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Adnams:

Developedby us,enjoyedby you.

Adnams plc Annual Reportand Accounts 2012

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Contents

02 Chairmans report04 Business review14 Finance commentary18 Report of the Directors19 Notice of meeting20 Prot and loss account

20 Statement of total recognisedgains and losses

21 Balance sheet22 Cash ow statement

23 Statement of accounting policies25 Notes to the accounts37 Corporate governance38 Directors responsibilities in

respect of the accounts39 Independent Auditors Report40 Contact information

Turnover 000

56,922 +4.3%

Operating prot 000

3,392 +3.5%

Dividend

1.94 +2.1%

Debt levels 000

19,492 +0.3%

Emissions attributable

to specic areas of thebusiness

Carbon emissions frompurchased electricity(Tonnes of CO2)

Carbon from fuels usedfor combustion, ownedtransport, processemissions(Tonnes of CO2)

Production

(Tonnes of CO2per barrelproduced)

Distribution

(Tonnes of CO2per barreldelivered)

Retail

(Tonnes of CO2per 1,000of sales)

Hotels and managed houses(Tonnes of CO2per 1,000of sales)

2,347

0.0177

0.0077

0.0175

0.1620

1,078

3,425

Total carbon emissions forcompany(Tonnes of CO2)

The attribution of carbonemissions to different parts ofthe company has been restated.This has affected the emissionsdisclosed for hotels (2011 and2010) and retail (2010).

2011: 54,5702010: 50,9122009: 51,3212008: 47,065

2011: 3,2772010: 3,1882009: 3,2382008: 1,521(before exceptional operating costs)

2011: 1.902010: 1.872009: 1.872008: 1.86(per 1 share)

2011: 19,4322010: 14,254

2009: 14,6862008: 11,788(including pension liability/asset)

2011: 2,3242010: 2,283

2011: 0.01842010: 0.0190

2011: 0.00772010: 0.0078

2011: 0.01702010: 0.0207

2011: 0.14082010: 0.1440

2011: 1,0602010: 1,181

2011: 3,3842010: 3,464

Financialhighlights

Carbonreport

CO2

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Adnams plc 01

Our performance in 2012 proved robust despite thechallenges of tough markets.

2012 was a year of tremendous achievements. We weredelighted to receive The Queens Award for Enterprise:Sustainable Development and The Investors In People

Gold award. Both achievements are applied for by many,but received by few.

Financial stability and business success can only be

achieved with an approach which encourages talentedemployees to better themselves.

Performance

Pride

Encouragement

Long-term success

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02 Adnams plc

Jonathan Adnams OBE,

Chairman

Adnams enjoyed a good year in

2012, despite the challenges of toughmarkets and lack of economic growth.Our turnover increased 4.3% to56.9 million, our operating prots

increased 3.5% to 3,392,000 from3,277,000 (before exceptionalitems), our debt fell 1.7 million to

13.7 million and the quantity ofAdnams beer sold rose by 3.8%.

There seems now to be almost an

acceptance that the UK economy isstagnant and a at line economic

performance is becoming the norm. In

many cases the income of consumers,allowing for ination, has been falling.

Adnams operates in some very

tough markets. Beer consumptionis declining, several high prole

bankruptcies have demonstrated the

challenges faced by retail businesses,and hotels, notably those outsideLondon, have had a very difcult year.

Government policy has done little

to help. In particular the continuingbeer duty escalator under which

each successive year has seen anincrease in excise duties at a rateahead of ination, has been extremely

harmful to both beer and pubs. A42% increase in beer duty since 2008has been accompanied by a 17% fallin beer consumption and closure of

5,800 pubs.

We have also seen a lack ofgovernment interest in reducing

the duty inequality between small

brewers and their slightly largercompetitors. As a measure of

this, if Adnams had paid duty atmicrobrewer rates its prots would

have been 5.4 million (160%) higher

in 2012.

Hard work,Achievement& Pride

A YEAR OF

Chairmansreport

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Adnams plc 03

Industry data suggests that the caskbeer market fell by 2.5% in 2012

whilst the overall market for beerdeclined by 4.7%. It is encouragingto see a little more evidence that

cask beer is a growing proportion ofbeer consumption, even though theoverall total is falling. Our brewing

and brands business made a prot

of 1,792,000 in 2012. This was 4%down on the previous year, though

without the loss that we sufferedas a result of the insolvency of thelarge wholesaler, Waverley The Beer

Seller, the result would have beenahead of 2011. As with last year thestrongest growth within our business

was in the take home trade, thoughinterestingly the much anticipated

point at which home consumptionexceeds consumption in pubs hasbeen deferred another year as salesthrough pubs and sales through shops

fell by almost identical amounts.

Our distillery has now been open for alittle over two years and we have seenstrong growth in both of those years.

We are also seeing an increasinginterest amongst those keen to followin our footsteps and we suspect

that plenty more micro-distillerieswill open in the next few years. In

part this reects the strength ofthe markets for gins and whiskies,and it also reects the quality and

new avours that specialist craft

producers can offer. Our gins andvodkas continue to win awards andgrow in recognition and our liqueur

range has been establishing a popularfollowing. There is growing interesttoo in the Adnams whiskies that we

will launch at the end of 2013.

Our pubs business enjoyed a verygood 2011 and continued to do

well in 2012. We are fully aware ofthe economic pressures on pubsand closure rates are still running

at around eighteen per week.Amongst other things, pubs havehad to contend with the smoking ban

imposed in 2007, with exceptionalincreases in beer duty, with wideningleisure opportunities, with growingprice competition from supermarkets

(who have often used alcohol as aloss leader), and with an increasinglyvocal health lobby.

We sold two pubs in the year and are

currently looking at further sales.Wherever possible we seek to sellpubs as going concerns, and we havemanaged to do this for all pubs that

we have sold in recent years. Weunderstand a local pubs importanceto its community; indeed the rst

project for The Pub is the Hub groupwas within the Adnams estate. Insome circumstances, however, the

fact has to be faced that a pub mayno longer be sustainable. It is a dis-service to incoming licensees to

encourage them to invest in a pubwhich offers no realistic chance of aprotable livelihood.

2012 proved to be a tough year for theSwan and Crown hotels in Southwold.Undoubtedly the wet weather that we

saw from April onwards contributedto this, but we have noted in recentyears that we suspect that spending

on hotel visits has represented arelatively easy saving in hardereconomic times.

Our shops business had an improvingyear. We have worked hard to growsales in the new stores that we

opened in later 2011 and also at theNorwich store which opened in May2012. Before allocating central costs,our shops business contributed a

prot in 2012, but we believe that it

can and should do better. Whilst thebusiness overall is not in prot, it is

nonetheless the case that, allowingfor shared costs, our total prots are

higher with the business than they

would be without it.

In recent years we have enjoyedexcellent continuity on the Adnams

board, which has not changed sinceSteve Sharp joined us in 2007.2013 will however see a change as

William Kendall is leaving us aftereleven years of service. William hasa huge breadth of experience both

of different industries and differentroles. I would like to thank himvery much for all that he has done

for Adnams. We are delighted thatBridget McIntyre will be joining uson 1st May 2013 and a resolution to

appoint her is included in the AGMNotice. Bridget was the UK ChiefExecutive of RSA Insurance until

2008 and before that she held senior

roles at Aviva PLC. Since leaving RSAshe has set up a Suffolk-based social

enterprise company which focuses onimproving the lives of women in thelocal community. We are sure that shewill be a great addition to the Adnams

board.

Adnams prides itself on doing the

right thing. Making such claims iseasy and it is important from timeto time to benchmark ourselves

against others. With this in mindwe were delighted to have receivedtwo very prestigious third partyendorsements during 2012. At the

start of the year we heard thatwe had been awarded the QueensAward for Enterprise, Sustainable

Development. This is the second timethat we have won this award. Onlya small proportion of applicants are

successful and we feel that it speaksvolumes for our long-term view. Atthe end of the year we received the

gold award of the Investors in People,again a very prestigious and rarely

awarded accolade. Investors in Peoplebenchmark performance againstworld class standards and thisaward is testament to our processes,

procedures and support that weprovide to our people and to theirdevelopment.

Outlook

It is difcult to be too positive about

an economy where things feel hard

and give little sign of being about toimprove. Our markets are tough onesand 2013 has begun as 2012 ended

with difcult trading conditions,exacerbated in January with acovering of snow. Nonetheless we did

many of the right things to improveour performance in 2012 and webelieve that our long-term view will

continue to hold us in good stead overthe years to come. I am grateful foryour continued support.

Jonathan Adnams OBE, Chairman

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04 Adnams plc

Business review

Described as a wonderfullywicked pale ale when we

launched it as a seasonal beerin 2010, Adnams Ghost Ship

became an instant hit. Tocelebrate its graduation intoour permanent beer range,

we held a party in Southwold.We turned the brewery intoa ghost ship by projecting a

lm on to the outside. If you

missed it, you can still see thelm on the Adnams YouTube

Channel. Ghost Ship is nowavailable in cask, 5-litre

mini-casks, 500ml bottles and440ml cans all year round!

