Adnams has announced a 12% increase to £962,000 in its operating profits for the six months to 30 June 2015, a strong result after a long cold spring, and reports that:
“The underlying trends within our business have mainly been positive. Our newer beers have grown well in a fickle market and our spirits have continued their strong growth. We are making substantial investments in both our brewery and distillery to secure capacity and flexibility for the future. Our continuing pub estate has traded well and has maintained profitability despite its smaller size, and our managed properties have received investment to secure their trading. Our retail business has had a strong six months and is looking at further expansion and at continuing investment in its online presence.”
Chairman’s report from Jonathan Adnams
Results
“We are pleased to announce a 12% increase to £962,000 in the Adnams operating profits for the six months to 30 June 2015, a strong result after a long cold spring. Turnover was down 3% at £29.1m, partly as a result of two of our large managed properties being closed for refurbishment, and own beer volumes were down by 5% after last year’s 18% increase. The current year dip in beer volumes was notably in the volatile area of sales to the large managed pub companies. Property profits were £407,000, last year they were £107,000. Three properties were sold in the last six months. We will continue to keep a strong property portfolio, however the shape of our business is moving towards our becoming a modern branded drinks company.
Dividend
“We are retaining our policy for the Company’s interim dividend, which is that we pay 35% of the total dividend paid in the previous year. As we flagged in our 2014 accounts this means that we will be increasing the dividend on our ‘B’ shares by 3p and on our ‘A’ shares by 0.75p to 72p per share and 18p per share respectively, a 4.3% increase.
The Adnams Brewing & Brands Business
“The beer market continues to evolve very rapidly as new products are launched, numbers of small producers continue to increase and consumer tastes change, inspired by the range of beers now available. This has created more challenging times for classic English beers like Adnams Bitter, however it has also created opportunities for our own new products. We believe that we have been successful in reading and reacting to industry trends. The rapid rise of Adnams Ghost Ship and the more recent success for some of our innovative products supports this view. Underlying market trends suggest that we are well placed to grow and it is with this background that we are pushing ahead with a substantial £7.0m investment in our brewery to achieve the capacity and flexibility that we will need.
Market data suggests that in the first six months of this year beer volumes have declined, by 3.6%, and the cask ale market has grown by 0.5%. Our volumes were behind this, however we have noted in previous reports that large managed house operators have become more important both to us and to the market as a whole. This creates some inevitable volatility in our volumes as these businesses rotate their offer.Our directly delivered business in East Anglia saw volumes on a par with 2014, though London volumes were less strong as that market is becoming increasingly competitive with
the rapid growth of local brewers, a phenomenon in which London has lagged most of the rest of the country. Our sales to supermarkets and other take home outlets were in line with those achieved in the same period last year. Our greater focus on export yielded good sales growth though volumes are still small.
The Adnams Copper House Distillery
“Our spirits business has continued its strong growth helped by Adnams Longshore Vodka winning the International Wine & Spirits Competition’s vodka trophy in the year after our Copper House Gin won the equivalent gin award. The strong demand that we have seen for gin has meant that our distillery has reached capacity as we have worked to meet this demand and also lay down whisky stocks for the future. We are investing half a million pounds in the distillery to roughly double the capacity and increase efficiency to realise our growth ambitions. This investment will be complete by the end of the year.
The Adnams Property Businesses
“With the move of two of our key outlets, the White Horse at Blakeney, and the Ship at Levington, to managed houses and our shorter term management of some of our smaller tenancies we are treating our property business as an integrated whole where pubs and hotels may move between tenancy or leasehold or our own management as circumstances require. The Managed Inns part of this
business, comprising the Swan and Crown in Southwold together with the White Horse and the Ship saw substantial investment in the first half of this year. Both the Swan and the White Horse were closed for several weeks whilst refurbishments took place. This had some inevitable impacts on trading, however we believe that we will start to see the returns from the investments coming
through in the second half of the year. The leased and tenanted part of the business has seen the impact of having fewer pubs as we have sold a number of smaller outlets in recent years, however underlying trading has been good with like-for-like results ahead of last year and an overall result similar to a year ago. The three pubs sold in the first half of this year were: The Bull at Cavendish, the Fleece at Bungay and the Queen’s Head at Long Stratton. Since the half year Adnams has sold the Ship at Burnham and the Cock at Clare and has three further pubs on the market.
The Adnams Stores
“Our shops have continued their recent trend of improved trading with like-for-like revenue growth well ahead of the high street average. These shops are an integral part of the Adnams proposition. They have been instrumental in portraying our brand to a wider audience, particularly a female audience less familiar with Adnams. They have also helped us to launch new products and have been
notably important in assisting the early growth of our spirits business. We saw no new openings or closures in this half year however we will open a new shop in Bury St Edmunds in the second half. Our online shop continues its growth and we are investing in our proposition to significantly improve the customer experience and further grow this increasingly important channel.
The Future
“The underlying trends within our business have mainly been positive. Our newer beers have grown well in a fickle market and our spirits have continued their strong growth. We are making substantial investments in both our brewery and distillery to secure capacity and flexibility for the future. Our continuing pub estate has traded well and has maintained profitability despite its smaller size, and our managed properties have received investment to secure their trading. Our retail business has had a strong six months and is looking at further expansion and at continuing investment in its online presence.”