Pubs group returns to profit as customers flock back post-lockdown

Blackburn brewer and pubs group Daniel Thwaites has doubled turnover and returned to profit, during the six months to September 30, it announced this morning.

Sales of £47.8m compared with £21.8m in the same period last year. A pre-tax loss of £5.5m in the six month period in 2020 has been turned into a pre-tax profit of £7.5m this year.

The board is not recommending payment of a dividend, saying that, while the business has recovered strongly over the period, the results have been achieved with financial support from the Government. The board said it will continue to review future dividend policy in line with the recovery of the business and the degree of future uncertainty.

Chairman, Richard Bailey, said the business started the six-month period having been in lockdowns or periods of significant restrictions to trade for more than six months, with most of its properties closed and the majority of staff on furlough under the Job Retention Scheme.

On April 12, 2021, the business reopened those properties with outdoor trading space, which was all of its hotels and about two thirds of the pubs and inns. The remaining properties reopened on May 17, with limited capacity due to social distancing measures, which were removed on July 19.

He said trade has recovered quickly and has surpassed early expectations.

The majority of staff returned to work during April and May, and have had to deal with a number of supply chain issues, staff shortages and intermittent outbreaks of COVID. He said: “I am incredibly proud of the way that our teams have responded to the challenge of getting going once again and they have all done an incredible job in helping the business to recover quickly and get back on track.”

He said net debt has been an area of special focus and at September 30, 2021, it was £61.4m, compared with £66.6m in 2020, a decrease of £5.2m compared with last year, but, more significantly, it represents a decrease of £17.4m during this half year, reduced from £78.8m at March 31, 2021.

At its current level the business has considerable headroom against its total banking facilities of £90m as it enters a period of trading uncertainty coming into the winter.

Mr Bailey said beer volume sales continued to recover through the period, and by September they were at 97% of 2019 levels: “We have seen a shift in consumer behaviour since reopening, with a move to more premium products as people seek to treat themselves after the turmoil of the last 18 months.”

The group’s hotels and spas have limited outdoor trading space and, in general, do not have passing footfall, so, while they reopened on April 12, they did not trade in any material way until May 17. Thereafter, leisure sales recovered quickly, although corporate sales were very slow to pick up as many organisations were still encouraging their staff to continue working from home.

There was a slight reduction in demand for leisure breaks coming into September, but at the same time the business started to see an increase in corporate activity.

On July 19, the removal of restrictions banning significant group gatherings saw the business host a large number of weddings over the summer, many of which were re-bookings from weddings that would have taken place if allowed over the past 18 months.

Sales for the period are at 89% of 2019 levels, although they have been growing steadily as the year has progressed. By September sales were running 15% ahead of 2019.

On October 5, just after the period end, the group announced the acquisition of the Red Lion at Burnsall, an iconic coaching inn sitting alongside the River Wharfe in the Yorkshire Dales. The property has 25 bedrooms together with five holiday cottages, each with two bedrooms, a large outdoor area, a busy bar and restaurant and function facilities.

Thwaites has also continued to divest pubs that no longer suit its requirements and sold 11 properties in the period. It also sold its old Blackburn brewery site that it vacated in 2018, during the period, receiving total proceeds from these disposals of £4.5m, making a profit on disposal of £0.3m.

Looking ahead, Mr Bailey said: “All credit must be given to our teams across the business for their success in making the most of the opportunity that has presented itself since re-opening in the spring.

“Our conservative approach and a focus on our balance sheet, in particular in reducing our level of net debt, puts the business in a strong position to face into a winter with lingering COVID cases and, consequently, potential government reactions.

“There are many headwinds, largely outside our control, which are creating a level of uncertainty as we look to the future. The lack of availability of new team members is disrupting both our ability to fully man our properties as well as our supply chains.

“Inflation is rising more quickly than in recent years with the national minimum wage set to increase by 6.6% next April. Lastly, in the next six months we will see the withdrawal of government support, which has been critical in achieving this set of interim results.”

He added: “The announcement of changes to draught beer duty in the Budget are welcome, but this reduction will be more than offset by inflationary rises elsewhere. As an industry we have campaigned for a permanent reduction in VAT to 12.5% for pubs and the hospitality industry as well as root and branch reform of business rates, both of which would be major investments in the long term health of our sector, help it to recover from the past 18 months of closures and provide confidence and employment, particularly for young people.

“The changes that we have made in recent years to orientate the business to larger scale properties towards the more premium end of the market, means that we are as well placed as any and better than most to navigate our way through any difficulties that are thrown at us.”