FROM

TEMPTOPERM

Brewing & Brands

We again succeeded in growing Adnams beer volumes in a declining market.Our cask beer sales were just ahead of 2011 and our overall sales of Adnamsbeers were up by 3.8%. 2012 was the fourth year in which the Adnams beerbusiness held the price of its own beer. 2013 will be the fth. Our strategy has in

part been a recognition that with falling consumption and increasing producernumbers industry margins have been under continuous pressure. In part tooit reects a statement of our values to do the right thing to support pubs in a

very difcult market. We recognise that at a time of rising raw material and

utility prices this position cannot continue indenitely, and that part of our

ability to pursue this strategy has been driven by the efciencies created when

we nished the rebuilding of our brewery in 2007 and our continual drive to

improve processes and lower costs.

Aside from sales to our own pubs, the key market in which the holding ofprice has been relevant is our sales to free trade pubs which are not part ofa larger tied group and where we deliver the beer using our own transport(Direct sales). Sales to larger pub groups (National sales) and Take Homesales to supermarkets and off licenses are often governed by more structurednegotiation processes and sometimes by longer-term contracts.

The brewing and brands business seeks to ensure that it offers customers a

coherent and consistently high quality experience. We try to explain the ethosof the Company and to communicate the attractiveness of our values andbrand. We try to ensure that we have a range of products that are desirable,characterful, innovative and made to the highest standards. We try also toensure that customers have a positive experience when dealing with ourteams in delivery, in sales, in our back ofce and in our contact centre. It is

by concentrating on all these aspects that we have been able to grow our beervolumes in a very competitive market and whilst prots have slipped slightly

compared to last year they have been maintained at a similar level to thatachieved over the preceding three years.

We have continued to develop new beers. 2012 saw the launch of Diamond Ale tomark the Jubilee, Flame Runner, at the time of the Olympics, Shingle Shells atChristmas and during the year we launched Topaz Gold and English Red. Thereis now a growing interest in craft keg beer, high quality small batch production,but sold in keg and not cask. Our Spindrift beer, launched in 2007, somewhatahead of its time, ts very well into that category and saw good growth in 2012.

The Adnams Direct business performed reasonably well. Volumes of own beerwere fractionally behind the prior year, but this was mainly as a result of somelarger customers being acquired by other breweries during that year andsubsequently locking out our beers.

It is pleasing to be able to talk about an improved nancial

result and increased volumes in difcult times. We worked hard

in 2012 in all parts of our business and we also restructuredour management team to bring our different businesses closer

together and save costs. This has helped to bring consistencyand better communication and has contributed to the improvedperformance that we have been able to report this year.

Andy Wood, Chief Executive

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Adnams plc 05

FROM ADMIN

Cellar Service administrator

Technical Service Asset Manager

Telesales

Beer order

Meet Sue aka wonder woman...

to managing

installs, barrefurbs, cellarserviceissues...

I rst joined Adnams in 1974

working in the Beer Orderdepartment situated in the mainofce where I stayed for seven years

before becoming pregnant with myrst daughter. After an absence of

about four years and the birth of mysecond daughter I was offered a part-time job in Telesales, which I took. Afew years later my role changed toCellar Service administrator andgradually as the children grewolder I returned to working full-time. When we relocated to the newDistribution Centre I was promoted to

my current role of Technical ServiceAsset Manager meaning that I amresponsible for making sure that pubshave all the necessary equipment andsupport to serve Adnams beers inperfect condition.

My job is made enjoyable because ofthe people I work with, I have metsome real characters and mademany good friends over the years.Help and support has always beengiven when required and I havebeen encouraged to take on extra

responsibilities. It helps to work witha fantastic team. The business haschanged considerably since I rst

started but if it hadnt we wouldnt bewhere we are today!

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06 Adnams plc

Congratulations to Karl andShirley Barber at the Railway

Inn, Aldeburgh for winningthe hotly-contested title ofAdnams Pub of the Year.

Every year we seek one pubthat is a shining exampleof all that exemplies the

Great British Pub it is notalways the biggest or busiest

or the one offering the widestselection of food. What weare looking for is a warm

friendly welcome, great beerand beverages, good food and

people who are passionateabout their community.

Well done to all our nalists

and winners, a full list can befound at adnams.co.uk

The rise and rise of Dave Pickles, proudlandlord at The Five Bells,Wrentham

I think it was 2008 when I started at the Crown Hotel. I started as a

relief chef, just for two weeks but after a busy summer I was offereda full time position. I started as Sous Chef, but as time went on my rolebecame more senior. What I loved about working for Adnams was thatI was encouraged to get out of the kitchen and get involved with otherinitiatives such as the Employee Forum and the Hotel Green Team.

Working for the company was a pleasure, and I enjoyed every minute,even though it was very busy at times! The support network wasamazing, I had a health problem two years ago, and Adnams reallylooked after me, what else can anyone ask for?

Ive made a lot of very good friends whilst working at Adnams and feelvery privileged to have worked for the company - I am very proud ofthe brand and what it stands for.

It is now slightly different; I am one of a number of employees whoAdnams has helped set up their own business, by taking on a pubtenancy. I have the best of all worlds, running my own business,promoting the Adnams brand and lots of support from Adnams.

I just wish Id found Adnams years ago!

FROM CHEF, TO CHEF,to proud

landlord& localpersonality

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Adnams plc 07

Street food is a growing andvibrant sector of the foodiescene in Britain. Nick, fromthe Harbour Inn, Southwold

takes his famous Fish Hutto many top notch events.His efforts were rewardedat the 2012 Great BritishStreet Food Awards whenhis Lowestoft Line-caught

Cod in Adnams Ginger BeerBatter won Best Main Dish.So, if youre not able to get

to Southwold for lunch, youmight be lucky enough to see

the award-winning Fish Hutout and about at eventsthis year.

We dont need much of anexcuse to bring out a new

beer and what better reasonthan Her Majestys DiamondJubilee? Amongst other new,and new-look beers, Adnams

Ginger Beer became thelatest addition to our loweralcohol range and Spindrift

& Explorer were treated to arefreshed design.

It has been widely reportedthat government duty on beer

has risen 42% since 2008.Adnams has been doing itsbest to help Tied and Free-trade customers by freezingpre-tax Adnams beer prices

for the fth year in a row.

The second year of the distillery built on the successes of the rst. We have

developed a strong portfolio of products and we added a few more in 2012,notably, Spirit of Broadside, a cask aged spirit made by distilling our popularbottled Broadside beer. This was launched in May 2012 to celebrate the 340thanniversary of the Battle of Sole Bay, fought off the coast of Southwold. On5th December 2013 we are looking forward to the launch of the rst Adnams

whiskies. We have held interim tastings and they appear to be developing

well. We believe that our spirits will prove not only to be popular products inour local market and in the wider UK market, but they should also offer goodexport opportunities.

Distilling

2012 saw a continuation of our National business moving towards sales tomanaged houses and away from sales to leased and tenanted groups. Thisin part reects the relative success of managed house groups at the present

time and this is in turn partly a result of the difcult times faced by leased and

tenanted companies as they have tried to reduce the substantial debt levelstaken on before the 2008 nancial crisis. One particular disappointment in the

National business in 2012 was the failure of one of our larger customers, thewholesaler, Waverley The Beer Seller. Waverley failed whilst owing Adnams164,000, and whilst some of this was recouped through returned stock ortrading after the date of Administration, it had nonetheless a very unwelcomeimpact on this years results.

The Take Home business again saw good volume growth in 2012, up by about14% on the previous year. Margins are extremely tight in this market, butwe were pleased to achieve an improvement in prot. We launched two lower

alcohol products during the year, Sole Star and Adnams Ginger Beer and laterin the year we launched a canned version of our highly successful Ghost Shipbeer. The market for cask beer in mini-casks, whilst still small, has continuedto grow robustly.

Our export volumes remain small, but they grew strongly during 2012 and wehave developed our customer base so that we can anticipate further growth inthe future.

We have UK distribution for the German Pilsner, Bitburger and for the Greekbeer, Mythos. After a good 2011, Bitburger had a less successful 2012, though itgrew strongly in our tied estate. Mythos, from a lower base, performed well.

2012 will of course be remembered for the London Olympics and the DiamondJubilee. We enjoyed good trade over the Jubilee weekend, however, theOlympics, hugely successful though they were for the Country, were notespecially positive for the pub and hospitality industry. London in particularwas signicantly impacted.

We have maintained our strong focus on marketing and communicating thepositive messages about what we do. Local sponsorships and distributionagreements, notably at Newmarket Racecourse, Ipswich Town Football Club,Diss Rugby Club and a number of high prole cycling events have been keyto this.

FIVEYEARSBEER PRICES HELD FOR

QUEENS

AdnamsDiamondubileeAle

emporar umpClipA/.0.

T KI L . L TT I .

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1

1

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08 Adnams plc

Does anyone know what thecollective noun is for whisky

journalists? With one year togo until Adnams Whisky is

launched, we invited a gaggleof them to the BloomsburyCellar & Kitchen Store to

taste the two-year old spirit.We have already received anumber of terric write-ups

and anticipate a queue at thedoor when it goes on sale in

December.

2012 was another year of change for the Cellar & Kitchen shops. We openedthree new shops in the later part of 2011, two in London, at Bloomsburyand Spitalelds, and one at the Waterside garden centre near Peterborough.

