Adnams issues profits warning

Adnams, the Suffolk-based brewer, has warned its operating profits for the half year to June 30, 2008, will be "substantially lower" than a year ago.

Adnams said that tough trading conditions in its brewing and brands business together with rising costs were to blame for the situation, which would also mean operating profits for the full year to December 31, 2008, would be "below prior levels".

The brewer said in the five months to May its total beer volumes were down six per cent against a total ale market decline of 8.3 per cent.

With 93 per cent of its beer volumes being sold outside its own pub estate Adnams said it had been "heavily exposed to the extremely weak trading environment in the national on-trade".

The group said its pub and hotel estate had performed "resiliently" in spite of the tough environment.

Costs had risen in part due to expansion across its brewing and brands sales force, as well as a number of new Cellar & Kitchen store openings. These new stores had established themselves, Adnams said, but were not yet profitable "in line with the experience from new store openings in previous years".

Current market conditions meant Adnams was going to review its investment plans and would "adjust them as appropriate". It was "reviewing the timing" of further store openings but said it was still confident in the strength of the concept.

In April Adnams shareholder Guinness Peat, the investment group, slammed the brewer over its Cellar & Kitchen expansion plans, suggesting that the decision had given "cause for concern" and "not been well canvassed".