Profit before tax down 27% at Adnams
Suffolk-brewer and pub operator Adnams saw a 27% drop in profit before tax for the six months to 30 June after a "very disappointing" dip in beer volumes.
Profit before tax fell to £641,000 with operating profit down 10.4% to £922,000 but turnover remained flat at just over £23m.
Adnams said the first six months of 2010 saw "some very tough conditions in the UK beer market, particularly in the on-trade" with industry data showing cask ale volumes down by 9.1% in the market overall. Adnams own volumes fell 6.8% mainly due to declines in supply to leased and tenanted pubcos. "This is very disappointing after a relatively strong performance in 2009," said chairman Jonathan Adnams.
"Within this number we saw considerable variation, with 6% growth in our directly delivered volumes offsetting larger declines elsewhere, notably in sales to leased and tenanted pub companies. Bitburger lager had a more successful first half, with volumes growing by 3.2%."
Adnams welcomed the freeze on duty in the budget but hopes the duty escalator will now also be scrapped. The brewer held its prices to its tenants at the start of the year. "This has been very positive in a beer market where price competition has become notably fiercer and it helped drive the growth in our directly delivered business," said Adnams.
It reported that trading had been "especially tough" for its tenants in the first few months of the year. It has written its new code of practice and is currently seeking accreditation. "We believe that in our case those relationships have always been clear and strong," he said.
Uncertain times
Its hotel businesses also "felt the full impact of the long hard winter and spring", it said. It also admitted that it had endured a "mixed experience" with its Cellar&Kitchen shops.
Its bank debt fell from £12.9m to £12.1m over the period. Capital expenditure in the first half was £972,000, which included work at the Swan Hotel and on its new distillery. It will be starting a cask replacement programme in the second half of the year.
The full cost of its distribution centre at Reydon has still not yet been agreed because of a tax dispute with the Government and its unwillingness to grant allowances for the centre. "Sadly they have remained intransigent on this matter, despite the clear inequity of being denied allowances because we chose to build in an environmentally friendly manner," said Adnams. "We are nonetheless continuing to argue our case."
He warned: "There is no doubt that the beer industry is going through tough times, with strong competition and declining demand. The economy is in a highly uncertain state.
"We know that cutbacks are happening and will continue, we know that VAT will increase. We do not know whether this will presage a revival or a renewed decline."
