Weather, Honeycombe and smoking ban take their toll on Cains

Cains Beer Company, the AIM-listed brewer, has been reported a pre-tax loss of £2.77m for 2007 and in line with other operators remains "cautious" about its prospects for the coming 12 months.

The Liverpool-based brewer said 2007 had been a year of "significant change, both internally and externally," and that the financial loss was "expected".

Chief executive Sudaghara Dusanj said: "This is a turnaround situation. We've always made it clear these things don't happen overnight."

Dusanj said that "taking into account market conditions the decline in our retail business, while we don't like it, is within our expectations".

He said that while shareholders would receive no dividend, it was the "medium to long term aim that we will deliver these to our shareholders".

Dusanj also confirmed that executive management would receive no bonuses or share options on the back of these results.

Cains reversed into pub operator Honeycombe Leisure in May last year, taking on 92 pubs, and the group said the costs of integrating the estate, as well as issues familiar to the sector such as the smoking ban, raw material price rises and last summer's poor weather, were taking their toll.

Overall like-for-like sales were down 11 per cent, with liquor turnover down 11.5 per cent and food sales declining by 7.6 per cent.

The group said gross retail margins had risen by one per cent.

Meanwhile brewing sales rose 7.3 per cent, with brands up one per cent, contracting up 7.4 per cent and retailing down 1.8 per cent.

Administration costs rose 60.3 per cent on a like-for-like basis as the brewer took on new rent payments, increased its marketing spend and paid higher salaries to new members of the management team.

The group's P&L shows administration costs from continuing operations of £3.3m, up 87 per cent.

"It is inevitable that it is going to take time to turn the [Honeycombe] business around," chairman Roy Morris said, "but the board are confident that the necessary controls and processes have now been put in place…to develop and grow the business based upon a firm set of foundations."

Total turnover for the 14 months to October 28 2007 rose 80 per cent to £43.2m, while sales from continuing operations including the Honeycombe acquisition sales were £29.7m, an increase of 23.7 per cent.

The group has already converted one ex-Honeycombe pub in Glossop, Derbyshire, with a new site, the Black Horse in Croston, near Southport, opening next week.

A further seven sites had been earmarked for development, with 30 more "in the pipeline", financed by existing banking arrangements.