Adnams PLC Final Results (9519S)

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RNS Number : 9519S

Adnams PLC

24 March 2016

Adnams Plc Annual Accounts 2015

Chairman's Statement

I am pleased to report that the Company made good progress in 2015 with our operating profits rising by 7.3% to GBP4,093,000. We noted at the half year that turnover was 3% behind 2014, however this improved in the second half of the year, to leave us just 0.5% short of the prior year.

On the back of our improved profits we are recommending a 5.9% increase in our final dividend. This represents an increase of 8p per 'B' share and is in line with the increase in the final dividend paid in 2014.

The economic mood for much of 2015 was reasonably buoyant, though it is clear that consumer spending patterns continue to evolve quickly, and it has been very important for us to keep our finger on the pulse of the market and our eye on future trends. The diversity of our business, spanning beer, spirits, shop retail, hotels and pubs also gives us some protection against any downturn in particular markets. One of the most notable features of 2015 was the growing regulation of the beer and pubs sectors together with continued changes to the many taxes that the industry pays.

In March we were pleased to see, for the third year running, a cut in beer duty rates. The penny a pint reduction was welcome, particularly when reflecting on the above inflation duty increases that had preceded these cuts, with duty having risen 42% in the previous five years. Shareholders will be aware of the recently proposed changes to safe drinking guidelines in the UK. The view that Adnams has held for many years is that we should work towards encouraging safe and responsible drinking. We see moderate alcohol consumption as an aid to relaxation and a source of enjoyment.

Total UK beer sales fell by 1.5% in 2015, a disappointing result after the modest growth the previous year, though in line with the long-term trends dating back to the later 1970s. However, within the beer market we saw the continued growth of beers brewed by smaller producers. UK cask ale sales, a subset of the total market, were 0.8% ahead of last year and sales of bottled and canned ales were 6.3% ahead. The continuing switch to the off trade is also a long-term trend, though another of those trends, the growth of lager relative to ale, seems to be turning around, aside from premium and craft lagers. The main lagers being sold are still those of the major international brewers, however we are hopeful that consumer tastes will increasingly open the door to products such as Adnams Dry Hopped Lager and the purchase of craft brewers by international brewers may serve to hasten that trend.

I wrote last year about the project that Adnams wished to undertake to ensure that we have the capacity and flexibility to meet the demands of a changing beer market. Our investment is now well underway and by the time that the work is completed at the end of 2017, we will have spent around GBP7 million on extensions and improvements. Most notably this project will give us new bottom fermentation, beer conditioning and filtration capacity, much enhanced cooling equipment and an automated kegging line.

During 2015 we spent about GBP0.5 million on extending our distillery. We started distilling at the end of 2010 and have been delighted with how well this business has grown and the reputation that our spirits have built. The result of this success was that we reached full capacity in the distillery last year and have now trebled what we are able to produce. The new equipment, including two new stills, was commissioned in January 2016.

Another clear trend of recent years has been the sad reduction in pub numbers. We too have seen the impact on our pub estate of changing consumer tastes and increasing competition from home entertainment, casual dining, fast

food outlets, coffee shops and others. We continued to sell some of our smaller pubs and six more were sold in 2015. We have sold one more pub since the year end and have another still for sale, but as things stand we do not envisage selling many more of our properties. We have tried hard to sell pubs as going concerns and to keep them trading as pubs and in nearly all cases we have been able to do this. Trading in our continuing tenanted and leased estate, where we have some great pubs and some first-rate operators, was good during the year with like-for-like income up by 3.5%.

The other side of our pub business is pubs and hotels that we manage ourselves. In the last couple of years we moved the White Horse at Blakeney and the Ship at Levington under our own management. We have been seeking to build a business in running managed properties outside the Swan and Crown in Southwold and signs so far are encouraging. There are clear advantages in running both a managed and a leased and tenanted estate and being able to move pubs between them as market conditions change. In 2015 the Swan was shut for refurbishment for much of the early part of the year, which inevitably affected its performance.

Our shops business has continued the success that we have seen in the last few years. We have built the retail skills that we require and honed our proposition towards our shops being an integral part of the Adnams brand, selling goods under the Adnams name and promoting that name to wider groups, especially a female audience. The take home market has been the strongest part of the beer market for some years and having our own shop outlets means that we are well placed to take advantage of this trend. We made a further modest expansion to our shop estate in 2015, opening in Bury St Edmunds and running a pre-Christmas pop-up in the Coes shop in Ipswich.

We were delighted to add Guy Heald and Karen Hester to the Adnams Board in April, with Karen becoming our first ever female executive director and our Executive Committee includes five senior female employees. We seek to recruit, retain and develop the very best talent based upon merit and contribution. We were therefore pleased that by applying these clear principles we have achieved such an effective gender balance. The Company is stronger as a result.

As from April 2016 a new National Living Wage will apply in the UK. In anticipation of this change we applied the new rate in October 2015 and we had already been moving towards the Living Wage Foundation rates. We believe that paying better wages is the right approach and may be particularly important in sectors such as leisure and hospitality where pay rates have often been less good.

Shareholders will notice a number of changes to the format of the accounts this year. The accounting regulators have released a new standard replacing the many previous ones that formerly applied. Adnams tries to keep its operations simple and the changes that affect us are for the most part quite modest and we have outlined these in the finance commentary section of the Strategic Report.

In 2015 we moved our annual general meeting to Snape Maltings. The move from Southwold was a wrench, and we know that there are shareholders who would have preferred that we had not changed. However, change was forced upon us by the lack of suitable and available facilities in Southwold and feedback from most at the Snape AGM was very positive. The facilities there are far superior to what we previously had in Southwold and we look forward to making Snape the regular home for our general meetings.

