Action leaves Adnams in strong position

SUFFOLK brewer Adnams says that “decisive action in a difficult year” has left it in a strong position to meet future challenges, despite flat turnover and profits during 2005.

The Southwold-based company reported an operating profit of £3.668million, against £3.648million in 2004, on turnover of £45.488million, marginally up on the previous year's £45.193million.

Headline pre-tax profits came in 43% ahead, at £4.883million compared with £3.423million in 2004, but this reflected a one-off profit of around £1.5million relating to the closure of the company's defined benefit pension scheme.

Adnams, which besides its brewing operation and pub estate includes the Swan and Crown hotels in Southwold, a wine merchants business and the Cellar & Kitchen Store retail outlets, said that 2005 had been “a tough year for everyone in the beer and pubs business”.

“Adnams was no exception, but it was also a year of real achievement for the company which included the honour of the Queen's Award for Enterprise: Sustainable Development,” it added.

Simon Loftus, Adnams' chairman, said: “Short-term growth was hard to come by. An already sluggish market was further disrupted by the time-consuming procedures and media-created hysteria connected with the new licensing system, as well as the tragic London bombings, rising energy costs and other factors.”

This had resulted in a national decline of 3.8% in beers sales through pubs and clubs during 2005, against which Adnams' sales had held up “better than most”. Although the current year had begun well for the company further challenges lay ahead, particularly with the impact of the forthcoming smoking ban, said Mr Loftus.

However, he added: “Looking to the long term, we feel more confident. Adnams is exceptionally well placed thanks to a number of decisive actions during the past year, which will continue to shape our future for decades to come.”

The actions taken by Adnams during 2005 included measures to address the issues of pensions and soaring energy costs.

Besides the closure of the defined benefit pension scheme to further accrual - and its replacement with what Adnams describes as “one of the best” defined contribution schemes currently available - the company paid £4.25million into the fund in order to reduce its deficit to “manageable proportions”.

“This decisive action has limited our liabilities for the future (with a consequent 'one-off' effect on the bottom line of our accounts) while enabling employees to enjoy the flexible pension arrangements that match their needs and circumstances,” said Mr Loftus. “It is a significant step forward.”

Last year also saw the start of work on a new distribution centre, using novel construction techniques which will make it one of the most energy-efficient structures of its kind, and a refit of the brewery which will also achieve significant energy savings.

“From the outside, little will have changed, but the new plant will achieve remarkable savings in energy usage, giving us a competitive advantage that will become more and more significant in the future,” said Mr Loftus.

Adnams, which in January confirmed that it was consulting with staff on changes which were likely to result in “a small number” of job losses, has already invested heavily to increase its fermenting capacity in recent years and the brewery refit will update the rest of the brewing process.

Since the year-end, the company has also continued to invest in its brand by launching a new look for its draught and bottled beer including a bespoke Adnams beer glass. The company also plans to open new shops under the successful Cellar & Kitchen Store format throughout the region.

Mr Loftus, who is due to stand down as chairman in August, to be replaced by current managing director Jonathan Adnams, added: “The Queen's Award recognises our efforts but also sets us a standard. That challenge is one we meet with confidence, whatever the future may bring.”