Daniel Thwaites, the Lancashire brewer and pub operator, has reported a fall in pre-tax profits in the six months to 30 September, a period the company described as “very challenging”.
Pre-tax profits were £3.7m against £4.6m in the same period in 2011 and operating profit fell 13% to 6.6m. Turnover increased slightly, from £70.9m to £71.1m.
“It has been another very challenging period for the economy and the consumer and corporate sectors in which we operate. Our performance has been adversely impacted by the very wet weather conditions which have had a significant effect on our summer trading,” said chairman Ann Yerburgh.
Thwaites included an exceptional provision for redundancy costs of £0.4m during the period in relation to relocate its brewery.
Operating profit in the beer and pub company division fell 20% to was £4m in H1. “The continued poor weather has particularly impacted on seasonal pubs in rural and seaside locations, and free trade supply to sporting clubs, as many cricket, golf and other sporting fixtures have been cancelled.”
Thwaites completed 19 refurbishments at a cost of £0.6m in H1, acquired three “good quality” tenanted pubs and sold seven pubs from the bottom end. “Our investment returns remain strong, and above our internal hurdle rate.
“We have looked to find innovative solutions to tenant recruitment and provide packages of support to help maintain tenant profitability.”
Operating profit in the Hotels and Inns arm remained static at £3.1m. “We continue to experience steady recovery in the performance of the hotels with increases in occupancy and food and beverage sales. However, room rates remain competitive and recovery of increasing cost inflation is challenging.
“We are committed to maintaining the quality of our Hotels and Inns with a programme of on-going refurbishment on which we invested £2.3m in the first half of the year.
The firm added; “The focus for our `Thwaites Inns of Character’ continues to be to provide comfortable accommodation with quality food. In September 2012, the Millstone at Mellor became our second Inn to achieve AA 5 Star Inn Status. We are actively continuing to seek suitable properties to develop into our Inns estate.”
Basic earnings per share fell to 3.9p per share (2011: 5.2p). Adjusted earnings per share (before exceptional items) fell to 4.6p per share (2011: 5.2p). The Board recommended an interim dividend of 1.10p (2011: 1.10p) be paid on 2 January 2013.
At 31 March 2012, Thwaites made provision to settle up to £50m of interest rate swap contracts, and so far it has paid £9.0m to settle £40m of these swaps. “Interest costs are now reducing as a result of this decision, although the unprecedented low rate of LIBOR is having an adverse impact on the residual swaps cost.”
Yerburgh added: “The first half of the year gave us many achievements, but we have certainly felt the impact of the challenging consumer environment, and the wettest summer for 100 years.
“Whilst the decisions that we have taken during the first half, to restructure brewery operations, settle £40m of interest rate swaps and cancel 3.5m shares have impacted our financial performance, they put us in a stronger position.
“We continue to work with Sainsbury’s and Blackburn with Darwen Council to plan for the development of our existing Brewery site and are carrying out feasibility studies on potential new sites.
“We remain positive about our medium term prospects and are taking actions to underpin them in the second half of the year.”
