TIDMADB
RNS Number : 8435G
Adnams PLC
11 August 2016
Adnams plc
Interim Accounts 2016
Chairman's Statement
Results
We saw many positive developments, notably 7% growth in our own
beer volumes and our spirits volumes were up by 60% in the first
six months of the year. Turnover grew by 7% although our first half
operating profit was behind that achieved in 2015. This was as
anticipated and included in our AGM statement. We have noted in
previous years that as our profits arise more in the second half of
the year, the first half result can be quite volatile.
The main reasons for the lower first half result were the
expansion of our shop and managed house retail operations, where
earnings tend to be stronger in the second half of the year, the
increased investment that we have made in marketing and the decline
in the Sterling exchange rate.
Income from asset sales was much higher this year at GBP1.4m,
comfortably ahead of last year's GBP407,000. Last year's income
arose from selling three pubs whilst in this half year there was
one pub sold, but most of the income came from the sale of our UK
distribution rights for Lagunitas beer. These rights were sold to
Heineken following Heineken's acquisition of a major stake in the
Lagunitas business.
Dividend
We are retaining our policy for the Company's interim dividend,
which is that we pay 35% of the total dividendpaid in the previous
year. As we flagged in our 2015 accounts this means that we will be
increasing the dividend on our "B" shares by 4p and on our "A"
shares by 1p to 76p per share and 19p per share respectively, a
5.6% increase.
The Adnams Beer Business
The fact that we have been able to push our own beer volumes
ahead in the last few years in the face of a fiercely competitive
market is a great credit to our sales and marketing work and in
particular to our success in reading market trends and producing
beers that appeal to consumer tastes. Adnams Ghost Ship continues
to be the beer that leads our sales growth, but a number of our
smaller products have seen good success too. We have seen a marked
shift in our production towards bottled, canned and kegged beers
and although cask beer is still the vital mainstay of what we
produce, its proportion of the whole has fallen. This trend
supports the major GBP7 million investment that we are making in
our brewery, which should be complete a year from now. This will
give us additional capacity together with the flexibility to make
the wider range of beer styles that are now being demanded.
Industry data suggests that the beer market grew by 0.4% in the
first half of 2016 and against that benchmark we performed very
well. We saw good growth in our directly delivered business in both
East Anglia and London and notably strong growth in our sales to
supermarkets and other take home outlets. In the National trade we
performed well with most customers, though two important managed
pub company customers saw declines. We have commented before that
these customers can switch substantial volumes between suppliers at
short notice which creates inevitable volatility. Our export
business had a relatively slow start to the year, but we are
hopeful of a stronger second half performance as we continue to
build our overseas distribution network.
Over the last three years Adnams has been the distributor for
the leading US craft brewer, Lagunitas. Lagunitas beers have sold
very well in the UK market and Adnams has enjoyed considerable
success in promoting these beers. Last September Heineken formed a
joint venture with Lagunitas and following subsequent discussions
Adnams agreed to sell its UK distribution rights to Heineken. The
effective date for this agreement was 1st July 2016 and as the
contractual commitment was made before that date, the profit from
the sale is reflected in these results. In future Heineken will
sell Lagunitas beers to Adnams so that we can continue to supply
our directly delivered customers, but there will of course be some
reduction in future earnings from this source.
The Adnams Copper House Distillery
The major extension to our distillery opened early in the year
giving us towards three times more capacity. We continue to see
very strong growth in our spirits sales led by Copper House Gin
which has been selling strongly across all channels. The additional
capacity is allowing us to lay down more whisky, a process that
slackened in the second half of last year as we had to devote
capacity to the immediate demand for gin.
The Adnams Pubs and Hotels
Our managed business, comprising the Swan and Crown in
Southwold, the White Horse at Blakeney, the Ship at Levington and
more recently the Plough at Wangford, produced results ahead of
2015. We were slightly behind our expectations given the lost
income in 2015 resulting from temporary closure for refurbishments
at the Swan and the White Horse. Relatively poor weather conditions
during key trading periods did not help and some extra costs were
incurred as we have sought to put the right teams in place at each
property.
In our 2015 accounts and at the AGM we talked about our
ambitions for the Swan. This hotel occupies a key position in
Southwold and is perhaps the most public face of Adnams. We believe
that it can be much stronger, more integrated with Adnams and more
relevant to today's customer with a substantial redevelopment and
refocussing. We are planning to spend around GBP4 million on this
development and subject to necessary consents this should take
place in the first half of 2017.