The Spitalelds shop was taken on a one year lease and whilst trade started

to build towards the end of that time we made the decision to close theshop rather than commit to a longer-term and more expensive lease. TheBloomsbury shop provides a valuable centre for Adnams in London includinga basement room available for meetings and tastings.

We have seen reasonable progress in our continuing estate, overall sales were

up by 6.5%, and were up by 3.3% on a like-for-like basis, and most shops havebeen improving. The new stores, however, performed less well than we hadhoped ahead of their opening. We believe that trade will build in these shops,as it has done elsewhere, but they held back performance in 2012 and wedetermined around the middle of the year to stop, at least for the near future,any further roll-outs beyond the already planned opening in Norwich and toreorganise this business on a leaner cost base. This has had a benecial effect

both in terms of nancial performance and in terms of being able to bring the

overall Adnams business closer together.

The Norwich shop opened in the same premises, the Grapevine on UnthankRoad, where Adnams had traded some ten years earlier. We are delighted tohave found a more permanent home in Norwich, after our relatively brief stayin the Chapeleld shopping centre. Given our new Norwich presence we also

decided to close the small concession that we had been running in the NorwichHouse of Fraser. This happened at the start of 2013.

Shops

We reported last year that economic conditions had been tough for the hotelsand that did not change during 2012. The Crown was shut during the early

part of the year whilst ten of its rooms were refurbished. We believe thatthey now provide a very attractive offer, and the Crown was awarded SuffolkDining Pub of the Year.

We have focussed on achieving a cost base that is appropriate both for thelevel of business and for the high standards that our hotels set themselves.The Swan in particular managed to reduce its costs and both hotels have alsofocussed on managing the difcult balance between room rate and occupancy

levels. Staff training and events have also been priorities. Trading was not atits best this year, and no doubt the weather played a part. Even if the economydoes not improve we hope that the weather will be kinder in 2013.

During the year we continued our management contract with the HolkhamEstate to run the Victoria Hotel at Holkham and the Globe Inn at Wells.Earnings from this contract, and from the supply of drinks to these

businesses, remained at a similar level to 2011.

Hotels

We were delighted toreceive the news in July

that our spirits picked upan impressive seven medalsat the International Wine &Spirits Competition. Since

we opened the distillery inOctober 2010, Adnams spiritshave been judged at a nationaland international level against

well-established big brandsand smaller craft distillers

like ourselves. With over 20medals, every one of our corebrands has been recognised

at least once. This gives us

enormous condence and of

course, reason to celebrate!

GOLD

365, 364, 363...

Despite selling two pubs, our income from our pub estate grew in 2012. This isin the context of a very tough trading environment and volumes of beer soldwere down on 2011. The improvement was achieved through ensuring that we

had good licensees, that pubs did not remain vacant and that tenant turnoverwas low. The pressure on pubs has been evident for a long while and remainsintense despite the closures that have already occurred.

We have some wonderful rural pubs, but those not in large villages and thosenot equipped to become food-led destinations can often nd conditions very

difcult. We plan to sell perhaps half a dozen pubs in 2013. We are very keen

that pubs should remain pubs if this is viable, but change of use is sometimesthe only sensible option.

Pubs

Retail Businesses

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Adnams plc 09

Since it began in 1992, theAdnams Charity has given

over 960,000 to 1020different organisations. Inaddition to a percentage ofAdnams prots donated

each year, we are incrediblygrateful to many shareholders

who kindly donate theirdividends.

In October, we signed up toPennies, an electronic charity

box, which allows Cellar &Kitchen Store customers

to donate their spareelectronic change. When

making a purchase with theircard, customers have the

opportunity to round up tothe nearest pound and give

their change to charity. In therst few months, the stores

have raised an impressive6,000 for Prostate Cancer

UK.

Of course I love coming to work Im the Adnams Distiller! I started atAdnams in 2001 as Brewery Engineer making sure that the brewery andeverything associated with it runs smoothly. I took my brewing exams andbecame one of the Duty Brewers, which involves checking fermentations,counting yeast cells and various other beer quality bits and pieces.

In 2010, when the Board approved the plans for the Distillery, Jonathan andmyself went to the University of Michigan on a distilling course. He wanted to

make sure that I understood the process before installing the distillery. I lovedit and on the ight home, we discussed the possibility of me not only building

the distillery, but becoming the distiller too. The rest, as they say, is historyand by the end of this year I hope to have completed the Diploma in Distilling.

The people, the working environment and Southwold all make Adnams such aspecial place to come every day. I love it that I have the freedom to experimentwith new ideas, but youll have to wait to see whats next!

FROM BREWINGENGINEERto award

winningartisandistiller

Meet John - Award winning distiller - not that he wants to talk about it...

USA Southwold960,485

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10 Adnams plc

to winebuffs -but notbores!

FROM WINEAPPRECIATION

Many moons ago, Helen Duddridgeleft the Adnams wine team to setup her own wine tasting & tutoringbusiness. We believe that it isessential that anyone at Adnams,remotely connected with wine andspirits, is given the opportunity tostudy for and sit the Wine & SpiritEducation Trusts exams. From

Intermediate to Diploma level, since2001, we have welcomed Helen backevery year as tutor to some 300+Adnams employees.

Sarah Strachan joined Adnamsas a Wine Sales Co-ordinatorand is now one of our TelephoneAccount Managers, Taking partin the Advanced WSET certicate

was key for my role in the Winedepartment. I understood customerservice and sales when I joined,however my product knowledge

was slim making my ability to talkto some customers a little testing attimes. Upon completing the course,I felt well-equipped to talk to awider spectrum of enquiries andsell wines condently. I now have

this knowledge for life and since Ihave a personal love for wine, it isinvaluable.

Meet some of the allconquering WSET Team...

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Adnams plc 11

2012 was another bumperyear of sponsoring and

attending events. Despitethe sometimes gloomy

summer weather, Julie andher team love the buzz ofbeing involved in such a

wide variety of events. Oursupport ranges from the tastyofferings at the regions food

and drink festivals, through tothe more active participation

and spectator-ing at cycleevents such as the prestigious

Tour of Britain.

The Adnams on-line presence and reputation has continued to grow andwe have extended this to include social media developments such as theMan of the Match app for Ipswich Town Football Club. We have around19,000 followers on Twitter and over 4,000 friends on Facebook. Web saleswere up by 11% in 2012 and we also managed to reduce our cost base. Webdevelopment and improving on-line sales are an important focus. Our stores

offer an attractive shopping experience, but even for our style of retailinga strong on-line presence is a necessity. During the year we redesigned theAdnams website to improve clarity and the user experience.

Our mail order business improved its performance in 2012, with en primeurdeliveries and cases sold through our Seasonal Cellar wine club both doingwell. The wine agency business slipped slightly in 2012, but showed bettergrowth towards the end of the year following integration into our Nationalsales business.

On-line and Mail Order

The Reydon-based anaerobic digester facility run by the joint venture AdnamsBio Energy Ltd continued to increase its feedstock inputs steadily throughout

2012. The nature of the feedstock changed somewhat to include signicantlevels of packaged food and as a result, a new de-packaging system wassuccessfully installed at the plant and is running very well. Liquid wastesfrom the brewery are now all being processed by the plant, and in a uniqueinnovation, these liquids are being used to replace water in the digestionprocess. Gas injection has been interrupted by a technical decision to installnew gas processing equipment. This ret will take several months but will

result in enhanced revenue.

2012 was a difcult year for the economy, but we came through it well and

achieved both beer volume growth and prot growth. 2013 promises every bit

as much challenge and we look forward to the task. My sincere thanks go toour staff.

Andy Wood, Chief Executive

Adnams Bio Energy

The shops made a prot in 2012, before allocation of central costs.

Whilst the bottom line after allocations remains negative, the businessis nonetheless valuable to Adnams. Not only does it provide a marketingshop front, it is also clear, given its absorption of central costs and itscontribution to beer sales, that our nancial result would be worse if we

were not to have it. Our edgling distillery business in particular has

beneted from the Cellar & Kitchen shops as they helped that business to

become known more quickly and produce in more commercial volumes.Our shops sell a substantial volume of Adnams beer, approaching half asmuch as we sell through our pub estate.

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To get these...

we do this...

The Queens Award for Enterprise judging panel said: Adnams plcwins a Sustainable Development Award for pursuing a values-based

approach to management within its brewery, wine and hotelierbusiness. As a result, it has reduced its negative environmental impactand made signicant contributions to the well-being of its surrounding

communities. It provides an excellent example to its industry.Through the introduction of carbon-neutral beer and lighter beer

bottles, it reduced operational impact. It established an innovativeEco-distribution Centre, regarded as an exemplar. Partnering a local

small business, it harnessed anaerobic digestion technology forgenerating gas from organic waste to supply its own requirements andfeed surpluses to the national grid. The company provides leadership,

staff resource and funding to promote responsible drinking andsupport work experience and training, especially for disabled and

disadvantaged people.

The Adnams team said: thank you, lets celebrate!

12 Adnams plc

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Adnams plc 13

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14 Adnams plc

COME

YOURSELF& SEE FOR

By the end of the year, weestimated that over 15,000people joined us on either abrewery or distillery tour and sometimes it was forboth! We were delighted

when in September the tourswere awarded a Tripadvisor

Certicate of Excellence.

