TIDMADB
RNS Number : 6081I
Adnams PLC
07 April 2020
Adnams plc Results for the 12 Months to 31 December 2019
Adnams, the Suffolk brewer, distiller and retailer, has today
published its Report & Accounts for the 12 months to 31
December 2019 and is also providing an update on the impact of
Covid-19 on its business.
Since the Covid-19 pandemic, Adnams has been faced with the
closure of most of its key customers and all of its own pubs. We
have also taken the decision to close our shops. Our operations are
currently limited to our take home business, primarily supplying
supermarkets with beer and spirits, and our online and mail order
sales. We have reduced costs to a minimum and have reduced staffing
to approaching ten percent of normal levels, with directors and our
senior team taking a 50% pay cut.
It is not possible at this time to predict the full impact on
our revenues, and whilst Adnams entered 2020 with gearing levels
higher than we have normally had, after a period of substantial
investment, we are managing our costs very closely and have
adequate headroom in our facilities at the present time. We were
already is discussion with our bankers regarding new facilities and
our bank has remained positive and supportive. We have a largely
freehold property estate, which we have not revalued, meaning that
we have substantial unrecognised value in our balance sheet.
Specific actions that we have taken include:
-- We have stopped all but essential spending of both a revenue
and a capital nature.
-- The large majority of our employees have been placed on
furlough further to the government's job retention scheme. Many
others are on reduced pay. Our culture has meant that our staff
have responded positively to these decisions and they look forward
to returning to work with us once the crisis has passed.
-- There will be no final 2019 dividend.
Adnams is a values-led business that has always focused on the
long term. We have continued to support our community, including
having our distillery produce alcohol for hand sanitizer, and as we
approach our 150th anniversary in 2022 we believe that we remain
well placed in these uncertain times.
Chairman's Statement (from accounts dated 23 March 2020)
As I write this report the news is dominated by discussion of
the possible impacts of coronavirus, or Covid-19. The situation is
changing rapidly and whatever I say here will undoubtedly be out of
date by the time this report is read. The advice given by the Prime
Minister on 16 March 2020, a week before the signing of these
accounts, that pub visits should be avoided, is hugely disruptive
for our industry. Much lobbying is in train to obtain government
support to mitigate the effects that this will have, and further
support has been announced since. We continue to develop our
detailed forecasts to help us to understand the constantly changing
environment, however there is enormous uncertainty regarding the
progress of Covid-19, the development of the government's response
and the effect on staff, customers and suppliers. It is our belief
that these accounts are properly prepared on a going concern basis,
but we acknowledge that the situation is one with material
uncertainties and the auditors have added a paragraph to their
report acknowledging these uncertainties.
Given the current uncertainties, Adnams has decided not to pay a
final dividend in relation to 2019. The board will keep payment of
interim dividends under constant review and retains the flexibility
to make payments at any point as 2020 progresses. Any payments and
the timing thereof is reliant upon events outside the control of
the business. We are cognisant of the fact that shareholders would
normally have received a final dividend and want to reassure
shareholders that this step has been taken in the long-term
interests of the company and its shareholders.
Adnams has invested very heavily in recent years, notably in
modern brewery and distillery equipment and in refurbishment of our
premium hotel, the Swan in Southwold. In 2019 we made a further,
though vital, investment by replacing our core computer systems,
something that we had not done for almost thirty years. This
absorbed a very large amount of management time and business focus
and we experienced some considerable business disruption
particularly in the second and third quarters of the year with the
result that 2019 operating profits slipped back from GBP1.6 million
in 2018 to GBP0.7 million in 2019.
The investments that we have made have been about positioning
Adnams for the future. We have state-of-the-art brewing and
distilling equipment with the flexibility to deal with rapidly
changing consumer tastes and demands. We have a unique UK facility
for making market-leading dealcoholised beer. We have a
well-invested estate and a premium luxury hotel in Southwold. We
now have modern computer systems linking suppliers, production,
sales and distribution in our drinks business.
2019 turnover of GBP74.7m, was down 5% on 2018 turnover of
GBP78.9 million. Beer volumes, assisted by some contract brewing,
increased by 2%. Cash generation remained strong with EBITDA
(Earnings before Interest, Tax, Depreciation and Amortisation, a
commonly used proxy for cash generation before capital expenditure)
at GBP4.4 million. In 2018 we had GBP1.8 million of highlighted
items relating to guaranteed minimum pension commitments and
property impairment costs. There were no equivalent costs in 2019.
The Adnams business remains highly cash generative and there was a
net cash inflow of GBP0.7 million in 2019.