Outlook

I observed earlier that the economic environment in 2015 was reasonably buoyant. Sentiment at the start of 2016 has been less so. The uncertainties created by the forthcoming EU referendum may have some role in this, though global economic conditions seem less benign. The impact of this on consumer spending and our own sales is always hard to judge, however there seems a fair likelihood that 2016 will be a tougher year for the economy than was 2015. In terms of the alcohol business in particular we saw somewhat lower January sales and it is hard to escape the conclusion that a growing interest in following 'dry January' may have had a role in this. January is far from the most important month, however the trend is perhaps indicative of the growing prominence of public health messages.

I nearly always conclude my comments with the observation that Adnams is here for the long-term, and that remains the case. We are fortunate to have a supportive group of shareholders whose perspective is intergenerational rather than focussed on annual announcements or exit strategies. That is a great advantage and we will continue to build a long-term business with that support, for which we thank you.

Jonathan Adnams OBE

Chairman

 
 Adnams plc profit and loss account 
  For the year ended 31 December 
------------------------------------------------------------ 
                                             2015       2014 
                                           GBP000     GBP000 
--------------------------------------  ---------  --------- 
 Turnover                                  65,698     66,032 
--------------------------------------  ---------  --------- 
 Operating expense                       (61,605)   (62,217) 
--------------------------------------  ---------  --------- 
 Operating profit                           4,093      3,815 
--------------------------------------  ---------  --------- 
 Profit on disposal of properties             625        626 
--------------------------------------  ---------  --------- 
 Profit on ordinary activities before 
  interest and taxation                     4,718      4,441 
--------------------------------------  ---------  --------- 
 Interest receivable                            1          1 
--------------------------------------  ---------  --------- 
 Interest payable                           (269)      (312) 
--------------------------------------  ---------  --------- 
 Other finance charge on pension 
  scheme                                    (382)      (240) 
--------------------------------------  ---------  --------- 

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 Profit on ordinary activities before 
  taxation                                  4,068      3,890 
--------------------------------------  ---------  --------- 
 Tax on profit on ordinary activities       (839)      (907) 
--------------------------------------  ---------  --------- 
 Profit for the financial year              3,229      2,983 
--------------------------------------  ---------  --------- 
 Earnings per share basic and diluted 
--------------------------------------  ---------  --------- 
 'A' Shares of 25p each                    171.1p     158.1p 
--------------------------------------  ---------  --------- 
 'B' Shares of GBP1 each                   684.3p     632.2p 
--------------------------------------  ---------  --------- 
 
 
 Balance sheet 
  As at 31 December 
-------------------------------------------------------- 
                                         2015       2014 
                                      GBP 000    GBP 000 
----------------------------------  ---------  --------- 
 Fixed assets 
----------------------------------  ---------  --------- 
 Tangible assets                       38,545     35,481 
----------------------------------  ---------  --------- 
 Investments                                -          5 
----------------------------------  ---------  --------- 
                                       38,545     35,486 
----------------------------------  ---------  --------- 
 Current assets 
----------------------------------  ---------  --------- 
 Stocks                                 6,377      5,921 
----------------------------------  ---------  --------- 
 Debtors                                7,587      8,647 
----------------------------------  ---------  --------- 
 Cash at bank and in hand                  17      1,202 
----------------------------------  ---------  --------- 
                                       13,981     15,770 
----------------------------------  ---------  --------- 
 
 Creditors: amounts falling 
  due within one year                (18,024)   (10,085) 
----------------------------------  ---------  --------- 
 Net current (liabilities)/assets     (4,043)      5,685 
----------------------------------  ---------  --------- 
 Total assets less current 
  liabilities                          34,502     41,171 
----------------------------------  ---------  --------- 
 Creditors: amounts falling 
  due after more than one year          (223)    (8,483) 
----------------------------------  ---------  --------- 
 Provision for liabilities              (990)          - 
----------------------------------  ---------  --------- 
                                      (1,213)    (8,483) 
----------------------------------  ---------  --------- 
 Net assets excluding pension 
  liability                            33,289     32,688 
----------------------------------  ---------  --------- 
 Pension liability                    (3,225)   (11,468) 
----------------------------------  ---------  --------- 
 Net assets including pension 
  liability                            30,064     21,220 
----------------------------------  ---------  --------- 
 Capital and reserves 
----------------------------------  ---------  --------- 
 Called up share capital                  472        472 
----------------------------------  ---------  --------- 
 Share premium                            144        144 
----------------------------------  ---------  --------- 
 Profit and loss account               29,448     20,604 
----------------------------------  ---------  --------- 
 Equity shareholders' funds            30,064     21,220 
----------------------------------  ---------  --------- 
 

The Directors have recommended a final dividend for the financial year ending 31 December 2015 of 144% per share (2014 136%) on the 'A' and 'B' Ordinary Shares. This amounts to GBP1.44 per 'B' share (2014 GBP1.36) and 36p per 'A' share (2014 34p), a 5.9% increase on the previous year. The dividend will be paid on 3 May 2016 to the shareholders on the register on 8 April 2016. In line with UK accounting standards, the 2015 final dividend has not been accounted for within the above financial statements.

The information contained in the above profit and loss account and balance sheet has been extracted from the audited accounts of Adnams PLC for the year ended 31 December 2015. The statement preceding the profit and loss account is unaudited.

This information is provided by RNS

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