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Thu 9th Aug 2018 - Update: Adnams, Cineworld and Easyhotel
Adnams reports First Half loss despite increased turnover: Suffolk brewer and retailer has reported a First Half loss as it beds in investments in its brewery and retail estate. Chairman Jonathan Adnams said: “After an exceptional year of investment in 2017 the first half of 2018 was a period of transition with the focus of the business being on developing the new capacity in our brewery and on building the proposition at the (flagship) Swan (Hotel in Southwold). Turnover has continued to grow well and at £35.5m it is up by 7.1% on 2017. Adnams own beer volumes are up by 4.8% on 2017, and own spirits are up by 6.3%. The board has agreed an unchanged interim dividend of 78p per “B” share and 19.5p per “A” share. We have observed in recent years that Adnams’ profits accrue in the second half of the year, particularly as we continue to develop our retail businesses and managed pubs. Rent receipts from tenanted pubs are fairly evenly spread over the year, however the returns from managed pubs and hotels, are focussed during the Summer and Christmas. This trend is apparent in 2018 where we made a loss of £557,000 in the first half, compared to a profit of £177,000 in 2017. This reduction was flagged in our AGM statement and was partly attributable to the increase in retail business and partly to some substantial costs of bedding-in new investments, particularly in the brewery. Depreciation is £403,000 higher in the half year and at this early stage it is running ahead of the investment returns. Sale of the King’s Head in Southwold produced the major part of the £526,000 of income from asset sales in 2017. In 2018 property profits were lower at £44,000. Adnams beer sales continued to outperform the market in the first six months of 2018, with good growth in kegged, bottled and canned beers. Our 4.8% increase compares to an overall market increase of 1.3%. The cask beer market was 8.4% down in the first half of 2018 and our volumes too were lower, though we again saw good growth in Adnams Ghost Ship. Ghost Ship became our best-selling beer in 2016 and remains the key driver of our volume increases, though we also saw encouraging growth from Mosaic Pale Ale and other recent products. The £7 million investment that we made in fermentation capacity, beer conditioning, filtration and automated kegging completed in 2017. This is vital for our ability to meet the changing demands of today’s customers and their growing interest in different styles of beer. Copper House Gin continued its growth in 2018, being up by 22.7%, with a particularly strong performance from our Copper House gin and tonic cans. Growth has slowed somewhat as the gin market has become more crowded with competitors and diverse styles. In response we will be growing our range of flavours and will shortly launch the Adnams Copper House Pink Gin and later this year a Quince Gin. Quince Gin was originally trialled through our Gin Club which brings the voice of the customer into our new product development process. Foremost amongst the Adnams properties is the Swan Hotel, which was completely refurbished last year. Along with the adjacent John Adnams Visitor Centre, it reopened in October 2017. Since its reopening we have been focussed on building the Swan’s reputation as a premium destination for both accommodation and dining. Adnams managed properties numbered seven through most of the first half of 2018, having added the Bell, Walberswick, and the Harbour Inn, Southwold early in 2017. Just before the 2018 half year Adnams moved the Five Bells, Wrentham, from its tenanted estate to its managed estate, making a total of eight managed properties at the period end. We anticipate a slow continuing increase in the proportion of pubs that we manage. Management gives us full control over branding, presentation and customer service at these properties. The weather has a very important impact on the performance of our properties, based as many of them are in parts of East Anglia reliant on visitors. This half year was an unusual mix of very poor weather through to the end of April, including “The Beast from the East”, and this was then followed by a hot and dry May and June. At the end of April like-for-like trading in the managed houses was behind 2017 and whilst May and June saw improvements the overall result remains below the prior year. Weather is an important influence, however increasing staff costs, rates bills, food costs and the apprenticeship levy, which started in April 2017, are also part of the picture. Our leased and tenanted estate has reduced in size in recent years and year-on-year results reflected that in 2018, along with the more difficult trading conditions that we saw in managed pubs. Like-for-like profits were down by 1.7% in the six months to 30th June 2018. We sold two pubs in the first half year, the Bricklayer’s Arms, Colchester and the King’s Head, Laxfield. Four of our leased and tenanted pubs are leased by Adnams, the others are freeholds. One of these leased pubs was the Bridge House, Tower Bridge Road, London and the lease on that property expired just after the half year end and we have not renewed the lease. In the first half of 2018 our shops returned a result in line with the prior year. We have not added any new shops and we decided to close the small shop in Felixstowe. Our shops continue to have an important role in helping to display our brand to a wider audience, in acting as a launch platform for our new products, and in providing a valuable sales channel through which we can directly sell product that we make or brand ourselves. Our online sales grew by 8.5% in the first half of 2018 though net income was lower as we increased our investment and expanded our team. The future appears particularly uncertain at the moment with the unknown shape of the impending exit from the European Union. Adnams is focussing on being flexible and agile to cope with the changes that will come. We have invested substantially in our brewery and are making a further major investment in new systems. We will continue to focus on the long term and on building a business for the future.” 

