Thwaites (Daniel) Plc - Annual Financial Report
PR Newswire
LONDON, United Kingdom, June 19
DANIEL THWAITES PLC
RESULTS FOR YEAR ENDED 31 MARCH 2024
CHAIRMAN'S STATEMENT
The Company has grown and turned in a robust performance during a period of high-cost inflation and economic uncertainty. The market positioning of its managed properties towards more premium segments and the resilience of its tenanted community pubs, together with its freehold property model has prevailed.
The first half of the year was level with the previous year and a stronger Christmas period allowed growth in both turnover and profits year on year, although conversion was a challenge due to higher costs. The winter period saw a succession of storms batter the UK and was one of the wettest on record. Easter fell early, but coincided with another wet and cold period and so did not kick start the spring season as it would usually do. That has not happened until the middle of May, with the arrival of some warmer and more settled weather.
The previously announced development of Langdale Chase Hotel in the Lake District is complete and the hotel is open and trading profitably. This is the largest investment the Company has made in the past 15 years and it has made quite an impact on the Lake District hotel market with favourable press reviews and strong customer feedback.
Results
Turnover for the year to 31 March 2024 grew by 6% to £115.5m (2023: £108.8m).
Operating profit before property disposals grew by 4% to £11.3m (2023: £10.9m). The earnings per share was 12.4p (2023: 21.9p).
Net Debt at 31 March 2024 was £70.8m (2023: £66.7m), which is an increase of £4.1m as a result of a larger than normal investment programme.
The Bank of England has continued to respond to higher inflation by raising interest rates to 5.25% from 4.25% at the end of March 2023. This increase in interest rates impacts the discount rate used to value the Company's pension scheme and interest rate swap liabilities. As a result, we have seen a decrease of £1.3m in our swap liabilities to £2.6m and an increase in our pension scheme surplus of £2.7m to £34.9m.
The profits retained for the year together with these positive impacts on our balance sheet provided a net asset value per share at 31 March 2024 of £4.26 (2023: £4.12).
Acquisitions, Developments and Disposals
During the year we have not acquired any trading assets, although we have evaluated a number of opportunities. Valuations remain uncertain in the current economic climate and prices for high quality assets have not adjusted much from the past few years despite increases in interest rates.
We invested £18.3m (2023: £15.6m) to improve the quality and offering in our existing properties including the completion of the full refurbishment of Langdale Chase, which was a significant spend.
The Company has sold eleven bottom end pubs and two ancillary properties with total proceeds of £3.8m (2023: £3.1m).
Dividend
An interim dividend of 0.85p (2023: 0.75p) was paid in January 2024 and the Board recommends a final dividend of 2.5p (2023: 2.4p). The Board will keep the level of dividend under review, continuing to assess the level of future dividend in the light of Company performance.
Board
I would like to recognise and celebrate the contribution made to the Company by Ann Yerburgh, who joined the Board in March 1974. Over 50 years she has been a longstanding director, inspiring chairman and a wonderful champion of the business. I would like to thank her for her ongoing support and wise counsel.
People
Daniel Thwaites is unbeatable when it harnesses the immense power of a family of teams working together, collectively we are more than the sum of our parts.
We have continued to celebrate the outstanding efforts made by individuals and teams across the Company at our Pride of Daniel Thwaites Awards. This year the event was held in Manchester and was a tremendous success with over 230 attendees. Over 1,000 nominations were received from across the business with our team members calling each other out for the amazing contributions being made by their colleagues. It is a very positive event and serves well to highlight both the individual and team performances that help us to be such a successful business.
Fortunately, the challenges of inflation that have been a problem for us all over the past two years appear, for the moment, to be receding. Wages are currently growing faster than inflation and that will help the pressure to ease. I would like to thank all of the Company's employees for their hard work over the past year to help the Company deliver a robust performance.
I would also like to thank our shareholders, your support has helped us to come through a rocky period, but the Company is in excellent shape for the future.
Outlook
Factors that have been against us for the last few years, including inflation, a difficult employment market and the cost of living crisis are now abating and we are hopeful that the coming year will present a more stable trading environment.
The UEFA European football championships present a good opportunity for pubs this summer, the inns continue to increase market share locally, our hotels are benefitting from a stronger corporate market and we have high hopes for the first full year of trading at Langdale Chase.
This last year has been one of confident investment across every area of the Company and that places us in a very strong position to move our performance forward in this current financial year. We have high expectations that, all things being equal, this coming year will be a good one.