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, but underlying trading has been good with
like-for-like results ahead of last year and an overall result only
a little behind that of a year ago. The pub sold in the first half
of this year was The Cherry Tree at Harleston. Two other pubs are
on the market: The King's Head, Southwold and the Lord Nelson,
Ipswich. Shareholders will be aware that the King's Head has been
closed for some while and given its Southwold location we have
tried particularly hard to see it pass to a supportive buyer. To
this end we spoke to a number of community groups over an extended
period. Sadly, these discussions came to nothing, and the property
is for sale with consent for mixed retail and residential use. We
hope that it will sell in the near future, though there are no firm
offers at the time of writing.
The Adnams Shops
Our shops have continued to trade well, though the first half
result in 2016 has been reduced by the weakness of Sterling, which
raises the price of imported wine. Having opened a shop in Bury St
Edmunds last autumn we recently opened a smaller outlet in
Felixstowe. All our shops make their profits in the second half of
the year and so more openings tend to reduce first half profits.
This too has had an impact in 2016. Our shops have been a great
success in helping to display our brand to a wider audience and in
boosting the growth in our beers and spirits and we plan to
gradually extend our presence over the next few years. Our online
shop continues to grow and help us to reach a customer base beyond
those near to our physical stores. Our Wine Club has seen
encouraging new membership.
Marketing
Our main focus in recent years has been on event sponsorship and
this has continued in 2016 with a notable new sponsorship of the
University Boat Races. This has given us more of a focus in London
and provided good television coverage. We are also sponsoring major
cycling events including the Tour of Britain and Women's Tour.
Beyond these major sporting occasions, we are sponsors at Newmarket
Racecourse and support many local teams and events. The University
Boat Race sponsorship and associated promotions has added to our
costs this year and this has had some impact on the first half
results.
Treasury, Tax and Pensions
Our bank debt at 30th June was GBP10.8m (30th June 2015:
GBP9.4m), an increase from our year end debt levels of GBP8.9m. The
main reason for the increase is the investment programme that we
have pursued in the brewery and distillery.
Our previous three-year facility agreement with Barclays expired
in February and we were pleased to replace it with a GBP15 million
facility that Barclays provided after a competitive tender. GBP5
million of this facility has been taken as a five-year loan at a
fixed rate.
Shareholders will be used to the way in which changes in market
values can cause swings in the position of our closed defined
benefit pension scheme. The GBP9.7million deficit at 30th June
2015, fell to GBP3.2m at 31st December and this has moved to
GBP6.4m at 30th June 2016. 1st April 2016 is a triennial valuation
date f or the Scheme and the results of this are expected to be
available in time for our full year accounts.
As noted above, the Sterling:Euro exchange rate was less
favourable to us in the first half of 2016 with weaker Sterling
making wine imports more expensive. Purchases of Euros have on
average been about 6% more costly this year.
The Future
The vote for the UK to leave the European Union has of course
created additional economic uncertainty. It has had the immediate
impact of making Sterling weaker and further raising the costs of
imported wines. More important will be the overall impact on the
economy. Further initial impacts included lower interest rates,
which helps Adnams as a borrower, where rates have not been fixed,
though lower rates will also increase the value of our pension
liabilities. Despite this turbulence we will maintain our eye on
the longer term, we need to invest to maintain and grow the Company
and our plans to do this remain unchanged.