The effective rate of tax (the tax charge in the accounts as a proportion ofthe pre-tax prot) fell sharply in 2012, down from 61% to 23%. Last years

charge was affected by the 1.7 million of exceptional costs, which included asubstantial element of cost that was not tax deductible, notably impairmentcharges against xed assets.

The basic UK rate of corporation tax has continued downwards and was cutfrom 26% to 24% in 2012/13. The government plans that it will be cut to 22%.When estimating our future tax liabilities we have assumed a rate of 23%.This was the tax rate considered to be substantially enacted at the balancesheet date.

Tax

The Good Pub Guide isdescribed as a nationalinstitution a bible for

pub-goers. The 2013 editionnamed the Crown Southwold

as Suffolk Dining Pub of

the Year. The bedrooms

at the Crown receivedsome attention too. Ten ofthem were refurbished atthe beginning of the yearusing dcor and furniture

sympathetic to the Adnamsvalues and location.

Having risen from 12.4 million to 15.4 million in 2011, partly on the backof the 1.6 million purchase of the White Horse at Blakeney, borrowingswere reduced in 2012 to 13.7 million. We think that this level is comfortablywithin the affordable range for Adnams and our interest expense was coveredeight times by our operating prots.

Towards the end of 2012 we asked a range of banks to tender for our bankingservices. We are not of a size where the use of two banks would be likely tobe advantageous and our banking business has been with Barclays for manyyears. We were pleased and encouraged by the interest shown and two otherbanks put forward very attractive offers. Nonetheless Barclays retained thebusiness and Adnams, we believe, has beneted from achieving very good

rates.

In recent years Adnams has kept its borrowings short term. The reason wehave done this is because we have been unwilling to pay the premium thatattaches to supposedly longer-term loans that come with nancial covenants.

The risk of breaching these covenants in a poor year means that what appearsto be long-term money may cease to be available at the very moment when itis most needed. However, the loan that Barclays offered us through the tenderprocess uses cheaper nance from the Bank of Englands Funding for Lending

Scheme. Whilst the loan is a three year loan the cheaper funding has removedthe need to pay a premium and has allowed us to agree an attractive rate for athree year period.

The new loan was drawn down at the start of February 2013. Whilst the feesand margins are agreed for three years, we have not xed the underlying rateof interest for this period and we are still using short-term rates. Whetherthis proves to be our cheapest option we will only know towards the end of theloan. Whilst we have certainly made savings over the last few years by usingshorter-term rates, we claim no prescience for this.

Borrowing

2008 2009 2010 2011 2012 Variance**

Operating prot 1,521 3,238 3,188 3,277 3,392 3.5%(before exceptional operating costs, 000)

ROCE (percentage)* 4.1% 8.7% 8.5% 8.7% 9.5% 9.4%

Gearing (book value) 48.2% 53.4% 49.4% 69.4% 62.8% (9.4%)

Net debt (000) 12,082 12,882 12,386 15,421 13,739 (10.9%)

Interest cover**** 2.1 9.0 7.0 9.2 8.2 (10.9%)

Ord dividend (per 1 share)*** 1.86 1.87 1.87 1.90 1.94 2.1%

*The return on capital is based on the operating prot line and capital employed, including debt**% variance between 2011 and 2012***Including proposed nal dividend for 2012****Excluding exceptional items and interest on pension decit

Financial highlights

Finance commentary

No pubs were acquired in 2012, but two were sold: The Mustard Pot inNorwich and the Star at Wenhaston. Proceeds were 432,000 and prot of

267,000 was achieved on these sales. We are likely to see a somewhat higherrate of pub sales in 2013.

Property

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Adnams plc 15

Over the years, we havewelcomed many Adnamsshareholders to our Open

Days. 2013 dates are set at29 May and 24 October. You

will be reminded of the datesnearer the time, but should

you want to book early,please email sarah.tilbrook@

adnams.co.uk

I still remember when Sadie called me for an interview Id justclimbed six ights of stairs and needed a minute to catch my breath

before I was able to speak.

I started on 18th October 2006 I think! I began as a waiter and now,six years on, I am manager of the Crown hotel. In my spare time, I amalso a tour guide for the Adnams Distillery Tours.

Why do I like Adnams? Because of the opportunities for development

(WSET in particular), both professionally and personally. Its quiteamazing how many people, and not just me, we have taught toappreciate good wine. I recently took two members of my team toPortugal to meet some of our producers.

The Crown is such a great place to work; the food, the buzz, and therecent refurbishment of the bedrooms are all incredible.

FROM BARMAN,TO FOOD & BEVERAGE

MANAGERto managerat TheCrown

Lukas tells us how Adnams supports himand his whirlwind career path...

PLEASE

DISTURB!

ITS A

DATE

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16 Adnams plc

I was on maternity leave when Isaw the part-time HR admin postadvertised. I applied and was offeredthe role in October 2001. Followinghalf a day handover with the lady Iwas replacing, I wrote to Michael thatevening saying that I had changed mymind as the role did not really suitme! The letter is still on my le. He

obviously persuaded me to change mymind and Im so glad he did.

Since then, my role in HR hasdeveloped. Along the way I have

been HR Assistant, HR Ofcer,Recruitment Manager, Recruitmentand Training Manager and I am nowHead of HR.

I love how we do business, how wetreat people and the fact that everysingle day is different. I look at theclock and groan that the day hasdisappeared so quickly rather thanthinking is it only three oclock?

From day one I have been encouragedto grow and develop in whatever role

I have been in. Being nosey helps, asthe more questions you ask and themore interest you show, the morelikely it is that opportunities willcome your way. I have been fortunateto receive a wide range of learningand development with Adnams, bothformal and informal, accreditedlearning, mentoring and coaching.

I think Adnams is great at spottingpeople at all levels and withinall areas of the business that areenthusiastic and passionate aboutwhat they do and want to do more

than just turn up. These people willourish at Adnams and are exactly

the people who make for a successfulbusiness.

FROM PART-TIMEADMINISTRATORto the headof humanresources

Meet Sadie and hersecret to success

SELFCONFESSED

NOSEYPARKER!

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Adnams plc 17

During 2012, the board has continued its policy of not hedging interest rate andforeign exchange exposures. We are not in a position that annual uctuations

in rates are so important to our results that we feel the need to hedge them.

Not having an active hedging policy saves us money both in terms of timethat would have been spent on such an activity and margins that would havebeen given away to the providers of the relevant nancial instruments. Not

having substantial budget-based incentive packages we have also avoidedthe temptation to lock-in budget rates in an attempt to secure payments tomanagement rather than cash to shareholders.

The default of Waverley The Beer Seller during the year was a painful loss,both to Adnams and to the wider industry. Their debts outstanding totalled64 million. Because there was little prior indication of the insolvency, creditinsurance would have been valuable. We have chosen not to insure debts owedto us as we have been concerned by an overly prudent attitude from insurersand we have also been reluctant to tie ourselves to the restrictive proceduresrequired by credit insurance. We seek to manage credit risk by settingappropriate customer limits based on payment history and credit references.We review limits regularly and actively chase outstanding debt.

Further details of nancial risk are contained in note 27 of the accounts.

Treasury policies

We are recommending a 3p (2.4%) increase in our nal dividend for 2012 to

1.28 per 1 B share. The equivalent for A shares is a move to 32p from31.25p per 25p share. This will mean that the full year dividend will be 1.94per B share (48.5p per A share), a 2.1% increase on 2011.

Whilst we retain discretion to vary our payment in accordance with thecircumstances of the time, our normal policy is to pay an interim dividendequal to 35% of the previous full year dividend. On this basis we envisage a 2pper B share (0.5p per A share) increase in our 2013 interim dividend whichwill make the B share payment 68p and the A share payment 17p, a 3%

increase on 2012.Stephen Pugh, Finance Director

Dividend policy

When many of Norfolksmost innovative businesses

gathered together inNovember for a glitteringEastern Daily Press Business

Awards ceremony hostedby BBC Look Easts Stewart

White, we were verypleased to win the Online

Performance category.

Adnams has ofcially been

named a CoolBrand in aninuential annual initiative

to identify the UKs coolestbrands. The CoolBrands

list, now in its eleventhyear, follows a vote by acombination of just under

3,000 consumers and a panelof 39 designers, style experts,

media personalities andprominent gures from the

worlds of TV, fashionand music.

BUSINESSINNOVATIVE

The seemingly inexorable increase in the pension liabilities of a scheme thatwas closed to all accrual over seven years ago has continued. These liabilitiesare calculated by discounting projected pension payments to a current value.The discount rate applied is crucial to the calculation and for accountingpurposes the rate required is that applicable to AA (high quality) bonds.The fall in discount rates over recent years has led to a corresponding increase

in the calculation of scheme liabilities.We have seen some, though rather less, offsetting increase in the marketvalue of assets. The net impact on assets and liabilities has led to an increasein the scheme decit (pre tax) from 5.3 million to 7.5 million. This will be

reassessed as at 1st April 2013 when the triennial scheme valuation takesplace. The results of this valuation will drive contribution rates for the future.For the last few years the Company has been contributing 420,000 per annum.

