TIDMADB
RNS Number : 9636M
Adnams PLC
20 September 2023
Adnams plc Interim Accounts 2023
""The UK economy remains a challenge for Brewing and
Hospitality".
Chairman's Statement
One year on from the removal of Covid restrictions, the UK
economic situation remained challenging in the first 6 months of
the year with inflationary pressures continuing to persist and
interest rates remaining stubbornly high. This has led to sales
across the sector remaining almost 15% below pre-pandemic levels
(source UK Hospitality). Lower levels of consumer confidence endure
with around 35% of people saying they were going to spend less on
going out (source: UK Hospitality) and KPMG citing in April this
figure may be as high as 65% (source: KPMG, April 2023).
Consequently, we continue to see the number of UK pubs continue to
fall with the current 46,000 down some 15% from a decade ago
(source: British Beer and Pub Association) and the cask beer market
around 25% smaller than 2019. In June the accountancy firm Mazars
reported some 45 breweries ceasing to trade in the 12 months to
March 2023.
It is against this backdrop I report turnover for the first half
of the year remaining at GBP30m consistent with the first half of
last year. Operating losses increased to GBP2.4m on the back of
continued pressure on input prices and reduced demand particularly
in quarter one of the year. Cash generation remains a focus for the
Company alongside managing levels of borrowing in the current
higher interest rate environment. We therefore cannot commit to
paying an interim dividend at this stage, but as is always the case
the board keeps the matter under regular review and intends to
return to paying dividends as soon as practicable.
The detail of the first half of the year from the company's
perspective needs to be divided into the two quarters. Quarter one
saw trading particularly subdued and we saw a consequent fall in
turnover by close to 5%. This was anticipated as continued
inflationary pressures and subdued consumer demand worked their way
through the system together with our cost mitigation activities
being only in their early stages.
The second quarter showed a marked improvement and generated a
compensatory level of growth as business levels improved as the
light evenings and warmer weather gave consumers a lift. Further,
our cost mitigation activities began to deliver savings through
headcount reductions, changes to brewery operations and a detailed
evaluation of each expenditure line. In the direct free trade, we
have seen customer numbers increase by close to 26% and this
indicates we are growing market share in our East Anglian heartland
and London. Average order size however remains challenging as rural
pubs still operate reduced opening hours. Our national on-trade
channel has been successful in winning new business in an extended
heartland area stretching into Northamptonshire and Bedfordshire
and we are in advanced conversations with several operators about
Adnams Lighthouse, a 3.4% beer that secures the duty advantage for
low strength beers that will be introduced by Government in August.
Our Boat Trip a Collaboration brew with Deya and Lazy SIPA also
both did well in the national on-trade. In the off trade the
premium bottled ale category remains challenging with the market
down by as much as 15% in March (source; BBPA March 2023). However,
we have gained additional distribution with Ghost Ship multipacks
in 440ml can. The Ghost Ship pairing of 4.5% and the market leading
0.5% remain the key focus across all distribution channels. Copper
House Gin has gained additional distribution with our supermarket
customers growing volumes by 2.5% over the first half of the year.
The export channel performed well and delivered volume growth on
last year.
Consistent with the rest of the business the half year for pubs
and hotels should be viewed as two distinct quarters. In quarter
one Managed Inns and Hotels were level with last year however, in
quarter two sales growth of 10% was delivered and this pattern of
trading was replicated by the leased and tenanted channel
delivering 9% sales growth in the second quarter. Whilst
encouraging, allowance needs to be made for systematic price
inflation contributing some of the sales uplift. Therefore, pubs
and hotels continue to be in the eye of the storm with food
inflation, the return of foreign holidays and for Adnams, a
dependence on good weather due to the coastal location of many of
our properties. In February, The White Hart, Blythburgh reopened
after a short refurbishment and kitchen upgrade. The pub is now
managed and focusing on a great welcome for locals, walkers and
visitors to the bar and gardens. In March we added a new experience
for Adnams guests and visitors by adopting the Southwold
Lighthouse. Working with Trinity House we are putting on daily
tours up the 113 steps to the top led by our tour guides. Great
views, some Southwold and Adnams history followed by a drink in The
Sole Bay Inn has proved a successful and enjoyable formula. In June
we received the Craft Guild of Chefs Sustainability Excellence
Award, recognising the excellent work our teams have done to reduce
food waste, work with local suppliers and making the most efficient
use of cooking techniques and energy use.
Trading conditions for our shops also remain demanding, in 2022
the visitor economy was still buoyed by staycations and there was
increased confidence in socialising following the end of Covid
restrictions. Notably, the comparable weather has also been less
good in 2023, impacting sales at key shops. Increased prices have
had to balance increased costs of production for our own beers and
spirits and increased supplier costs for our wines. We remain
highly conscious as to how much can be passed through to the end
customer before demand is significantly impacted therefore, we keep
competitor pricing under regular review. In April we opened our
14th shop at Frinton-on-Sea. The town has warmly welcomed Adnams
and the reputation of the shop, Adnams products and our friendly
service continues to grow. The Shop is beautifully presented and
the team there have embraced all things Adnams and Southwold. A
further positive is when customers do decide to enjoy and celebrate
occasions, they then choose Adnams. There have been excellent
trading periods around Easter, the Coronation and bank holidays,
and there is a direct correlation between improved sales with the
all-too-infrequent moments of good weather so far this year.
