Adnams plc
Results for the 12 Months to 31 December 2020
Adnams, the brewer, distiller and retailer has today published its Report & Accounts for the 12 months to 31 December 2020, showing sales of £50.66m and a £3.742m operating loss.
Commenting on the performance Jonathan Adnams OBE, Chairman said: “The beacons throughout this crisis have been our purpose and values. These inform our approach and our ability to use our long-term perspective to such good effect. The way we work with each other, our support for our customers and the communities we operate within, alongside bold and timely investments in preceding years, has meant the business has been able to weather this most challenging of years, avoid significant job losses, retain cash in the business and pay down borrowings”.
The Adnams Report & Accounts headlines include:
- Trading days down 61% on 2019
- Beer volumes down 23%
- Sales of £50.66m
- Reduction of net debt by £8.3m (46.6%)
- Negative EBITDA of £164k
- No 2020 final dividend
2020 was a very different year:
- There was strong underlying demand for Adnams products when the business was able to be open
- The business worked with the UEA (University of East Anglia) to supply NHS hospitals in the Eastern Region with hand sanitiser
- Over 15,000 support packages distributed to frontline workers throughout the UK
- Third Queen's Award for Enterprise in Sustainable Development
- Lord Lieutenant Award for Outstanding Contribution to the Community
- Online sales rose 245% and off trade grew 15%
The environment on which we trade has changed significantly with the advent of the inevitable consequences of Covid 19 and the temporary closures in hospitality. Trading revenues have continued to be restricted, however, the strong focus on cost control and investment in the available mechanisms that support cash flow have been successful in mitigating the financial impact of the pandemic.
Chairman's Statement (from accounts released on 23 April 2021)
There is no doubt this has been a year like no other. On 23 March 2020, the hospitality industry was instructed by the Government to close its outlets and we saw our Free-trade and Tied Estate business disappear overnight. We also closed our shops at that point as scientific opinion was unclear on how the virus was transmitted. Our overriding concern at that stage was the safety of our customers and staff and we therefore decided to close the doors. Whilst the instruction to completely close came as something of a shock, we had been planning for it for a number of weeks prior and were able to close down in an orderly and manageable fashion. In order to financially safeguard our own pubs, we were one of the first businesses to cancel rents and I was pleased to see most of the industry followed this lead. Adnams strives to do the right thing in every decision it makes, and I am pleased we were able to support our tenants, protect our customers and protect our staff in this way during the extremely uncertain and dangerous first phase of the pandemic.
Clearly, this situation significantly impacted the business and we saw beer volumes fall by 23% and spirits volumes fall by 31%. This led to turnover falling from £75m in 2019 to £51m in 2020. The speed at which we took decisions early in the crisis meant we were able to manage cash retained in the business well throughout the year. We curtailed all but the most essential capital expenditure, delivered a negative EBITDA of £164k and reduced net debt by £8.3m. Allowing for depreciation, we delivered an operating loss of £3.8m. Whilst reporting a loss is unpalatable under any circumstance, this should be seen as a good result given the restrictions the business has been operating under for almost a year. During the pandemic, we also refinanced for another three years with Barclays, which demonstrates their confidence in the underlying strength of the Adnams business and our strategy. We should also note and recognise the swift response provided by the Treasury in introducing the furlough scheme and providing business rate relief. Both initiatives benefitted the core company as well as our tenanted pubs. Their timely introduction avoided the significant job losses that would have occurred had they not been introduced rapidly and at scale.
The company and its pubs were also beneficiaries of the Chancellor's stimulus package in the form of a VAT reduction to 5% for the hospitality industry, which runs until April 2021, and the Eat Out to Help Out Scheme that ran for the month of August. At the time of writing, the vaccine rollout is progressing well, the 'R' rate is reducing and Coronavirus case numbers are falling, and this is encouraging news. However, it is the Board's view that there remain significant material uncertainties as the economy begins its path to recovery. How specifically this relates to the hospitality industry and under what restrictions it will be expected to adhere to as it reopens remains an unanswered question. The Government is certainly striking a more cautious tone, and given this, it is our expectation that the country will walk back slowly from lockdown. We therefore do not expect demand to reach normal levels for some time and further expect government stimulus and support schemes to be withdrawn during the year. Given these uncertainties, the company has decided not to pay a 2020 final dividend, although the Board will keep the payment of an interim dividend under continual review.
Our recent investment in our systems infrastructure meant our website was robust and able to withstand significant levels of increased business. This was also true for our back-office systems and pick, pack and despatch operations in our warehouses. During the year, our database grew dramatically. Our online business and our sales to supermarkets were the mainstay of the business during the initial period following closure and we are grateful that our diversified strategy allowed us to maintain sales and cash coming into the business. As the pandemic progressed, we were able to reopen shops in June and they enjoyed a good trading period despite operating under social distancing restrictions. Pubs and hotels were allowed to open in July and they too enjoyed strong demand and generated cash. In November, pubs were further restricted as more stringent tiers were introduced and we effectively lost Christmas, our most profitable period. Throughout, I have been delighted to see the way in which customers reacted to the social distancing and safety measures we put in place in our shops, pubs and hotels. It was our stated aim to create oases of calm and safe havens for people to come and spend time with us without feeling compromised or unsafe in any way and to top that off with outstanding levels of service. I think we achieved this in a fast-moving situation with often-changing government rules and restrictions.
Twin beacons throughout this crisis have been our purpose and values. These inform our approach and our ability to use our long-term perspective to such good effect. The way we work with each other, support for our customers and the communities we operate within, alongside bold and timely investments in preceding years, has meant the business has been able to weather this most challenging of years, avoid significant job losses, retain cash in the business and pay down borrowings.
Support to local communities is critical for any business rooted as deeply as Adnams. Early on we worked with the University of East Anglia (UEA) turning part of our distillery over to the production of ethanol for hand sanitiser for use in all East Anglian hospitals. We regularly supported NHS and front-line employees with small tokens of our thanks for their work throughout the year and continued to keep money flowing into the Adnams Community Trust. Its work is more important than ever, supporting the most vulnerable in society and our local community. I was also delighted to observe many of our pubs providing vital services in their local areas. Community shops, warm meals on wheels for the elderly and takeaway services for those more mobile customers are just a sample of the innovations we have seen. Pubs are an essential part of everyday life for many and hugely symbolic within the economy. When we are able to open them, it will be a significant signal towards life returning to some normality for us all.
The company was a recipient of the Queen's Award for Enterprise, Sustainable Development in 2020. This is the third time we have been acknowledged in this way and demonstrates our commitment to doing the right thing.
Finally, I must say thank you to our shareholders. I know many of you are also customers and you demonstrate your loyalty by giving us your custom and support. I am confident that we will be able to rebuild the business relatively quickly once we reopen and return to paying dividends at a future point. Thanks also to our staff; many have been on furlough for much of the year with all the attendant concerns and worries that can bring, but when able to work they stepped forward and delivered service to our customers with care, confidence and great style.
Last but not least, I am delighted to formally and publicly welcome Jenny Hanlon to the Board as Chief Financial Officer. Jenny's contribution during the second half of 2020 and the wealth of experience she brings to the Board will stand the company in good stead for many years to come.
I look forward to welcoming shareholders, customers and staff back into the business soon.
Jonathan Adnams OBE
Chairman