The strategy of Adnams is to be a high-quality branded drinks
producer and provider of top-quality customer experience in our
property estate. Our commitment to this strategy remains constant
and our beers, spirits and property remain testament to this
commitment.
Beer
Industry data shows a modest 1.1% increase in beer volumes sold
in 2019, however the unusual increase in on-trade volumes witnessed
in 2018 was not repeated and the on-trade contracted by 0.8% whilst
the off-trade grew by 2.7%. As in 2018 the most buoyant category of
beer was lager, driven by a 7.5% increase in premium lager volumes.
In contrast to lager, cask ale volumes were down by 4.4%, a
disappointing decline for what is still the largest category of
beer for Adnams. This market backdrop emphasises the importance of
our recent investments in new and flexible brewing equipment.
The growth in "low and no" alcohol beers remains an opportunity
for Adnams with our industry-leading reverse osmosis technology
meaning that our Ghost Ship 0.5% is regularly seen as the best low
alcohol ale on the market. Our recent investments in being able to
produce filtered beer, remove the alcohol and then keg the product
have all contributed to our being able to lead the field in
important and growing categories.
In 2019, after many years of lobbying on the matter, the
Government finally undertook a review of the UK's system for
granting lower duty rates to smaller brewers known as Small
Breweries Relief. We understand that the government will publish
the results of this review in the spring. We reported last year
that if Adnams paid the same duty rates as its smaller competitors
we would save around GBP7 million per annum. It will be clear to
shareholders that this is a very important matter for the health of
breweries such as Adnams.
Spirits
Adnams spirits volumes sold in the UK market were up by 3.2%
compared to 2018. Growth has been slowing in the last two years as
the key gin market has become ever more crowded and ever more
segmented into different flavoured drinks. There is some evidence
that demand is starting to flatten and with so many new suppliers,
margins are under pressure, however we believe that those with
truly high-quality products will be those who survive best. We
remain one of a small number of producers with a "grain to glass"
product. We produce the alcohol that we distil, we do not buy it
from bulk suppliers. The quality tells.
Copper House Gin is still central to our range, though we have a
strong family of gins with a rotating seasonal range that has
proved very popular.
We have now been distilling for over nine years and our whiskies
are gaining true quality as they mature. We have a diverse range
and good prospects for future growth.
Properties
The Adnams properties performed well in 2019 increasing their
operating profit by 5.5%. Adnams has a top-quality estate of pubs
and hotels in premium locations, mainly in Suffolk and Norfolk. The
centrepiece of the estate is the Swan Hotel, in our hometown of
Southwold. Our properties aim to benefit from the Adnams brand
whilst also adding value to that brand. We closely monitor customer
feedback and seek to build ever stronger performance.
The Adnams estate comprises both properties that we manage
ourselves and others that are tenanted or leased. This structure
gives us the flexibility to move properties between tenancy,
leasehold or management as circumstances require. In 2019 we moved
the Ship, Levington from management to leasehold when it reopened
at the end of the year following its closure for several months
after a serious fire.
The managed estate gives us full control over the way in which
the Adnams brand is portrayed in the pub or hotel. However, some of
our pubs, especially smaller ones, are better managed by others and
many of our tenants and lessees are excellent advocates of
Adnams.
Retail
The Adnams shops have evolved over a number of years from being
focussed on wine and kitchenware to showcasing Adnams' own
products, our range of beers and spirits and also our
fast-increasing range of own brand wines. They have raised our
profile and helped us to launch new products such as the
much-praised Adnams Cider, Wild Wave and the even more recent 0.5%
version of the same product.
Our shop estate did not change in the year, nor did we launch a
Christmas pop-up on this occasion. Nonetheless our shops traded
well, and profits were ahead of 2018. Our mail order and web
businesses went through considerable change in 2019 as they
reorientated their proposition and their operations. This meant
that our Retail business overall was less strong than last
year.
Marketing
The Adnams marketing strategy has evolved substantially over
recent years. Whilst we have always undertaken a large range of
activities, there have been points of focus and these have included
periods when we have invested strongly in outdoor poster
advertising and periods when we have done so in sponsorships and
local events. We still undertake sponsorships and retain
relationships at Newmarket racecourse, however more recently we
have focussed on digital marketing and on improving our
understanding of our customers. The availability of data linked to
our investment in new systems will help us to fulfil customer needs
ever more closely. We have great products and stories behind them
and our marketing is helping to ensure that our voice is heard.
Systems
Systems issues were central to Adnams in 2019. We implemented
new systems across our business at the end of March. Our previous
business systems were approaching thirty years old, which was a
great credit to their robustness, though the long gap meant that
the change was very substantial, and we experienced considerable
disruption in our customer service.
