotels has been a difficult one and 2013 was another tough year for the Swan and Crown hotels in Southwold.
“The poor weather in the first half of the year was undoubtedly a contributing factor, but consumer trends in relation to hotel visits are also a challenge and the cost of such visits is a relatively easy saving in harder economic times.” However, he said that Adnams’ shops business had a enjoyed “a strong 2013”, with a 6.0% increase in like-for-like turnover across the Cellar & Kitchen chain.
“Whilst some stores have always done well we have started to see improvements in most of the estate,” said Mr Adnams.”We believe that a focus on operations, cost savings and a good offer of Adnams products bodes well for the future.
“The store estate remained unchanged during the year except for the fact that we opened a pop-up shop in the Chapelfield shopping centre in Norwich. This shop was open from September until the end of the year and traded very well. We will look at other such opportunities as and when they arise.”
Looking ahead, Mr Adnams said:“It is pleasing to see economic circumstances that are starting to look up after a number of years of squeezed living standards. I think, nonetheless, we need to temper that pleasure with caution regarding difficulties that may lie ahead and caution too regarding the specific challenges of the markets in which Adnams operates.
“The beer market, especially the free market in cask ale, and the pubs market have been particularly tough. It is perhaps notable in 2013 that we saw the greatest improvements from our more recent diversifications into shops and our distillery.
“2014 has started reasonably well for us and we believe that our long-term focus will help us to surmount the challenges that we will undoubtedly face. I am very grateful for the continued support of our shareholders.”
The final dividend will remain unchanged at £1.28 per share, making a total for the year of £1.96 per share, an increase of 1.0% on 2012.