Adnams – brighter times are emerging: Suffolk brewer and retailer Adnams has reported “brighter times are emerging” in its interim results. Chairman Jonathan Adnams said: “We are pleased to announce a strong move forwards in the Adnams operating profits for the six months to 30 June 2014. Our success in continuing to innovate and develop our brand, along with improvements in the weather and the economic outlook, has helped profit to increase 29% to £862,000. Turnover rose 15% to £30m and own beer volumes were substantially ahead, up by 18%. In 2013 profit before tax was boosted by property profits of £789,000, notably from the sale of The Southwold Arms. Whilst Adnams has a number of pubs currently on the market, only one sale took place in the first half with the result that property profits were much lower at £107,000 and profit before tax was down 35% at £861,000. We have noted before that our profits are weighted towards the second half and our first half profit can be quite variable. Overall trends in the beer market have improved a little with industry data showing total beer volumes ahead by 4% in the half year and cask ale volumes roughly flat. On the pub side the most recent data, which relates to the period from April to December 2013, showed pubs closing at the rate of 28 per week, a slight increase on the previous period. In our own estate we have seen smaller rural pubs under particular pressure. Against this backdrop our beer business has done very well, with both overall volumes and cask volumes being up by 18%. In the last few years we have been developing our beer brand and have focussed on growing our business with managed pub companies and we have also had success working in partnership with other brewers producing collaborative brews. The largest driver of the volume increase in the last six months came from this strategy. We are delighted with this achievement, but such beer volume is volatile and can vary by large amounts between different periods. Our directly delivered business has also enjoyed a good first half with volume growth in own beer of over 10%. After five years of holding our prices to directly delivered customers we implemented a 3% price increase this year. The long period of holding our prices has helped to make this a palatable matter for our customers at a time when prices have been under pressure from the fast growing numbers of small brewers and the longer-term trend towards reduced consumption. Our sales to supermarkets and other take home outlets have recently been in strong growth, though this slowed a little in the first half of 2014 to about 5%. Sales of Adnams Ghost Ship continued to be robust and we have seen good growth too from our Jack Brand range: Mosaic Pale Ale, Rye IPA, Dry Hopped Lager and Innovation. Dry Hopped Lager has performed well in both bottles and kegs reflecting the growing interest in craft lagers. We noted last year that after a good performance from our tenanted pub estate in both 2011 and 2012, trading has been much more challenging, especially for the smaller rural pubs. We have taken into management a few of our pubs on a short-term basis whilst seeking new tenants and we are looking for buyers for seven outlets at the current time. When these are sold our estate will number around 50 pubs. The less good trading within our pub estate has held back our results in this half year.”

Spirits: Jonathan Adnams said: “Our spirits business, whilst still very small in terms of total company sales, continued to perform well with volumes rising by 40%. The fact that last year our Adnams Copper House Distilled Gin won the International Wine & Spirit Competition’s ‘Trophy for Gin’ against internationally regarded competition has been a particular boon to our sales. Having received this recognition of the quality of our products we were more than delighted that our Longshore Vodka received the equivalent vodka award this year. The first Adnams whiskies were launched in December last year. These have almost all now been sold and we will launch a further batch in the second half of this year.”

Shops: Jonathan Adnams said: “The shops continued the positive trend that we have been seeing recently with like-for-like improvements in turnover and earnings. They have been proving their worth in enhancing the image of Adnams and being important conduits for the sale of our products. We keep our estate under continuous review and in the first half of this year we made two changes. We opened a new shop in Aldeburgh and closed the shop in Bloomsbury. We will also be closing the Waterside shop later this year. The new shop in Aldeburgh, whilst very small, has traded well since it opened. Sales in our shops rose by 12% compared to last year, with like-for-like sales up by 10%. Our online shop continues to grow quickly, increasing by 22% in the last six months. Our customers come from across the UK, allowing us to reach areas where we do not have physical shops or other outlets. Online ordering is convenient for customers and there has been an anticipated decline in telephone ordering as online grows. 2014 marked the first time in which sales in the first half are higher from online business than from mail order.”

Hotels: Jonathan Adnams said: “For some time trade at the Swan and Crown has been challenging, but they saw an improvement in the first half of this year. One development has been that we have sought to encourage customers to book through our own website by promising the best rates through that route. We have also seen greater continuity in staffing and attractive offers; together with the better weather and improved economic outlook these matters all played a part. During the last six months we restructured elements of our pay arrangements and this has included moving lower paid staff towards receipt of the Living Wage. Hotels staff comprised the largest proportion of the beneficiaries from this change.”

The Future: Jonathan Adnams said: “It is pleasing to report an improved picture in 2014, aside from our pubs, our businesses generated better results. Nonetheless, some caution is necessary. The first half of 2013 was not strong, but the second half showed good growth so comparators will be much tougher. Fundamental trends within the beer and pubs industries will not alter quickly and the better weather and improved economic outlook will not always be the case. We have been a business unafraid to make major investments and our brewery in particular has been transformed over the last ten years. The benefits from this have allowed us to manage volume increases and have given us the flexibility to brew a wide variety of beer styles. We believe that the long-term intergenerational perspective afforded by our structure, having its roots as a family business, has been very helpful in facilitating these investments. As noted in our 2013 accounts, we plan further investments to build additional production capacity and flexibility and we will comment again on this in our 2014 full year accounts. Our heritage as a family business, with some shares being quoted, has served us well and will continue to do so.”