Pensions

In 2011 we changed the way in which we assess whether our xed assets have

become impaired. We now look at each asset separately instead of groupingsimilar assets into income generating units before assessing potentialimpairments. This change was in large part responsible for the 0.9 millionof asset impairment costs that we provided in 2011 as part of a 1.7 millionexceptional item. The change also means that we are likely to see moreimpairment charges in the future and in 2012 we had charges of 55,000,though these have not been treated as exceptional.

Exceptional item

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Trading results and dividends 000

Company prot on ordinary activities after taxation 2,455Dividends to ordinary shareholdersFinal 125% (paid 1 May 2012) (590)Interim 66% (paid 1 October 2012) (312)

Retained prot 1,553

Proposed final dividend of 604,000 (128%) to be paid 2 May 2013.

A Ordinary 25p B Ordinary 1Directors interests 2012 2011 2012 2011

Ordinary sharesJ P A Adnams 184,061 183,924 3,263 3,263W B Kendall* 2,644 2,644 S P D Loftus* 36,339 36,339 S C Pugh 1,709 1,572 S M Sharp* 304 304 A C Wood 4,097 3,960

10,670** 10,670** 3,800** 3,800**

* Denotes non-executive Director. ** Shares held as Trustee.The company has a Share Incentive Plan (SIP) in which the executive directors are eligible to participate.Directors interests in shares attributed under the terms of this scheme are included above.

18 Adnams plc

Report of the DirectorsFor the year ended 31 December 2012

The Chairmans Report, Business Review and Finance Commentary on pages 2 to 17 include information about thecompanys business and financial performance during the year and indications of likely future developments and

should be read in conjunction with this report.

The principal activities of the company are brewing, retailing and wholesaling beer, wines, spirits and minerals,property ownership and hotel management.

Principal risks and uncertaintiesIt is our objective that our Chairmans Report and Business Review discuss the business in such a way that we properlyexplain the principal risks and uncertainties that we face. However, for claritys sake and in line with the practice adoptedby most others, we note below a description of these principal risks and uncertainties, beyond those explained in theFinance Commentary. We believe that they fall into four main categories.

Firstly the state of the economy, notably the level of consumer confidence and changes in alcohol consumption patternsare key to us. We try to ensure that we are sensitive to changes so that we can rapidly adapt.

Secondly the regulation of our industry affects the ways in which we compete. The alcohol industry is, unsurprisingly,highly regulated. We seek to ensure that we adopt a consistently responsible attitude towards alcohol consumption, thatwe are well informed on regulatory developments and engage with the development of these regulations.

Thirdly we face operational risks in ensuring the continuing functioning of our brewery, computer systems and other

key processes. We deal with these by attracting and retaining staff with the right abilities and by establishing wider riskmanagement processes.

Fourthly our brand and reputation are key to all our business activities and we seek to be constantly vigilant in ensuringthat we stand by our values and live up to the name that we have built.

PropertiesIn the opinion of the directors the market value of the properties considerably exceeds the amount included in the balancesheet. The directors are unable to quantify this excess in the absence of a professional valuation, the costs of which arenot considered justifiable in view of the companys intention to retain ownership of its existing properties for use in itsactivities for the foreseeable future.

DirectorsThe Directors who held office at 31 December 2012 and their beneficial interests in the share capital of the company,at the beginning and end of the financial year, are shown below.

S C Pugh and S M Sharp retire by rotation and being eligible offer themselves for re-election.

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Adnams plc 19

Report of the DirectorsFor the year ended 31 December 2012

Employee matters

InvolvementAdnams is committed to involvingemployees in the performance anddevelopment of the company byencouraging them to discuss withmanagement matters of interestand subjects affecting day to dayoperations. Most employees, includingexecutive directors, benefit from thecompanys success through a profitsharing scheme, and through a shareincentive plan which distributes sharesto employees during their period ofservice with the company.

Health, welfare and development ofemployeesFor many years Adnams has operatedschemes for the welfare and benefitof employees. As well as pensionand life assurance, we provide coverfor illness and we make available toemployees qualified specialists to covermedical welfare, pension advice andany counselling needs. Health andsafety policies are given a high profilein all areas with wide representationthroughout the company on the Health

and Safety Committee. It is our policyto train and develop the knowledgeand skills of employees at every leveland to provide long-term secure andfulfilling employment. We are proudachievers of the Investors in PeopleGold award.

Disabled personsIt is the companys policy to give full

consideration to suitable applicationsfor employment by disabled persons.Opportunities also exist for employeeswho become disabled to continue theiremployment or to be trained for otherpositions.

Independence

Adnams continues to value and workfor its independence as a regionalfamily brewer.

Charitable donations

Adnams is committed to giving notless than 1% of its annual profits tocharitable causes. Charitable donationsduring the year amount to 34,000(2011: 32,000).

Supplier payment

It is the companys policy to makeevery effort to agree terms of paymentwith suppliers in advance, to ensurethat suppliers are made aware ofthe terms and to abide by them. At31 December 2012, the company

had an average of 23 days (2011: 20days) purchases outstanding in tradecreditors.

Directors qualifying third

party indemnity provisionsThe company has granted anindemnity to its directors againstliability in respect of proceedingsbrought by third parties, subject to theconditions set out in the CompaniesAct 2006. Such qualifying third partyindemnity provision remains inforce as at the date of approving thedirectors report.

Statement as to disclosure ofinformation to the auditor

The directors confirm that: so far as each director is aware,

there is no relevant auditinformation of which the companysauditor is unaware; and

the directors have taken all the

steps that they ought to havetaken as directors in order to makethemselves aware of any relevantaudit information and to establishthat the auditors are awareof that information.

Auditor

Grant Thornton UK LLP offerthemselves for reappointment asauditor in accordance with section 489of the Companies Act 2006.

By Order of the BoardS C Pugh

Secretary19 March 2013

Notice of meetingNotice is hereby given that the One Hundred and Twenty-Third Annual General Meeting will be held at St.Edmunds Hall,Southwold on 29 April 2013 at 12 oclock noon for the following purposes:

Ordinary Resolutions1. To consider the Accounts and Directors report2. To declare a final dividend3. To re-elect S C Pugh, who retires by rotation4. To re-elect S M Sharp, who retires by rotation5. To elect B F McIntyre as a director of the Company with effect from 1 May 20136. To re-appoint Grant Thornton UK LLP as Auditor7. To authorise the Directors to fix the remuneration of the Auditor

A member entitled to attend and vote at the above meeting is entitled to appoint a proxy to exercise all or any of his/herrights to attend, speak and vote.

By Order of the BoardS C PughSecretary19 March 2013

Registered Office

Sole Bay Brewery, Southwold , Suffolk, IP18 6JWCompany registered number 31114

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2012 2011 Notes 000 000

Turnover 1 56,922 54,570

Operating expenses (including exceptional items) 2 (53,530) (52,961)

Operating profit before exceptional items 3,392 3,277Exceptional operating items 2 (1,668)

Operating profit 3,392 1,609Profit on disposal of properties 5 267 Interest receivable 7 1 1Interest payable 8 (415) (356)Other finance (charge)/income on pension scheme 26 (61) 45

Profit on ordinary activities before taxation 3,184 1,299Tax on profit on ordinary activities 9 (729) (796)

Profit for the financial year 20 2,455 503

Earnings per share basic and diluted 11

A Shares of 25p each 130.1p 26.7pB Shares of 1 each 520.3p 106.6p

All amounts relate to continuing activities.

20 Adnams plc

Profit and loss accountFor the year ended 31 December 2012

2012 2011Notes 000 000

Profit for the financial year 2,455 503

Actuarial loss on pension scheme 26 (2,482) (3,290)Movement on deferred tax relating to actuarial loss 18 571 823

Total recognised gains and losses relating to the year 544 (1,964)

Statement of total recognised gains and lossesFor the year ended 31 December 2012

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2012 2011 Notes 000 000

Fixed assets

Tangible assets 12 38,129 38,341Investments 13 247 298

38,376 38,639

Current assets

Stocks 14 4,803 5,147Debtors 15 7,072 7,132Cash at bank and in hand 12 14

11,887 12,293

Creditors:amounts falling due within one year 16 (21,814) (23,776)

Net current liabilities (9,927) (11,483)

Total assets less current liabilities 28,449 27,156

Creditors:amounts falling due after more than one year 17 (299) (304)

Provision for liabilities 18 (525) (611)

(824) (915)

Net assets excluding pension liability 27,625 26,241Pension liability 26 (5,753) (4,011)

Net assets including pension liability 21,872 22,230

Capital and reserves

Called up share capital 19 472 472Share premium 20 144 144Prot and loss account 20 21,256 21,614

Equity shareholders funds 21 21,872 22,230

The financial statements were approved by the board of directors on 19 March 2013, authorised for issue and signedon its behalf by:

S C PughDirectorCompany registered number 31114

Adnams plc 21

Balance sheetAs at 31 December 2012

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2012 2011Notes 000 000

Net cash inow from operating activities 22 5,668 4,156Returns on investment and servicing of financeInterest received 1 1Interest paid (417) (423)

(416) (422)

TaxationCorporation tax paid (595) (1,187)

(595) (1,187)

Capital expenditure and financial investmentPayments to acquire tangible fixed assets (2,608) (4,794)Receipts from sales of tangible fixed assets 539 105Payments to acquire investments (86) (112)

Receipts from investments/deposits 82 102 (2,073) (4,699)

Equity dividends paid (902) (883)

Net cash inflow/(outflow) before financing 1,682 (3,035)Financing - (decrease)/increase in loans (1,800) 800

Decrease in cash (118) (2,235)

Reconciliation of net cash ow to movement in net debtDecrease in cash 23 (118) (2,235)Cash flow from decrease/(increase) in loans 23 1,800 (800)

Movement in net debt 23 1,682 (3,035)Net Debt at 1 January (15,421) (12,386)

Net debt at 31 December 23 (13,739) (15,421)

22 Adnams plc

Cash flow statementFor the year ended 31 December 2012

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Adnams plc 23

Statement of accounting policies

Basis of preparationThe financial statements have been prepared in accordance with applicable United Kingdom accounting standards

(United Kingdom Generally Accepted Accounting Practice) and under the historical cost convention. The policiesremain unchanged from the prior year.