Profit and loss account
For six months to 30 June 2016
Unaudited Unaudited
----------------------------- ------ ---------- ---------- ------------
6 months 6 months 12 months
to to to
----------------------------- ------ ---------- ---------- ------------
30 June 30 June 31 December
----------------------------- ------ ---------- ---------- ------------
2016 2015 2015
----------------------------- ------ ---------- ---------- ------------
Notes GBP000 GBP000 GBP000
----------------------------- ------ ---------- ---------- ------------
Turnover 31,219 29,139 65,698
----------------------------- ------ ---------- ---------- ------------
Operating expenses -30,595 -28,177 -61,605
----------------------------- ------ ---------- ---------- ------------
Operating profit 624 962 4,093
----------------------------- ------ ---------- ---------- ------------
Profit on disposal
of assets 1,419 407 625
----------------------------- ------ ---------- ---------- ------------
Profit on ordinary
activities before interest
and taxation 2,043 1,369 4,718
----------------------------- ------ ---------- ---------- ------------
Interest -118 -134 -268
----------------------------- ------ ---------- ---------- ------------
Other finance charge
on pension scheme -65 -195 -382
----------------------------- ------ ---------- ---------- ------------
Profit on ordinary
activities before taxation 1,860 1,040 4,068
----------------------------- ------ ---------- ---------- ------------
Tax on profit on ordinary
activities 2 -367 -238 -839
----------------------------- ------ ---------- ---------- ------------
Profit for the financial
year 1,493 802 3,229
----------------------------- ------ ---------- ---------- ------------
Earnings per share 4
----------------------------- ------ ---------- ---------- ------------
'A' Shares of 25p each,
Inc. asset disposals
(pence) 79.1p 42.5p 171.1p
----------------------------- ------ ---------- ---------- ------------
'B' Shares of GBP1
each, Inc. asset disposals
(pence) 316.4p 169.9p 684.3p
----------------------------- ------ ---------- ---------- ------------
'A' Shares of 25p each,
Exc. asset disposals
(pence) 17.7p 25.2p 138.8p
----------------------------- ------ ---------- ---------- ------------
'B' Shares of GBP1
each, Exc. asset disposals
(pence) 70.7p 100.8p 555.3p
----------------------------- ------ ---------- ---------- ------------
Balance Sheet
As at 30 June 2016
Unaudited Unaudited
---------------------------------- ---------- ---------- ------------
30 June 30 June 31 December
---------------------------------- ---------- ---------- ------------
2016 2015 2015
---------------------------------- ---------- ---------- ------------
GBP000 GBP000 GBP000
---------------------------------- ---------- ---------- ------------
Fixed assets
---------------------------------- ---------- ---------- ------------
Tangible assets 39,149 36,818 38,545
---------------------------------- ---------- ---------- ------------
Investments 50 5 0
---------------------------------- ---------- ---------- ------------
39,199 36,823 38,545
---------------------------------- ---------- ---------- ------------
Current assets
---------------------------------- ---------- ---------- ------------
Stocks 6,634 6,389 6,377
---------------------------------- ---------- ---------- ------------
Debtors 9,742 6,960 7,587
---------------------------------- ---------- ---------- ------------
Cash at bank and in hand 21 18 17
---------------------------------- ---------- ---------- ------------
16,397 13,367 13,981
---------------------------------- ---------- ---------- ------------
Creditors: amounts falling
due within one year -15,451 -17,694 -18,024
---------------------------------- ---------- ---------- ------------
Net current assets/(liabilities) 946 -4,327 -4,043
---------------------------------- ---------- ---------- ------------
Total assets less current
liabilities 40,145 32,496 34,502
---------------------------------- ---------- ---------- ------------
Creditors: amounts falling
due after more than one
year -5,225 -240 -223
---------------------------------- ---------- ---------- ------------
Provision for liabilities -390 0 -990
---------------------------------- ---------- ---------- ------------
-5,615 -240 -1,213
---------------------------------- ---------- ---------- ------------
Net assets excluding pension
liability 34,530 32,256 33,289
---------------------------------- ---------- ---------- ------------
Pension liability -6,381 -9,665 -3,225
---------------------------------- ---------- ---------- ------------
Net assets including pension
liability 28,149 22,591 30,064
---------------------------------- ---------- ---------- ------------
Capital and reserves
---------------------------------- ---------- ---------- ------------
Called up share capital 472 472 472
---------------------------------- ---------- ---------- ------------
Share premium 144 144 144
---------------------------------- ---------- ---------- ------------
Profit and loss account 27,533 21,975 29,448
---------------------------------- ---------- ---------- ------------
Equity shareholders' funds 28,149 22,591 30,064
---------------------------------- ---------- ---------- ------------
Notes
1 Basis of preparation
The interim accounts, which have not been audited, have been
prepared under the accounting standard, FRS102. The 2015 full year
accounts were audited.
2 Taxation
The taxation charge is based on the estimated tax rate for the
year. Profit on sale of assets includes property profits which are
assumed to be reinvested and the tax rolled-over, but tax will be
payable on the profit from sale of distribution rights.
3 Dividend
The interim dividend on ordinary shares will be GBP359,000 (76%)
(2015: GBP340,000 (72%)) and will be paid on 3 October 2016 to
those on the register at the close of business on 8 September
2016.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
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August 11, 2016 02:00 ET (06:00 GMT)