Adnams PLC - Final Results
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 The situation is changing rapidly and whatever I say here will undoubtedly be out of date by the time this report is read.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 £1.6 million in 2018 to £0.7 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 £74.7m, was down 5% on 2018 turnover of £78.9 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 £4.4 million. In 2018 we had £1.8 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 £0.7 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.



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 £7 million per annum. It will be clear to shareholders that this is a very important matter for the health of breweries such as Adnams.



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.



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.



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.



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 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.



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 28th 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.



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








Operating expenses



Operating profit before highlighted items



Highlighted items - operating expenses



Operating profit/(loss)



Profit/(loss) on disposal of assets



Profit/(loss) on ordinary activities before interest and taxation



Interest receivable



Interest payable



Other finance charge on pension scheme



Profit/(loss) on ordinary activities before taxation



Tax on profit on ordinary activities



Profit/(loss) for the financial year



Earnings per share basic and diluted

'A' Shares of 25p each



'B' Shares of £1 each




Balance sheet

As at 31 December







Tangible fixed assets





Current assets








Cash at bank and in hand








Creditors: amounts falling due within one year



Net current assets



Total assets less current liabilities



Creditors: amounts falling due after more than one year



Provision for liabilities






Net assets excluding pension liability



Pension liability



Net assets including pension liability



Capital and reserves


Called up share capital



Share premium



Profit and loss account



Equity shareholders' funds




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.

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