Going concernThe company has considerable property assets and is soundly based. As at 31 December 2012 the company has chosento keep its borrowings short term, and therefore has net current liabilities. The Directors have a reasonable expectationthat the company has adequate resources to continue in operational existence for the foreseeable future. For this reasonthey continue to adopt the going concern basis in preparing the accounts. Since the year end 10 million of borrowings hasmoved to a three year maturity, subject to financial covenants. The short-term facilities have been renewed at 7 million.

TurnoverTurnover is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer,usually on despatch of the goods; or on provision of services. Rental income received from the tied estate properties isrecognised in the period to which it relates. Turnover is measured at the fair value of the consideration receivable.

Tangible fixed assets

Depreciation is provided on all tangible fixed assets other than freehold land, at rates calculated to write off the cost,less estimated residual value, of each asset evenly over its estimated useful life, as follows:

Freehold buildings 2% to 4% p.a.Leasehold property

long lease 2% p.a. short lease period of lease

Plant, equipment, fixtures and fittings and motor vehicles 4% to 25% p.a.

Fixed assets in the course of construction are not depreciated until they are brought into use.

Impairment reviewsIn accordance with FRS 11, asset values are reviewed for impairment should it appear that their value might notbe recoverable. In assessing the potential impairment of assets or income generating units (those assets affected bythe same economic factors) returns are forecast and compared to the carrying value of the assets. Any shortfall is

recognised as an impairment loss.StocksStocks have been valued on a consistent basis at the lower of cost or net realisable value on a first-in, first-out basis.Cost of beer and spirits stocks includes relevant production costs and associated overheads. Net realisable value isbased on estimated selling price less any further costs expected.

Deferred taxationDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balancesheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or aright to pay less or to receive more tax with the following exceptions:

Provision is made for tax on gains on disposal of fixed assets only to the extent that at the balance sheet date, there

is a binding agreement to dispose of the assets concerned. However, no provision is made where, on the basis of allavailable evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over intoreplacement assets and charged to tax only when the replacement assets are sold;

Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that

there will be suitable taxable profits from which the future reversal of the underlying timing differences can bededucted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in whichtiming differences reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date.

Foreign currenciesTransactions expressed in foreign currencies are translated into sterling and recorded at rates of exchange rulingat the date of transaction. Monetary assets and liabilities are translated at rates ruling at the balance sheet date. Alldifferences are taken to the profit and loss account.

Pension costs - defined benefit schemeThe service cost of providing defined benefit pension entitlements to employees during the year is charged tooperating profit. This scheme closed to future accrual on 30 June 2005. The cost of providing amendments to benefits

in respect of past service is also charged to operating profit. The expected return on the assets of the scheme duringthe year based on the current bid price of scheme assets at the start of the financial year is included within otherfinance (charge)/income on pension scheme. This also includes a charge representing the expected increase inliabilities of the scheme during the year, arising from the liabilities of the scheme being one year closer to payment.Differences between actual and expected returns on assets during the year are recognised in the statement of totalrecognised gains and losses, together with (losses)/gains arising on scheme liabilities and differences from changesin assumptions. The (deficit)/surplus on the defined benefit pension scheme is reported on the balance sheet, net ofrelated deferred tax. Additional information is included in note 26.

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24 Adnams plc

Statement of accounting policiescontinued

Pension costs - defined contribution schemeIn respect of the defined contribution pension scheme, the amounts charged to the profit and loss account are the

contributions payable in the year.

LeasingTotal rentals payable under operating leases are charged to the profit and loss account on a straight line basis over thelease term, taking into account any rent free periods.

Fixed asset investmentsFixed asset investments are stated at historic cost and include unlisted investments and trade loans to customers.The carrying values of the fixed asset investments are reviewed for impairment if events or changes in circumstancesindicate that the carrying amount may not be recoverable.

DividendsDividends payable on ordinary shares are shown as a movement in reserves when paid. Dividends payable onpreference shares are shown as an interest cost in accordance with the payment date attaching to those shares.

Financial instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangementsentered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity afterdeducting all of its financial liabilities.

Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debtinstrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as suchin the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and lossaccount. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability.

Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability thenthis is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited directto equity.

Share Incentive Plan and Employee Benefit TrustFor many years the Company has encouraged employee participation through incentive schemes under which sharesare allocated to employees. The Company currently uses a tax-approved Share Incentive Plan for this purpose. The

Company does not issue shares for such schemes and so has to arrange the purchase of shares. It does this throughan Employee Benefit Trust. The Employee Benefit Trust buys shares as required during the year and passes themannually to the Share Incentive Plan, at a valuation approved by the tax authorities. The shares held by the ShareIncentive Plan are not consolidated in the Companys accounts as they are already allocated to employees. Shares heldby the Employee Benefit Trust are a mixture of those already earned by employees, which are awaiting transfer to theShare Incentive Plan, and those not yet allocated.

As performance reached the requisite level a share transfer to the Share Incentive Plan will occur in relation to2012 as it did in relation to 2011. The unallocated shares are small in number and accordingly the Company doesnot consolidate the Employee Benefit Trust on grounds of materiality. 1,830 shares, all of which were Adnams plc Ashares, were held by the Employee Benefit Trust at 31 December 2012 (2011: 5,659 shares).

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As restated

2012 20112. Operating expenses 000 000

Raw materials, consumables and duty 33,575 32,743Change in stock of nished goods and work in progress 337 (822)Staff costs (note 4) 9,418 9,570SIP scheme for employees (note 28) 176 197Depreciation (note 12) 2,631 2,443(Prot)/loss on disposal of plant and vehicles (33) 17Auditors remuneration - Audit services 31 31 - Audit of pension schemes 6 7 - Taxation services 5 5Operating lease rentals - Land and buildings 488 458Foreign exchange gain (112) (88)Exceptional expenses (note below) 1,668Other operating costs 7,008 6,732

53,530 52,961

Adnams plc 25

Notes to the accountsFor the year ended 31 December 2012

1. TurnoverRepresents sales invoiced (excluding VAT and net of discounts), rents, commissions and royalties in the United Kingdom.

Brewing & Brands Retail Central Management Total

2012 2011 2012 2011 2012 2011 2012 2011 000 000 000 000 000 000 000 000

Total sales 33,511 31,401 23,386 23,122 25 47 56,922 54,570Operating expenses (31,719) (29,536) (20,425) (20,441) (1,386) (1,316) (53,530) (51,293)

Operating profit/(loss) 1,792 1,865 2,961 2,681 (1,361) (1,269) 3,392 3,277before exceptionalsExceptional items (1,668) (1,668)

Operating profit/(loss) 1,792 1,865 2,961 1,013 (1,361) (1,269) 3,392 1,609Profit on disposal of properties 267 267 Interest receivable 1 1 1 1Interest payable (415) (356) (415) (356)Other finance (charge)/income (61) 45 (61) 45

on pension scheme

Profit/(loss) on ordinary 1,792 1,865 3,228 1,013 (1,836) (1,579) 3,184 1,299activities before taxation

Net assets employed 21,549 21,769 22,387 22,830 (22,064)(22,369) 21,872 22,230

3. Segmental analysisThe companys business segments are Adnams Brewing & Brands, which comprises brewing and distribution of beer,spirits and other products and Adnams Retail which comprises tenanted pubs, Hotels and Managed Houses and Cellar& Kitchen stores together with home delivery and web sales.

Of the exceptional charge of 1,668,000 in 2011, 884,000 related to impairment provisions against five properties,and 784,000 related to the closure of premises. In the current year there are 55,000 of impairment charges notconsidered exceptional.

Potential impairments are assessed by comparing the book value of properties against the higher of the realisablevalue and the value in use. The value in use is determined by discounting the cash flows from the assets at a pre tax

real rate of 7.5%.

1,006,000 of the exceptional items represented a charge against xed assets. This comprised all of the impairment

charge and 122,000 of the other costs.

The 2011 operating expense analysis has been restated to show 2,062,000 of packaging and related costs as rawmaterials, consumables and duty rather than other operating costs.

