Flat sales of £23.1 million, coupled with a 134% increase in interest payments to £0.28 million, has resulted in brewer Adnams releasing a disappointing set of interim results. During the six months to 30th June 2010 the company experienced “very tough” trading conditions with its own beer volumes declining by 6.8%. Earnings per A share declined by 26% to 23.1p but the firm decided to maintain the interim dividend at 16.25p per share.

A balance sheet was not released with the accounts but the business stated that net debt at the half-year end was 6.2% lower at £12.1 million.

Operating highlights in the six-month period included the launch of two bottled beer products, Lighthouse and Greenhill in cask form. Further building work was conducted in its brewery and the business hopes to have a micro distillery installed by the end of the year which will enable it to launch its own range of spirits, gin and vodka. The group hopes to complete these operations in time for products to be on the shelves by Christmas.

Commenting on its outlook the Southwold-based business said the beer industry continued to go through “tough times” with demand remaining weak in an environment of strong competition.

At a mid-price of £111.50 Adnams is capitalised at £31.9 million. Since its profit warning in April the company’s shares have declined by 11% to the current mark. Aside from the firm’s gloomy comments we note that an increase in VAT to 20% set to hit consumers’ pockets in January 2010. Furthermore, with the Bank of England also cutting its estimates for the UK economy’s growth, the outlook for future trading certainly looks gloomy. On a historic multiple of 13.5 the shares continue to look fairly valued. Furthermore, unlike other PLUS-quoted brewers such Shepherd Neame and Daniel Thwaites the group’s shares trade at a sizeable premium to year-end net assets, of £24.1 million. Avoid.