North west pub operator and brewer Thwaites saw EBITDA pubs across its c300-strong estate increase 11% in the 12 months to 31 March, in a year which it said that trade across all areas of its business had been mixed.

Overall turnover for the year decreased by 1% to £137.6m. Operating profit before exceptional items increased by 19% to £12.3m, while pre-tax profits after exceptional items were £3.3m, as opposed to losses of £3.8m a year earlier.

The company said that despite trading fewer pubs over the course of the year than last year Thwaites Pubs turnover was level with last year and operating profit increased by 1%. The year started strongly with sales in the first half up by 6%, this performance was adversely impacted during the second half of the year by more difficult trading through the last quarter, which was quieter than normal.

Earlier this year, the company agreed to sell the major part of Thwaites Beer Company to Marston’s for £25.1m.

Ann Yerburgh, chairman of Thwaites, said: “However, as we have entered our new financial year we are seeing the signs of increasing consumer confidence in all areas of the business.

The financial year has started well, with strong trading in the Inns and Hotels. The disposal of our Beer Co will mean that our accounts will look very different next year, with a significant drop in turnover. I am hopeful that the impact on our bottom line will be limited to a more manageable level as a result of restructuring. As we reinvest in our core businesses I expect that our profits will recover and then grow from their current level.

“We have thought carefully about how the proceeds from the sale of our Beer Co will be deployed. Initially these funds have been used to pay down our bank debt, which puts the Company in a stronger position for the future, both to invest in new projects and properties and to continue to meet our historic final salary pension obligations. Our new capital structure gives us great flexibility and scope as to how we reinvest in our business. We intend to acquire freehold properties which complement our tenanted and managed pubs businesses, and to develop Shire Hotels & Spas by adding to our hotel collection either through acquisition or building new hotels.”

The company said that during the year it evaluated a large number of potential acquisitions. It said: “We are actively looking for new properties and have the resources to be able to make acquisitions in all areas of the business.”

It is currently on site at Cottons Hotel & Spa, where it is investing to add 30 new bedrooms and thereafter is developing a plan to build another Lodge on the Park in the south of England. It said: “We have several interesting opportunities within the Inns, and we have started to build an excellent pipeline of other opportunities, which I expect will develop over time.”

The group said that it had made significant investment (£3.1m)across its eight ‘Inns of Character’ sites and that it continued to seek “high quality properties in outstanding locations to develop our Inns portfolio”. Sales across the sites increased by 13% during the period despite some significant periods of disruption from closure and the company expects them to move forward again this coming year.

Profits in the Inns increased by 23% compared to 2014, despite some impact from closure and disruption. It said: “As a result of a full trading period in 2015 we have high hopes for a continued growth and improvement in performance in the coming year.

During the year, the company sold 22 pubs for a total of £4.2m generating a profit against book value, after disposal costs, of £200k. 20% of its properties were subject to a formal revaluation, and additionally an impairment review was carried out on the rest of its property estate. This resulted in a reduction in the total value of its property portfolio of £4.4m of which £1.4m was charged to the profit and loss account and £3m deducted from the revaluation reserve.

Yerburgh said: “Our strategy in recent years has been to focus on the quality pubs within the estate, investing in them alongside proven operators to expand and improve the premises with a focus on establishing good quality food offerings and the development and refurbishment of bedrooms. Our investments over the past few years have seen a transformation in the scale and penetration of food sales within the estate, which we believe over the medium term will allow our pubs to grow and be sustainable.

This strategy has been very successful initially in stabilising our estate and thereafter putting it in a position to grow and it is a course of action that we have continued to pursue in the last year.

During the year we completed a further 48 development projects at a cost of £3.3m, making returns well ahead of our hurdle rate of 20%. Major projects in the year have been completed at The Gateway, Kendal, The Red House, Solihull, The Higher Buck, Waddington and The Hunters, Lostock Hall, which completed just before the year end.”

The company said it had invested significant resources over the past few years in trying to attract the very best operators and entrepreneurs to run its pubs.

Yerburgh said: “This investment has proved to be very successful with more than 750 applications to take on one of our pubs over the course of the year. The key aspects of this success have been through improving the quality of support and service that we offer our pubs coupled with the new recruitment website that we launched in December 2013.

“We reported last year on the success of this site, which has brought more than 44,000 unique visitors to us since launch, many of whom are outstanding operators who have gone on to work with Thwaites in one of our excellent properties. The measure of success in recruiting and retaining great partners in our pubs is how many pubs need new operators at any point in time. I am pleased to be able to say that as a percentage of the total estate this has dropped from 10% to 6% over the course of the year.”

She said that the market for food in pubs continues to be one of the key drivers across the sector.

Yerburgh said: “Our capital investment schemes are focused on significantly improving the food offering in our pubs, such that over two thirds of our pubs now have a credible food offer.

“Our wine volumes grew across the estate in the year by 7% against 9% last year, largely as our food sales continue to grow. We offer a wine menu production service, very similar to our food menu packages and often using the same design templates. This ensures our pubs have the appropriate wine offer for their target market.”

The company said that the decision to sell its Beer Co was not taken lightly.

It said: “However the free trade market that we operated within has become increasingly competitive in recent years, as a result of oversupply of production in a declining beer market, both from large national and regional brewers, together with a proliferation of micro-brewers selling beer at highly competitive prices, aided by the government’s progressive beer duty.

“These factors have made it much more difficult to grow volumes, margin and overall contribution in our free trade business, which formed the backbone of our brewery operation. In addition, the trends in the UK beer market are for growth in the supermarket and off trade segment, which for us were low margin channels. It became clear to us that a larger partner would be better suited to take this business forward, allowing us to simplify our business and focus our attention and capital on the areas that we wish to grow.”

The company has retained a small brewery, currently situated in Blackburn and that it is its intention to continue to brew some beer for its own retail outlets whilst also retaining the option to offer its customers a broader range of drinks as well.

It said that the Beer Co had a good year in developing its ale brands, in addition it said it benefited from the closure of it old brewery last year and the savings that flowed through from that.

Yerburgh said: “We ended the year with Wainwright having continued to climb the national rankings of cask ale and at the time that we transferred it to Marston’s it was the thirteenth largest brand in the UK by volume, a considerable achievement since we created it in 2007, as a seasonal ale to celebrate our bi-centenary.

“The Beer Co had a good start to the year, followed by increasingly more difficult trading as the year went on, especially in the final quarter, when we saw a slowdown in sales in January and February, with some poor weeks trading. Overall operating profit moved forward as a result of the changes that we made last year.”

In Free Trade, the group’s profits held up, with EBITDA up 2% year on year, and operating profit up significantly as a result of lower costs and depreciation from the closure last year of the old brewery, however total volumes declined by 6%, in line with the market in the North West. Furthermore margin per barrel declined by 1% as the company said it reacted to the competitive pressures of the market.

Yerburgh said: “Our National business traded satisfactorily, again our volumes were down year on year by approximately 6%, however our operating profit increased by 6% as we focused on profit over volume. Our take home and export businesses performed well with volumes of our bottled ales up by 22% and operating profit 32% ahead.

“It was pleasing that our craft ale range grew strongly in the year, winning prizes both for the ales, 13 Guns in particular, and also for the design of the range. In this range there are the formative signs that the craft market, whilst small, provides opportunities for specialising in an area of the market that at the moment is not so crowded and where reasonable profits can be made.”