Theakstons, the North Yorkshire brewer, has reported a sharp rise in profits in the year to 31 December 2012 and called for a formal review of the system of tax breaks for smaller brewers.

Pre-tax profits grew by more than one third to £2m. Operating profit increased by 22.3% to £2.1m during the year, in which Theakstons benefited from a £81,000 deferred tax payment. Turnover grew 4.3% to £10.4m.

The company exceeded its pre-exceptional KPIs for pre-tax profit, which grew 35% against a budget of 17%; and gross margin, which, at 39%, exceeded budget by six percentage points.

However, turnover growth was below the 7% budgeted. There was a £351k decrease in cash, against a budget of -£107k, which Theakstons attributed to the phasing of various payments at the year end.

Theakstons said: “The directors are satisfied with the results for the period and will continue with the existing management polices.

“During the year Theakstons brands were exported to a number of international markets and the directors anticipate that the turnover derived from these volumes will increase further in subsequent years.”

No interim dividend was paid in the period and directors did not recommend any final dividends be paid.

The company paid 48% of gross turnover (£9m) in beer excise duty in the year - this proportion remained unchanged against 2011.

Theakstons criticised Progressive Beer Duty, the system of tax breaks for smaller brewers, for creating “unintended market distortions which offer an increasingly significant advantage to small scale, micro brewers of cask ale”.

Theakstons said it supported PBD but said it should be “subject to a formal review in order to reassess its impact in the UK ale market”.