Suffolk based brewer and operator Adnams has reported a strong second half as it clawed back operating profit to finish the year broadly flat on last year.
Operating profit for the 12 months to 31 December was £3.188m — slightly down on 2009's £3.238m — but represented a good performance as operating profit had been 10% down on 2009 at the half-year.
Sales at the Southwold brewer, which has 70 tenanted pubs, were also slightly down on last year from £51.3m to £50.9m. Cash inflow for the year was £496,000, leaving the company with profits that cover its interest expense by seven times. Pre-tax profit dipped from £3.11m to £2.818m for the year.
"In contrast to the generally favourable weather conditions in 2009, both halves of 2010 suffered from poor weather, with heavy snows at the start of the first half and the end of the second," said chairman Jonathan Adnams.
"Pubs and hotels in East Anglia are vulnerable to such weather. In shop retail it is possible that a visit missed due to bad weather will be recovered at a later date but with pubs and hotels, visits missed are much less likely to be recouped."
Adnams said pubs remain under pressure. "Good, well-run pubs remain strong, but the smoking ban, the recession, duty increases far above inflation and the ever-rising price differential between beer in the pub and beer in the supermarket have helped to sound the death knell for many."
But he praised the company's licensees. "Our strategy is to own pubs that benefit from Adnams' ownership and in turn benefit Adnams by being part of our estate. Some pubs by their nature and location possess a natural attraction, but the key to success for any pub lies in those who run it.
"We are privileged to have a hard working, committed and talented group of licensees. They appreciate the opportunity to run an Adnams pub and we appreciate their skills and values in doing so."
Its hotels endured a "difficult time" in 2010 due to the poor weather while beer volumes remained in line with a declining market — with its own beer volumes down 8%.
Adnams has recruited a new head of retail to lead expansion of its Cellar & Kitchen stores from its current 10 after being left with a choice — close them or expand — in order to justify the overhead costs involved.
Adnams completed building its microdistillery and an anaerobic digester this year, which it said showed its "innovative and forward-looking approach".
Tough times ahead
Adnams warned tougher times may lay ahead in 2011. "A year ago I sounded a note of caution looking forward to the prospect of a general election and tax increases," he said.
"As it turned out, 2010 was a steady year for the economy as a whole, but it looks as though we may see tougher times in 2011, starting with the VAT increase to 20% at the beginning of the year and with the prospect of substantial public sector cutbacks.
"Nonetheless, Adnams believes itself to be well placed. Our balance sheet and brand reputation are strong and we have the team in place to grow, develop and innovate."
It will pay an unchanged final dividend of 122p.