Continually improving retail standards and team training has played
a key role in achieving these results and we remain a shop of
choice when people do decide to celebrate and enjoy a drink. The
web business is undergoing some changes with a greater reliance on
organic growth in numbers of customers coupled with stronger
customer retention levels. There is a growing focus on local
deliveries from our network of shops using a fleet of mainly
electric vehicles. For wider UK distribution, operations are being
moved back to the Reydon Distribution Centre to reduce costs,
improve service, and provide local jobs.
In March we also welcomed HRH The Princess Royal, completing a
year of 150th Celebrations, who visited The Swan Hotel, Distillery,
Lighthouse, and Sole Bay Inn. Princess Anne met lots of our teams
who brought our stories to life.
Although trading conditions continue to be uncertain. We are
encouraged by the growth in new on-trade customer numbers, new
listings in the off-trade and the performance of Ghost Ship 0.5%.
Finally, our recent customer research gave an indication of a
younger cohort of consumers discovering Adnams.
Dr Jonathan Adnams OBE
Chairman
Profit and loss account
For the six months ended 30 June 2023
Unaudited Unaudited
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2023 2022 2022
Notes GBP000 GBP000 GBP000
---------------------------------------------- ----- ------------- --------- ------------
Turnover 29,990 30,075 64,215
Other operating income 2 - - 62
Operating expenses (32,508) (30,789) (65,504)
---------------------------------------------- ----- ------------- --------- ------------
Operating loss (2,518) (714) (1,227)
Gain on disposal of assets - - 2
---------------------------------------------- ----- ------------- --------- ------------
Loss before interest and taxation (2,518) (714) (1,225)
Gain on financial instruments at fair value 119 - (212)
Interest (734) (275) (759)
Other finance charge on pension scheme - (30) (89)
---------------------------------------------- ----- ------------- --------- ------------
Loss before taxation (3,133) (1,019) (2,285)
Tax on loss 3 686 208 757
---------------------------------------------- ----- ------------- --------- ------------
Loss (2,447) (811) (1,528)
---------------------------------------------- ----- ------------- --------- ------------
Loss per share 4
'A' Shares of 25p each, inc. asset disposals
(pence) (129.7)p (43.0)p (81.0)p
'B' Shares of GBP1 each, inc. asset disposals
(pence) (518.6)p (172.0)p (323.8)p
'A' Shares of 25p each, exc. asset disposals
(pence) (129.7)p (43.0)p (81.0)p
'B' Shares of GBP1 each, exc. asset disposals
(pence) (518.6)p (172.0)p (323.8)p
Balance sheet
As at 30 June 2023
Unaudited Unaudited
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
--------------------------------------------------- --------- --------- -----------
Intangible assets 1,861 - 1,939
Tangible Fixed assets 34,354 37,792 34,900
36,215 37,792 36,839
--------------------------------------------------- --------- --------- -----------
Current assets
Derivative financial instruments 119 - 16
Stocks 9,702 10,463 10,615
Debtors 5,971 5,447 5,171
Cash at bank and in hand (757) 44 693
--------------------------------------------------- --------- --------- -----------
15,035 15,954 16,495
--------------------------------------------------- --------- --------- -----------
Creditors: amounts falling due within one year (17,429) (15,705) (16,288)
--------------------------------------------------- --------- --------- -----------
Net current assets/(liabilities) (2,394) 249 207
--------------------------------------------------- --------- --------- -----------
Total assets less current liabilities 33,821 38,041 37,046
--------------------------------------------------- --------- --------- -----------
Creditors: amounts falling due after more than one
year (10,186) (10,192) (10,180)
Derivative financial instruments - - (228)
Provision for liabilities 421 (414) (1,106)
--------------------------------------------------- --------- --------- -----------
(9,765) (10,606) (11,514)
--------------------------------------------------- --------- --------- -----------
Net assets excluding pension liability 24,056 27,435 25,532
Pension liability - (5,005) -
--------------------------------------------------- --------- --------- -----------
Net assets including pension liability 24,056 22,430 25,532
--------------------------------------------------- --------- --------- -----------
Capital and reserves
Called up share capital 472 472 472
Share premium 144 144 144
Profit and loss account 23,440 21,814 24,916
--------------------------------------------------- --------- --------- -----------
Equity shareholders' funds 24,056 22,430 25,532
--------------------------------------------------- --------- --------- -----------
Notes
1 Basis of preparation
The interim accounts, which have not been audited, have been
prepared under the recognition and measurement principles of FRS
102 using the accounting policies consistent with those disclosed
in the 2022 annual report. These are the policies expected to be
applied in the preparation of the audited financial statements for
the year ended 31 December 2023.
The financial information for the year ended 31 December 2022
does not constitute the full statutory accounts for that period.
The Annual Report and Financial Statements for the year ended 31
December 2022 have been filed with the Registrar of Companies. The
Independent Auditor's Report on the Annual Report and Financial
Statements for the year ended 31 December 2022 was unqualified, did
not draw attention to any matters by way of emphasis, and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Despite the major uncertainties at this time across the economy
as a whole, and the challenges of this industry, Adnams continues
to operation within its banking covenants on its debt facility. The
business manages cash carefully and has concluded, based on its
cash management ability and current projections, that it is
appropriate for Adnams to adopt the going concern basis for these
accounts.
2 Other operating income
The inclusion of the other operating income line within the
profit and loss account is to reflect correct accounting treatment
of furlough claims and grant income in all periods.
3 Taxation
The taxation charge is based on the estimated tax rate for the
year.
4 Earnings per share
Earnings per share is calculated by dividing the earnings
available to ordinary shareholders by the issued ordinary share
capital of GBP471,842. The earnings per share calculation is the
same for basic and diluted earnings.
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END
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