Despite the challenges of making the change to the new systems
we are pleased to have done so, the flexibility and transparency of
the new system is much greater, and it will provide us with the
infrastructure to grow and improve performance in future years.
Directors
After sixteen years with the Company our Finance Director,
Stephen Pugh, has decided to retire from Adnams and will step down
as a director at the Annual General Meeting on 28(th) April.
Stephen joined us before we had shops outside Southwold and before
we had a distillery. Much has changed in the last sixteen years and
I would like to thank Stephen for helping to steer our course over
these many years. Recruitment for a new Chief Financial Officer is
in train and I hope to be able to provide an update at the AGM.
Those who have been shareholders for some years will remember
our former non-executive director David Woodhall. I am sad to
report that David passed away in February 2020.
Outlook
I started my Statement with a discussion of the impact of
Covid-19. This virus creates huge uncertainties for trading in
2020, however we are hopeful that we are looking at a short-term
phenomenon and we will return to more normal times later this
year.
We have faced other, longer-term uncertainties in recent years,
notably uncertainty arising from the indecision over Brexit. That
decision having been taken means some greater assurance, though
much will depend on the nature of the deal that is proposed to be
in place at the end of the Brexit transition period in December.
The Adnams business is primarily UK orientated and the direct
effects of Brexit will affect us less than more international
firms, however consumer spending and the availability of suitably
skilled staff in our wider supply chain and customer base is key to
us.
We have been through some difficult times since 2016 as we have
invested and transformed our business. The level of disruption that
we experienced in 2019 was greater than we had envisaged, however
the changes that we made were necessary and will serve the business
well in the future. We have the infrastructure and we have the
people to drive success and we will continue to keep our eyes on
doing the right thing for the long term.
Jonathan Adnams OBE, Chairman
Adnams plc profit and loss account
For the year ended 31 December
2019 2018
GBP000 GBP000
--------- ---------
Turnover 74,749 78,918
--------- ---------
Operating expenses (74,030) (77,312)
--------- ---------
Operating profit before highlighted items 719 1,606
--------- ---------
Highlighted items - operating expenses - (1,766)
--------- ---------
Operating profit/(loss) 719 (160)
--------- ---------
Profit/(loss) on disposal of assets 62 (21)
--------- ---------
Profit/(loss) on ordinary activities before
interest and taxation 781 (181)
--------- ---------
Interest receivable 1 1
--------- ---------
Interest payable (526) (505)
--------- ---------
Other finance charge on pension scheme (217) (192)
--------- ---------
Profit/(loss) on ordinary activities before
taxation 39 (877)
--------- ---------
Tax on profit on ordinary activities (10) 92
--------- ---------
Profit/(loss) for the financial year 29 (785)
--------- ---------
Earnings per share basic and diluted
--------- ---------
'A' Shares of 25p each 1.5p (41.6)p
--------- ---------
'B' Shares of GBP1 each 6.1p (166.4)p
--------- ---------
Balance sheet
As at 31 December
2019 2018
GBP000 GBP000
--------- ---------
Tangible fixed assets 43,791 45,181
--------- ---------
Current assets
--------- ---------
Stocks 9,185 9,496
--------- ---------
Debtors 9,706 10,654
--------- ---------
Cash at bank and in hand 24 22
--------- ---------
18,915 20,172
--------- ---------
Creditors: amounts falling due within
one year (17,411) (18,883)
--------- ---------
Net current assets 1,504 1,289
--------- ---------
Total assets less current liabilities 45,295 46,470
--------- ---------
Creditors: amounts falling due after
more than one year (10,196) (10,199)
--------- ---------
Provision for liabilities (1,114) (720)
--------- ---------
(11,310) (10,919)
--------- ---------
Net assets excluding pension liability 33,985 35,551
--------- ---------
Pension liability (6,198) (7,964)
--------- ---------
Net assets including pension liability 27,787 27,587
--------- ---------
Capital and reserves
--------- ---------
Called up share capital 472 472
--------- ---------
Share premium 144 144
--------- ---------
Profit and loss account 27,171 26,971
--------- ---------
Equity shareholders' funds 27,787 27,587
--------- ---------
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 2019. The statement
preceding the profit and loss account is unaudited.
The Adnams AGM, to have been held on 28 April 2020, has been
deferred and will be held on 30 June 2020 or potentially later if
further deferral is needed.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
NEXFLFELSRIFIII
(END) Dow Jones Newswires
April 07, 2020 02:00 ET (06:00 GMT)
Adnams (AQSE:ADB)
Historical Stock Chart
From Sep 2024 to Oct 2024
Adnams (AQSE:ADB)
Historical Stock Chart
From Oct 2023 to Oct 2024
