Brewer rebuts shareholder's criticism
THE chairman of Southwold brewer Adnams has launched a robust rebuttal of criticism from a high-profile investor over the company's strategy. Guinness Peat Group has written to fellow shareholders ahead of Adnams' annual general meeting next Monday blaming the company's performance last year - which saw its operating profits fall 64% - on poor corporate governance.
THE chairman of Southwold brewer Adnams has launched a robust rebuttal of criticism from a high-profile investor over the company's strategy.
Guinness Peat Group has written to fellow shareholders ahead of Adnams' annual general meeting next Monday blaming the company's performance last year - which saw its operating profits fall 64% - on poor corporate governance.
In its letter, GPG seeks to pin the blame on the family management of the company, and in particular the decision to invest millions of pounds in a new energy-efficient brewery, an eco-friendly distribution centre and an expansion of its Cellar & Kitchen retail business.
It claims that last year's results were “so poor as to suggest that the substantial expansionary investment projects sanctioned by the board since 2000 have actually weakened rather than strengthened Adnams' traditional brewing and pub businesses in East Anglia”.
GPG, which reportedly holds 5% of Adnams equity but as only 2.5% of the voting rights, also attacks the company's “anachronistic dual share structure” which it says leaves the family members with effective control
However, Adnams' chairman, Jonathan Adnams, responded yesterday by writing himself to the company's 1,300 shareholders, rejecting some of GPG's points as “inaccurate” and others as “a matter of interpretation with which we strongly disagree”.
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Mr Adnams, who took over from Simon Loftus as chairman three years ago, before which he was managing director, acknowledged that the timing of some investment had been poor, in light of the subsequent downturn in the economic, but said the Adnams board remained confident that the strategy was right for the long term.
The brewing and distribution investments had started four to five years before GPG began buying shares in the company - which it had done in full knowledge of the share structure in now opposed - and the board continued to believe that this strategy was soundly based.
A more “traditional” strategy would not have been appropriate for Adnams, given the re-emergence in recent years of large brewer/pub owners and a “huge expansion” in microbrewers, particularly in East Anglia.
Similarly, the board believed that the expansion of the Cellar & Kitchen format, which had operated successfully in Southwold for more than 20 years, was also well founded. Further openings had been halted amid the current economic climate but the progress so far remained encouraging.
On the wider issues of corporate governance, Mr Adnams said the board was well balanced, with two of the three non-executive directors having extensive experience outside of the company and being unconnected with the major shareholding families. The same was true of the executive directors.
Mr Adnams added that it was the third year running GPG had raised the issue of the company's share structure and soundings among shareholders last year had indicated that there was “minimal appetite for change”.