Daniel Thwaites, the Lancashire brewer and pub operator, has reported a rise in full-year pre-tax profit from £5.7m to £7m, despite experiencing a fall in turnover. The company, which operates 350 tenanted pubs, said turnover in the 12 months to 31 March 2011, fell 6.3% to £126.7m, due to the sale of the Stafford Hotel in London during its previous financial year, its withdrawal from some marginal brewing contracts and the transfer of its managed houses to tenancies. Operating profit for the year fell by £1m to £12.3m but increased on a like-for-like basis by £600,000. The company said that despite the “challenges continuing to face the on-trade” its brewery and pubs made an operating profit of £7.9m, an increase of 6.8%, as a result of investment across its pub estate, “the growth of its beer brands in national pub groups and tight control of costs”. During the year the company sold 29 pubs and four further properties for a total of £6.1m, which generated a profit over book value, after disposal costs, of £100,000m. It also acquired two pubs at a cost of £1.2m – the Hollybush, near Leek in Staffordshire and The Roaches Lock in Mossley, near Manchester. It said that both pubs had been integrated successfully into its pub estate and were trading well. Thwaites said it continued to seek further “good quality tenanted pubs with balanced income streams” and believed that more opportunities to acquire high quality tenancies will arise in the forthcoming year. The company carried out 33 investment projects across its pub estate during the year, which led to returns “comfortably in excess of our hurdle rate of 20%”. Based on this performance, it has a pipeline of a further 75 investment projects which it will seek to complete over the next 12 months. During the year, the group launched its “WayInn” agreement, which provides a lower risk entry to the pub market for individuals who either “do not have the necessary funds to invest in taking on a tenancy or are risk averse”. This revenue sharing model has been rolled out into six pubs and the group said the initial results were “promising”. The group’s hotels and inns division reported an operating profit of £5.7m, down from £7.1m in 2010, although the previous year included a contribution of £1.6m from the sale of the Stafford. Operating profits on a like-for-like basis increased by 3.6% across the division, boosted by higher occupancy and efficiency gains. Turnover in the hotels and inns division fell by 7.9% due to the sale of the Stafford. Excluding the impact of the Stafford, like for like sales grew by 3.7%. The company reduced its net debt during the year from £48.8m to £40m, which it said was due to tight control over cash, the proceeds from pub disposals outweighing investment in acquisitions and an acceleration in customers repaying free trade loans. Ann Yerburgh, chair of Thwaites, said: "2011 has started well with some good weather. However, we remain cautious about the prospects for the year ahead as the impact of the higher rate of VAT, duty increasing well ahead of inflation, growing inflation in all other areas, and public sector job cuts, all of which have been well publicised begin to take effect. "We have a low level of debt, with the funds to invest in our existing properties and to purchase additional pubs and inns as those opportunities arise." During the year the company carried out a detailed market review, which concluded “there was a significant opportunity for the business to broaden its public awareness and to bring more focus to the operational structure”. In line with the review its has revised its corporate imagery and introduced a “refined” `Thwaites' logo, which it hopes will build on its heritage and introduce “a cleaner, more modern look and feel” to give its name and beers more impact. At the same time, the company intends to re-classify the operation of its business into four key divisions: Thwaites Beer Company; Thwaites Pubs - its estate of 350 tenanted pubs; Thwaites Inns of Character - its recently launched and growing inns; and Shire Hotels and Spas - its established group of six full service regional hotels. Over the coming months, the group will also update its communications and websites to reflect its revised branding and the structural changes to its business.

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