Profits down at Adnams

Suffolk brewer and pub operator Adnams experienced a 63% drop in operating profits as the economic decline hit — and warned things may get worse in 2009.

Sales at Adnams were down to £47.1m from £47.4m with operating profits plummeting from £4.2m to just £1.5m on last year for the year to 31 December 2008.

"A weak beer market, coupled with softening consumer confidence, regulatory and lifestyle changes have affected our performance and seen an increase in drinking at home. Similarly, our wine business has been hit by the decline of sterling against the euro," said executive chairman Jonathan Adnams.

"2008 was the toughest year that most pub owners have experienced for a long time and 2009 may well be as bad or worse. A number of factors have conspired to create this situation. The weakness of the UK economy has squeezed the discretionary spending power of consumers.

"The supermarkets have continued to use alcohol as a loss leader, thus widening the price gap between drinking at home and in the pub. Social and lifestyle changes, along with the smoking ban in pubs, have enhanced the relative attractiveness of drinking at home. For the pubs themselves input and regulatory costs have risen sharply, just as demand has been falling away."

Adnams said it was continuing with plans to dispose of poorly performing pubs and it recently completed the purchase of three "high quality" pubs from Punch.

Despite its own difficulties, Adnams is determined to "do the right thing" in support of British pubs by holding its prices in the on-trade, duty increases aside, throughout 2009. "Whilst many others are continuing to put through price increases to the hard-pressed pubs, we believe that holding prices at this point is right and important," said Adnams. "We are also providing support to some of our pub tenants."

It also announced that directors have agreed that they will receive no pay increase during 2009 and that the five-year plan, to which the renumeration of directors was linked, has been withdrawn and will be reviewed.

"From today's perspective it is hard to see much light at the end of the global economic tunnel and we have to anticipate a tough 2009," said Adnams.