Daniel Thwaites, the Lancashire brewer and pub operator, saw pre-tax profits rise 24.5% to £4.9m in the six months to 30 September and said it has witnessed an improvement in consumer confidence.
Sales in the period grew 1% to £71.9m. Adjusted for discontinued contract work in its brewery, turnover increased 4% on a like-for-like basis. Operating profit before exceptional items was up 5% to £6.9m. The company said it was “well placed” for further “highly selective” acquisitions.
Basic earnings peer share rose 46% to 5.7p and adjusted earnings per share increased 24% to 5.7p.
Operating profit in the Beer Co and Pubs division grew 5% to £4.2m.
Chairman Ann Yerburgh said: “The difficult steps that we took during last year and at the start of this financial year to restructure our brewery are beginning to show the improvements that we had planned for. The better summer weather has benefited many parts of the business, from volumes in the brewery to trade in our tenanted pubs and inns, many of which have seen growth over the summer months.
“Our free trade business in particular is performing well and the focus put in place over the past year to sell more of our own products has seen a very positive increase in the profit that we are achieving per barrel. The strength of our team, quality of our service and strength of our relationships continues to set us apart and allow us to outperform the market.”
The company spent £2.2m on pub investment projects in H1. Yerburgh said: “Thwaites Pubs has seen continued investment in refurbishment schemes to improve the quality of our pub estate and the welcome offered to people visiting our pubs.
“The number of our pubs available to be taken on by new people is now at a five year low, demonstrating the progress that we have made in this area over the past few years.”
Yerburgh highlighted a “number of other very encouraging developments” in its beer business, including Wainwright becoming a top 20 cask ale brand.
“We have seen good growth in both sales to the national pub operators and also in our premium bottled ales, both of which are securing new distribution both at home and abroad. This autumn will see us launch a craft ale range into the off trade which is new to us and will help reinforce our brewing credentials in a new and increasingly premium area of the market.
“We also have plans to introduce some new keg ales, into a small but growing market appealing to customers who are not typical cask ale drinkers.”
Operating profit in the Hotels and Inns arm grew 6% to £3.3m in the half year, with sales growing over the summer, “aided by the good weather and the investment schemes we completed last year, where we are achieving returns considerably ahead of our hurdle rates”.
“The major development in the second half of this year will be a complete refurbishment of The Judges Lodgings, York, which we acquired in the autumn of 2012. The site has traded well over the summer which bodes well for next year, once the refurbishment programme is complete.”
Meanwhile “an encouraging pickup in the regional hotel market” helped its Shire Hotels & Spas.
“Here too we have seen new investments underpin our continuing success, the most notable project this year being the complete refurbishment of the bar and restaurant areas at Cottons Hotel & Spa, Knutsford. The corporate hotel market seems to be showing tentative signs of recovery, as consumer and corporate confidence improves.”
Net debt at 30 September was £59m (2012: £62.7m), “still well within our banking facilities”. During the period Thwaites sold “several poor quality pubs” for £1.3m, broadly in line with net book value. “Interest costs of £2.3m, were 18% lower than last year due to the benefit of the settlement of £40m of swap contracts in the first half of 2012, and the provisions made at 31 March 2013.”
The board recommended an interim dividend of 1.10p (2012: 1.10p).
Yerburgh said: “I am pleased to report that in the first half of this financial year we have seen some encouraging signs that consumer confidence is improving. Our performance has been assisted by better weather over the summer trading period and we have seen this translate into a better performance in every area of the business.
“The impact of the brighter weather and more positive economic news together with the actions we took last year and in the early part of this year to restructure our brewing operations has resulted in an improvement in profitability in the first half of the year, and we are cautiously optimistic about our prospects for the second half of the year and beyond, although trading in September and October has been more challenging.
“National beer consumption continues to decline at around 5% per annum, and the marketplace is ever more competitive as the number of microbreweries in the UK continues to increase, in the last 12 months alone by more than 12%. However, with our recent restructurings and investment in our brands we are well placed to outperform in challenging markets.
“We continue to work through our plans to address the issues that we face in our aging and oversized brewery and to engage with Sainsbury’s and Blackburn with Darwen Council to explore development plans for our Blackburn site, and although progress is slower than we had hoped for, we are committed to finding a path forward.
“We have made progress in our search for a new independent non-executive director and hope to be in a position to update further in the coming months.
“We have plans in place to make additional investment to ensure that we make the most of our existing properties. Furthermore, we are well placed to acquire additional properties as opportunities arise, although we will continue to be highly selective.”