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Salaries Car and pension Performanceand fees Benefits allowances related pay 2012 2011

000 000 000 000 000 000

J P A Adnams 185 1 28 14 228 211W B Kendall 28 28 28S P D Loftus 28 28 28S C Pugh 139 2 14 10 165 163S M Sharp 28 28 28

A C Wood 226 1 14 16 257 234 634 4 56 40 734 692

2012 20116. Directors remuneration 000 000

Fees 84 84Basic salaries 550 523Benefits 4 5

Car and pension allowances 56 42Performance related pay 40 38

734 692

2012 20115. Profit on disposal of properties 000 000

Prot on sale of properties 267

Prot on disposal of properties includes prots on properties sold at the year end.The effect on the current tax charge for the year of the above items is nil (2011: nil).

2012 20114. Staff costs 000 000

Wages and salaries 8,268 8,406Social security costs 763 778

Other pension costs (note 26) 387 386

9,418 9,570

The average monthly number of persons employed by thecompany, including executive directors, was as follows: Number NumberTrading 23 24Customer services 85 85Production 25 24Wine/Shops 69 71Hotels 149 152Corporate services 47 46

398 402

Total number of part-time workers included in above: 99 95

26 Adnams plc

As a result of regulations governing pension contributions, the companys contributions for J P A Adnams stoppedduring the year and an equivalent amount has been paid as a pension allowance which has been included within carand pension allowances above.

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2012 20118. Interest payable and similar charges 000 000

Bank loans and overdraft 413 354

Preference share dividends paid: 3.85% cumulative 10 shares 1 1Preference share dividends paid: 4.9% non-cumulative 5 shares 1 1

415 356

2012 20117. Interest receivable 000 000

Trade loans 1 1

1 1

2012 2011 A shares A shares

J P A Adnams 137 108S C Pugh 137 108A C Wood 137 108

There were no share option arrangements in place.

2012 2011

J P A Adnams 4,615 18,190S C Pugh 13,924 13,668A C Wood 22,626 20,362

The company has an approved Share Incentive Plan in which the Executive Directors participated. Allocated shares,which are included in Directors Interests in the Report of the Directors, were as follows:

Adnams plc 27

J P A Adnams and A C Wood are members of the companys defined benefit pension scheme which closed to futureaccrual on 30 June 2005. The following disclosures are made in respect of that scheme:

Accumulated totalaccrued pension at

31 Dec 2012 31 Dec 2011

J P A Adnams 86,447 84,627A C Wood 25,457 24,921

Accumulated total accrued pension normally represents scheme service to retirement, but for 31 December 2011 and2012 this gure reects the scheme closure in June 2005.

The transfer value of the highest paid directors accrued benets in the dened benet pension scheme amounted to

411,376 (2011: 385,733).

The following contributions were paid to the Adnams dened contribution pension scheme in respect of the directors:

Directors remunerationcontinued

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2012 20119. Taxation 000 000

The charge based on the prot for the year comprises:

UK corporation tax @ 24.5% (2011: 26.5%) 820 788

Tax (over)/under provided in prior years (196) 119

Total current tax 624 907

Deferred taxation (note 18)

Origination and reversal of timing differences (34) (211)Pension cost relief in excess of pension cost charge 191 176Adjustment in respect of prior years (52) (76)

105 (111)

Tax on profit on ordinary activities 729 796

Factors affecting the current tax chargeThe tax assessed on the profit on ordinary activities for the year is lower (2011: higher) than the average rate ofcorporation tax in the UK of 24.5% (2011: 26.5%). The differences are reconciled below:

Profit on ordinary activities before tax 3,184 1,299Profit on ordinary activities multiplied by standard rate ofcorporation tax in the UK of 24.5% (2011: 26.5%) 780 344Disallowed expenses and non-taxable income 82 226IBAs received with no balancing charge (4)Capital allowances less than depreciation 29 72Rollover relief claimed on property disposal (79) (2)Other timing differences 8 152Adjustment relating to prior years (196) 119

Current tax charge for the year 624 907

Factors that may affect future tax chargesNo provision has been made for deferred tax on gains recognised on the sale of properties where potential gains will

be rolled over into replacement assets. Such tax would become payable only if the property were sold without it beingpossible to claim rollover relief. The total amount unprovided is 1,299,000 (2011: 1,331,000). At present it is notenvisaged that any tax will become payable in the foreseeable future.

11. Earnings per share 2012 2011

Including property disposals:A Ordinary shares 130.1p 26.7p

B Ordinary shares 520.3p 106.6p

Basic and diluted earnings per share for A Ordinary shares are calculated by dividing the earnings available for AOrdinary shareholders of 968,000 (2011: 198,000) by the number of issued 25p A Ordinary shares (note 19):744,000 (2011: 744,000).

Basic and diluted earnings per share for B Ordinary shares are calculated by dividing the earnings available for BOrdinary shareholders of 1,487,000 (2011: 305,000) by the number of issued 1 B Ordinary shares (note 19):285,842 (2011: 285,842).

Excluding property disposals:A Ordinary shares 115.9p 26.7pB Ordinary shares 463.7p 106.6p

2012 201110. Dividends 000 000

Equity dividends on ordinary sharesInterim paid 1 October 2012 66% (2011: 3 October 65%) 312 307Final paid 1 May 2012 125% (2011: 9 May 122%) 590 576

902 883

The directors propose a nal dividend of 1.28 per 1 nominal share (totalling 604,000) for the year ended

31 December 2012. The dividend will be submitted for formal approval at the Annual General Meeting, to be heldon 29 April 2013. This dividend has not been accounted for within the current year nancial statements as it has

yet to be approved.

28 Adnams plc

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2012 2011000 000

The cost of land and buildings comprises:Freehold land 2,556 2,586Freehold buildings 28,576 28,312Long leasehold 575 532Short leasehold 667 667

32,374 32,097

The company carries out an annual impairment review of its pub and shop assets. This is assessed by comparing thecarrying value of these assets to the value in use or if necessary fair value. As at 31 December 2012 a loss of 55,000was recognised in line with the accounting policy disclosed on page 23 (2011: 884,000). A further 122,000 wasrecognised in 2011 in relation to closure costs (2012: nil).

Freehold and Plant, equipmentleasehold fixtures andland and fittings and

buildings motor vehicles Total

12. Tangible fixed assets 000 000 000CostAt 1 January 2012 32,097 30,611 62,708

Additions 408 2,200 2,608

Disposals at cost (131) (1,276) (1,407)

At 31 December 2012 32,374 31,535 63,909

DepreciationAt 1 January 2012 5,484 18,883 24,367

Provided in the year 596 2,035 2,631

Disposals (4) (1,214) (1,218)

At 31 December 2012 6,076 19,704 25,780

Net book value at 31 December 2012 26,298 11,831 38,129

Net book value at 31 December 2011 26,613 11,728 38,341

At 31 December 2012 18,000 (2011: 106,000) of assets were in the course of construction.

Adnams plc 29

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2012 201113. Fixed asset investment 000 000

Unlisted investments at cost and net book value 5 5Trade loans 242 293

Total investments 247 298

In the opinion of the Directors the value of these investments is not less than book value.

2012 2011

Trade loans 000 000At 1 January 293 131Loans transferred from debtors 37Loans advanced during the year 81 227Repayments (132) (102)

At 31 December 242 293

Further details on trade loans are contained in note 27.

2012 201116. Creditors: amounts falling due within one year 000 000

Bank overdraft and loans 13,751 15,435Trade creditors 3,697 3,665Taxation and social security 1,488 1,399Corporation tax 398 368Accruals 2,480 2,909

21,814 23,776

The bank overdraft and loan are secured by a debenture to Barclays Bank Plc over the assets of the company.

2012 201115. Debtors 000 000

Trade debtors 5,795 6,034Prepayments 1,277 1,098

7,072 7,132

2012 201114. Stocks 000 000

Raw materials 224 231Work in progress 397 112

Finished goods and goods for resale 4,182 4,804 4,803 5,147

The difference between purchase price or production cost of stocks and their replacement cost is not material.

30 Adnams plc

Joint venture Class of share % held Country of Year end Principalundertaking incorporation activities

Adnams Bio 1 ordinary 49.99% England & Wales 30 April Conversion ofEnergy Limited organic waste

into biogas

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Authorised Allotted, calledup and fully paid

2012 2011 2012 201119. Share capital 000 000 000 000

Ordinary sharesA of 25p each (744,000 shares) 186 186 186 186B of 1 each (285,842 shares) 288 288 286 286

Called up share capital 474 474 472 472

Profits distributed by the company are applied first to the 3.85% cumulative preference shares, then to the 4.9% non-cumulative preference shares before distribution on the ordinary shares. The preference shares carry no votes atmeetings, the ordinary shares have a single vote for each A or B share. On a winding up of the company, the surplusassets will be applied first to repay capital on the 3.85% cumulative preference shares, then capital plus any dividendarrears on the 4.9% non-cumulative preference shares; the remaining surplus is applied to the A and B ordinaryshares in proportion to the amounts paid up. Preference shares are classed as financial liabilities and held withincreditors falling due after more than one year, see note 17.

