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Welsh brewery Brains has continued to benefit from its expansion into coffee as profits soared 23% to £5.5m last year.
Operating profits grew on the back of a 7% rise in revenues to £135m in the year ended 1 October 2016, a statement by SA Brain & Co Ltd revealed this morning.
The Cardiff-headquartered brewer said the sales hike was largely driven by continued growth of the group’s Coffee#1 business, which grew by 28% following the opening of 14 new stores and also expanded on a like-for-like basis in shops open more than a year.
Brains acquired the chain of coffee shops back in 2011 as it sought to adjust to its customers changing habits.
A collaboration with Welsh band Stereophonics also boosted Brains during the year, with the launch of its ‘Phonics’ beers.
The company’s managed pub estate grew by 3% in total compared with the previous year and by 1.5% on a like-for-like basis, outperforming the overall national pub market by around 0.8%.
“A wide number of initiatives were undertaken across the business during the year as we implement our five-year plan,” CEO Scott Waddington said.
“I have been pleased with the progress that has been made in the last 12 months and delighted by the customer reaction to our pub developments, coffee shops, new food offers and beers.
“The opening of 14 new coffee shops, the development at The Dock Bar & Kitchen in Cardiff Bay and the brewing of ‘Phonics’ in collaboration with the Stereophonics have been particular highlights.”
More than £6m was invested in Brains’ managed pubs, including £1.2m in the Dock, during the period.
Sales were boosted by strong growth in food of 5% and pub operating costs were 0.5% lower than theprior year, despite continued investment in staff development, marketing and the additional costs resulting from the introduction of the National Living Wage.
Coffee#1 was named ‘Coffee Chain of the Year at the Café Life Awards for the seventh time in eight years.
Underlying sales across the leased and tenanted pub estate were down by just more than 1%, while rationalisation continued with the sale of 13 commercially unviable pubs.
Brains added that sales of its portfolio of ales took a hit as part of a wider consumer trend for more moderate alcohol consumption. However, The Rev. James range, comprising ‘Original’, ‘Gold’ and ‘Rye’, continued to grow, with sales increasing 20% in the year. Total volume through the brewery increased by 8%, mainly driven by contract brewing for Heineken, but this contract came to an end earlier this month.
Chairman John Rhys added: “The year saw good progress being made across many of the fundamental areas of the business and it is encouraging to see the significant improvement in operating profit.
“We invested significantly in the fabric of our managed pub estate at a level ahead of our business plan in order to continue to improve our guests’ experiences. Through our new agreements and an enhanced level of investment in our leased & tenanted pub estate we are now seeing real growth potential, whilst Coffee#1 expanded further in terms of store numbers, sales and profit contribution.”
Morning update
The value of sterling has slipped against both the dollar and euro following the officially signing of article 50 by PM Theresa May to begin the two-year process of formally leaving the European Union. The pound fell against the dollar to below $1.24 and slightly against the euro in Asia early on Wednesday as traders watched May sign the letter that will take the UK out of the Union.
THe FTSE 100 has shrugged off Brexit uncertainty to open 0.3% higher at 7,364.6 points, but the FTSE 250, which is made up of more UK-based companies, fell 0.04% to 18,946 points.
In the grocery/fmcg sector, early casualties included Greencore (GNC), Reckitt Benckiser (RB) andOcado (OCDO), down 0.8% to 247p, 0.5% to 7,282p and 0.5% to 240.5p respectively.
British American Tobacco (BAT) has climbed 0.7% to 5,253p, while Associated British Fods (ABF) is back up 0.6% to 2,628p, and Unilever (ULVR), Britvic (BVIC) and B&M European Value Retail (BME) are also among the risers, up 0.4% to 4,021.5p, 0.3% to 644p and 0.3% to 303.4p.
Yesterday in the City
Tesco (TSCO) emerged from a tough day with no damage done to its share price, with the stock actually rising 0.6% to 191.1p after CEO Dave Lewis said the £129m settlement allowed the company to move on.
Booker Group (BOK) shares fell 1% to 198p, however, ahead of a full-year trading update on Thursday and after two Tesco institutional shareholders came out against the merger.
On the wider markets, the FTSE 100 recovered after a torrid Monday to close 0.7% higher at 7,343.42 points. Investors had reacted to Trump’s failure to repeal of Obamacare last week.
AG Barr (BAG) surged 3.7% to 568p after it reported a healthy 4.4% rise in annual profits as consumers reacted positively to the Irn-Bru maker slashing the sugar in its portfolio of soft drinks.
Other risers yesterday included Greggs (GRG), up 0.9% to 1,031p, PZ Cussons (PZC), up 0.5% to 326.2p, and PureCircle (PURE), which jumped 4.3% to 295p as Liberum reiterated a ‘buy’ rating.
Greencore (GNC), Associated British Foods (ABF) and Dairy Crest (DCG) were among the fallers, down sharply by 2% to 249p, 1.5% to 2,610p and 1.2% to 552.5p respectively.
Sainsbury’s (SBRY) was also down 1.1% to 265p and Morrisons (MRW) fell 0.7% to 235.2p.
Crawshaw (CRAW) was back down 10% to 20.3pafter strong gains of more than 30% over the past week.
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