Cineworld reports soaring First Half turnover and profit after transformative acquisition: Cineworld has reported revenue up 252% to $1,862.9m in the six month ended 30 June in the wake of the purchase of US chain Regal Entertainment Group, making it the second largest cinema chain in the world. Pre-tax profit rose 164.8% to $160.2m. It now has 9,542 screens – 12 further sites with 111 screens are planned for the second half of 2018. Mooky Greidinger, chief executive of Cineworld Group, said: “We are pleased to announce strong first half results following the successful acquisition of the Regal Entertainment Group. Following the completion of the transaction, I have spent a lot a time in the United States getting to know our US business and implementing our strategy. I am very pleased with the Regal acquisition, we have already identified a significant number of opportunities. We are focused on delivering on the full potential of the combination through the strengths of our brands, focus on customer experience and investment in technology. The second half of 2018 has started well with the release in July of “Mission Impossible: Fallout”, “Mamma Mia! Here We Go Again” and “Equalizer 2”. Still to come in 2018 there is “Fantastic Beasts: The Crimes of Grindelwald”, “Venom”, “Aquaman” and “Mary Poppins Returns” and many more. Based on the film slate in the second half and our first half results, we remain confident of delivering a performance for the year as a whole in line with management’s expectations.” Anthony Bloom, chairman of Cineworld Group, added: “The first half of the current financial year was a successful and exciting time for the group. It completed the transformative $5.8 billion acquisition of the Regal Entertainment Group in the US; a successful $2.3 billion Rights Issue; and the renegotiation of the group’s debt facilities on advantageous terms. At the same time, the existing operations in the group were expanded, refurbished where necessary in accordance with our strategic policy and performed successfully in line with our expectations. This was not a trivial challenge and on behalf of the board, I would like to convey appreciation for the exceptional amount of hard work that this entailed on the part of the group’s executive management, very competently led by our chief executive and Deputy chief executive.”

Easyhotel completes Cardiff acquisition and franchise development pipeline update: Easyhotel , the owner, developer and operator of “super budget” branded hotels, has completed the acquisition of a site in Cardiff, following the grant of planning permission and has announced a further 174 rooms (five hotels) under development by its Swiss franchisee. The company stated: “The group announced on 30 October 2017 the acquisition of a freehold site in Cardiff. Planning permission for a 120-bedroom hotel has now been granted. Development work for the new purpose-built site, which is located at Fitzalan Place, just 0.3 miles from Cardiff Queen Street Station will now begin and the hotel is anticipated to open in the 2019/20 financial year. The group also confirms that it has signed an agreement for the development of a further 174 rooms in Switzerland with four hotels to be developed in Zurich and a further hotel in Basel. The hotels are being developed by the group’s Swiss franchisee and are anticipated to open over the course of the next 14 months. Easyhotel Belfast will open on 10th August, taking the total number of hotels in the group’s portfolio to 29. With the addition of the new hotels in Switzerland, the group’s development pipeline currently includes 1,280 owned/lease rooms and a further 1,956 franchise rooms now under development.”

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