2012 Full 2011 Full 2012 potential 2011 potential

Provided liability Provided liability18. Provision for liabilities 000 000 000 000

Deferred taxationAccelerated capital allowances 589 589 808 808Other timing differences (64) (64) (197) (197)Chargeable gains 1,299 1,331

Deferred tax excluding thatrelating to pension liability 525 1,824 611 1,942Deferred tax on pension scheme deficit (note 26) (1,719) (1,719) (1,338) (1,338)

Total provision for deferred tax (1,194) 105 (727) 604

Movement in the provisionAt 1 January 2012 611Deferred tax charge to the profit and loss account(current year movement at 23%) (34)Adjustment in respect of prior years (52)

31 December 2012 525

Deferred tax asset relating to pension deficitAt 1 January 2012 1,338

Change in brought forward provision arising fromchange in future tax rates (107)Deferred tax charged in the profit and loss account (83)Deferred tax credited to the STRGL 571

31 December 2012 1,719

On the balance sheet, the deferred tax liability of 525,000 (2011: 611,000) is shown before deferred tax on thepension scheme deficit of 1,719,000 (2011: 1,338,000).

2012 201117. Creditors: amounts falling due after more than one year 000 000

Tenants deposits 253 2583.85% cumulative preference shares of 10 each (3,100 shares) 31 31

4.9% non-cumulative preference shares of 5 each (3,100 shares) 15 15

299 304

See note 19 for full details of these preference shares.

Adnams plc 31

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At 1 Jan Cash At 31 Dec2012 flow 2012

23. Analysis of net debt 000 000 000

Cash at bank and in hand 14 (2) 12Bank overdraft (4,635) (116) (4,751)Reduction in cash (118)Bank loan (10,800) 1800 (9,000)

Net debt (15,421) 1,682 (13,739)

2012 2011

21. Reconciliation of shareholders funds 000 000Profit for the year 2,455 503Dividends paid (note 10) (902) (883)Actuarial loss on pension scheme (note 26) (2,482) (3,290)Movement on deferred tax relating to pension scheme (note 18) 571 823

Net reduction in shareholders funds (358) (2,847)

Opening shareholders funds 22,230 25,077

Closing shareholders funds 21,872 22,230

Share ProfitShare premium and loss

capital account account Total20. Reserves 000 000 000 000

1 January 2012 472 144 21,614 22,230Profit for the year 2,455 2,455Actuarial loss on pension scheme (note 26) (2,482) (2,482)Movement on deferred tax relating topension scheme (note 18) 571 571Dividends paid (note 10) (902) (902)

31 December 2012 472 144 21,256 21,872

Pension deficit (note 26) 5,753

Profit and loss reserve excluding pension liability 27,009

All reserves relate to equity.

2012 201122. Net cash inflow from operating activities 000 000

Operating prot 3,392 1,609

Depreciation charges 2,631 2,443(Prot)/loss on sale of routine xed asset disposals (33) 97Difference between pension charge and cash contributions (420) (455)Decrease/(increase) in stock 344 (917)Decrease/(increase) in debtors 60 (1,175)(Decrease)/increase in creditors (306) 1,548Impairment (note 2) 1,006

5,668 4,156

32 Adnams plc

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2012 201124. Capital commitments and contingent liabilities 000 000

Contracted for 551 557

The amount for 2012 principally reflects capital commitments for new casks (prior year commitment principallyrelates to new casks and the refurbishment of 10 bedrooms at the Crown Hotel).

The final settlement for the construction of the Reydon Distribution Centre has not yet been agreed.

2012 Land & 2011 Land &buildings buildings

Operating lease commitments 000 000

On leases expiring:Within one year 57In 2 - 5 years 23 51In over 5 years 413 422

436 530

At the year-end Barclays Bank held a bond guarantee on behalf of Adnams plc with Her Majestys Revenue andCustoms for 15,000 (2011: 1,000,000).

A bank guarantee for 935,000 (2011: 935,000) was provided by Adnams plc to the Royal Bank of Scotland inrespect of the obligations of Adnams Bio Energy Ltd to that bank.

Adnams plc 33

25. Related party transactionsDuring the year the company carried out trading activities with the following directors and/or organisations in whichDirectors have an interest.

Mr W B Kendall: 22,000 (2011: 22,000) for consultancy services. These amounts are included within salaries andfees in note 6. No amount was outstanding at 31 December 2012 (2011: nil).

A Ordinary 25p B Ordinary 1

Dividends paid to directors in the year 2012 2011 2012 2011

J P A Adnams 87,369 85,475 6,232 6,102W B Kendall* 1,263 1,236 S P D Loftus* 17,352 16,998 S C Pugh 773 698 S M Sharp* 145 142 A C Wood 1,914 1,791 5,095** 4,988** 7,258** 7,106**

*Denotes non-executive Director. **Dividends paid on shares held as Trustee.

The Directors are granted a discount of 25% on purchases from the company, in line with the discount given to allother staff.

Dr A C Wood, Chief Executive of Adnams plc is a director of Adnams Bio Energy Ltd, a subsidiary of the Bio Group Ltd.At the year end 36,000 (2011: 36,000) was owed by Adnams Bio Energy Ltd to Adnams plc.

The Employee Benefit Trust (EBT) held 1,830 Adnams plc A shares at 31 December 2012 (2011: 5,659 A shares).During 2012 the EBT received dividends of 2,000 on its Adnams shares (2011: 1,000).

There is no overall controlling party of Adnams plc.

26. Pension schemeDened benet pension schemeThe assets of the dened benet pension scheme are held separately from those of the company, being invested with a

fund manager. The contributions are determined by a qualied actuary on the basis of triennial valuations using the

dened accrued benet method. The most recent valuation was at 1 April 2010. The next will be as at 1 April 2013.The

assumptions that have the most signicant effect on the results of the valuation are those relating to the rate of return

on investments. It was assumed in 2010 that the pre-retirement investment returns would be 6.75% per annum and

that post-retirement returns would be 5% per annum.The most recent actuarial valuation showed that the market value of the schemes assets was 22,525,000 and thatthe actuarial value of these assets was sufcient to cover 93% of the benets that have accrued to members. The

contributions of the Company and employees have been at least equal to the rates recommended by the actuary.

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The major assumptions used by the actuary were (in nominal terms)Financial assumptions Valuation at Valuation at Valuation at

31 Dec 2012 31 Dec 2011 31 Dec 2010

Pensionable salary growth N/A N/A N/APension escalation in payment:Benefits accrued prior to 1 October 1999 4.0%pa 4.0%pa 4.0%paBenefits accrued after 1 October 1999 to 5 April 2005 3.1%pa 3.2%pa 3.6%paBenefits accrued after 6 April 2005 2.5%pa 2.5%pa 2.5%paDiscount rate for liabilities 4.1%pa 4.7%pa 5.3%paInflation assumption 3.1%pa 3.2%pa 3.6%paPension revaluation in deferment 2.3%pa 2.7%pa 3.6%pa

Demographic assumptionsAssumed life expectancy in years, on retirement at 65 31 Dec 2012 31 Dec 2011

Retiring today Males 24.1 24.0 Females 26.0 26.0Retiring in 20 years Males 26.1 26.0 Females 27.2 27.2

Pre-retirement mortality ratesThe following mortality rates represents the probability of a person of the age shown dying within one year.

Age Males Females

30 0.00033 0.00019 40 0.00052 0.00041 50 0.00138 0.00104 60 0.00441 0.00278

For year to For year to31 Dec 2012 31 Dec 2011

Analysis of the amount included as other finance (charge)/income 000 000

Expected return on pension scheme assets 1,284 1,440Interest on pension scheme liabilities (1,345) (1,395)

Other finance (charge)/income (61) 45

Actual return on plan assets 1,878 (356)

The assets and liabilities in the scheme and the expected rate of return were

Expected Value at Expected Value at Expected Value at return 31 Dec 2012 return 31 Dec 2011 return 31 Dec 2010

for 2013 000 for 2012 000 for 2011 000

Equities 8.0% 11,430 8.0% 9,317 8.0% 11,531Bonds 3.5% 10,553 4.5% 8,500 5.0% 8,356Property 6.3% 2,080 6.3% 2,265 7.0% 1,790

Cash 1.5% 1,003 3.5% 3,269 3.5% 2,196Total market value of assets 25,066 23,351 23,873Present value of scheme liabilities (32,538) (28,700) (26,432)Decit in the scheme (7,472) (5,349) (2,559)Related deferred tax asset 1,719 1,338 691

Net pension liability (5,753) (4,011) (1,868)

Dened benet pension schemecontinued

34 Adnams plc

The disclosures required by FRS17 are set out below.

Valuation of the scheme has been updated to 31 December 2012 by a qualied actuary in order to assess the following:

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For year to For year to31 Dec 2012 31 Dec 2011

Changes in the present value of the dened benet obligation are as follows 000 000

Opening defined benefit obligation 28,700 26,432Interest cost 1,345 1,395Actuarial losses 3,076 1,459Benefits paid (583) (586)

Closing defined benefit obligation 32,538 28,700

History of experience gains and losses 2012 2011 2010 2009 2008

Defined benefit obligations 000 32,538 28,700 26,432 24,191 18,360Plan assets 000 25,066 23,351 23,873 21,685 18,769(Deficit)/surplus 000 (7,472) (5,349) (2,559) (2,506) 409Difference between the expectedand actual return on scheme assets amount 000 594 (1,796) 1,113 1,975 (3,795) % of scheme assets 2% (8%) 5% 9% (20%)Experience gains and losses on scheme li