Profits glass half full at Lancashire brewer Thwaites
Daniel Thwaites, the Blackburn-based brewer, inns hotels and spas, and pubs group, said it has achieved a “solid” set of half year results, despite profits being cut by almost half the level of the previous year.
Sales in the six months to September 30, 2023, reached £60.3m, compared with £57.9m the previous year. Pre-tax profits of £8.5m were down on last year’s £15.7m level.
However, the board has recommended an increase in the interim dividend from 0.75p per share last year to 0.85p per share.
Thwaites said it has continued to operate in volatile markets with large swings in its costs, particularly utility costs, increasing interest rates, embedded inflation and pressure on people’s discretionary spend.
Net debt was £70.6m, an increase of £9.5m compared with last year, and up from £66.7m at March 31, 2023, but the business said it has comfortable headroom against total banking facilities of £82m and is trading well within it banking covenants.
Thwaites said its pubs got off to a strong start with some fine spring weather, although this deteriorated with a terrible wet spell throughout July and August returning to a glorious start to September, which overall has resulted in beer volumes down one per cent year on year, but ahead on contribution.
Inns performed very strongly over the summer months with sales up 10% on the past year and profits up 12%. After a relatively quiet summer last year as people opted for overseas holidays, this summer saw an improved staycation market as cost pressures encouraged more people to opt for short breaks in the UK and the business has seen strong occupancy and room rate growth in its leisure locations.
The hotels & spas have delivered a steady growth in sales, which are up on a like for like basis by two per cent year on year, and with a close eye on their cost base, particularly labour and utility costs, profits increased by five per cent.
Thwaites said it has seen increased demand for rooms driving both occupancy and rate. Its gym memberships have increased, but treatment sales have suffered slightly as customers rein in their spending.
After a bumper year for weddings in 2022, catching up after the pandemic, this summer saw a much lower number, which impacted both food and drink sales, forward bookings for next year suggest that the post-pandemic boom in weddings is now in the past and business will revert to normal numbers.
Last September the business closed Langdale Chase and embarked on the development and repositioning of the hotel, which was acquired in 2017, and is situated on the banks of Lake Windermere.
Thwaites said this has been a major undertaking and a significant investment. However, it is due to reopen this month, largely on time and on budget and it is expected to make a real mark in its market once it is properly re-established.
During the year the business continued to sell off pubs that no longer suit its requirements. It sold six pubs and two ancillary properties in the period, for £2.5m, generating a profit on disposal of £200,000.
Looking ahead, the company said it has a diversified property portfolio situated across much of England, however, it said it is not immune from the impact of international events.
The risk premium of shocks such as the war in Ukraine and recent developments in Israel and Palestine continue to pose a sizeable threat to input costs and bring considerable volatility which is difficult to predict, it said.
Furthermore, the Government, while ostensibly saying it wishes to control inflation and support economic growth, is scheduled to withdraw the current support on the overburden that pubs contribute to the Government coffers in respect of business rates in the spring.
Thwaites said such an increase can only be borne by pubs, increasing their prices at a time when it is unclear how much more the customer will stand. This issue disproportionately affects the hospitality industry at a time when it is already under stress and may lead to more pub failures, it warned.
Chairman Richard Bailey said: “World events and the UK specific tax burden on pubs are not positive and mean that we are cautious about how consumer spend will hold up over the next 6-12 months, with the media once more talking up a mild recession.
“However, so far both we and the general economy have continued to grow our top line and navigate the current cost and tax challenges, so we look forward with overall, albeit tempered, optimism.”
The board also revealed it has conducted a review of the group’s audit arrangements and has decided to appoint MHA Moore and Smalley to replace BDO for the financial year ending March 31, 2024.