R A J Bailey Chairman 18 June 2024 |
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OPERATING REVIEW
Overview
The Company got off to a strong start this financial year, with a fine period of weather early in the year helping the pubs and inns to post excellent early results. The summer was largely a wash-out, but September and October were good months and Christmas held up to expectations, before a prolonged period of storms and wet weather took hold until the spring.
The employment market now seems to have stabilised such that we have largely been able to fully staff our properties, which has been a challenge in the last few years. This has been aided by the staff accommodation that we have invested in over the last two years and we are in as good a position to capitalise on our opportunities when they present themselves as we have been for a while.
The level of investment in our properties and teams has paid off, with improving Net Promoter Scores and customer reviews across both our inns and hotels both of which will help drive return visits and increased profitability.
Financial results
Turnover for the year was £115.5m, (2023: £108.8m), an increase of 6%. The operating profit for the year was £11.5m, (2023: £12.3m). The profit before tax, which benefited from a mark to market gain on interest rate swaps was £9.1m (2023: £15.1m). Net debt increased to £70.8m, (2023: £66.7m) an increase of £4.1m. At the year end the company had banking facilities of £82m, giving headroom to its debt facilities of £11.2m.
The tenanted pubs continued to benefit from the 2023/24 Retail, Hospitality and Leisure Business Rates Relief (RHL) scheme which provides eligible, occupied, retail, hospitality, and leisure properties with a 50% relief, up to a cash cap limit of £110,000 per business from 1 April 2023 to 31 March 2024. We received £110,000 in total for our managed business.
Pubs and Inns
Understanding our Pubs
Our freehold estate of tenanted pubs numbers approximately 200 properties. We continue to recycle capital into new, more attractive tenanted and managed pub opportunities, where there is the potential to invest and add value and so we continue to dispose of pubs that we do not believe have a long-term future with us.
Our pub estate encompasses community locals to destination food led pubs in both rural and town centre locations, ranging geographically from Cumbria to the Midlands, and from North Wales to Yorkshire.
We have been operating tenanted pubs for a long time, and we have a strong reputation for our well-established approach. We strongly value our reputation as a partner of choice, acting with integrity, and focusing on investing alongside proven operators to expand and improve the premises with a focus on establishing good quality food offerings. Where the property has the scope, and we believe the demand exists, we support the development of letting bedrooms. We have an estate of high quality, sustainable businesses with multiple income streams that have the ability to generate attractive cashflows.
Our tenanted pubs are a mature business, looking to deliver returns at least in line with inflation. They tend to be heavily influenced by weather and so are subject to the vagaries of the British summer.
Pubs performance
The turnover of our tenanted pubs increased year on year by 8%, with EBITDA and operating profit increasing by 4%.
The pub market continues to be a very challenging environment in which to trade, and we have continued to see a churn in our pub customers in our tenanted estate, albeit at a lower level than in the previous year. As a result, disruption in the tenanted estate continues to be at a higher level than we have historically experienced.
The number of pubs that needed to be re-let started the year at 21, with nine closed pubs and finished the year at 20, with eleven closed pubs - eight of which were under offer to new tenanted customers, which was encouraging. Enquiries from parties looking to run their own business in one of our pubs are high and we continue to see high quality candidates coming forward.
In addition, we have continued to run pubs on our WayInn Franchise Agreement, which helps to keep pubs open when an operator leaves and we do not have an operator ready to take the pub on with a traditional brewery tenancy, these have increased to 16 pubs at the year end, up by one pub year on year. Several of these pubs have become multi- year WayInn franchises as some operators prefer this lower risk approach to running a pub.
Beer volumes increased by 1% year on year with wines and spirits down by 2% and soft drinks 1% ahead. Tenanted pub sales increased by 5% and gross margin fell by 0.4%, as we chose to support pubs through discounts. Machine income continued a good run, up strongly year on year as digital machines and changes in the market provided attractive conditions.
The costs of running a pub have increased substantially over the past few years, and in particular utilities and wage costs are testing pubs to the limit. From 1 April 2024 the national minimum wage increased by 9.8%, substantially ahead of inflation, creating additional pressure on the profitability of pubs. Utility bills have started to ease and the business rate relief provided by the government to smaller pubs is welcome, but due to expire in April 2025. We continue to lobby the government to extend it, it is an investment in local communities and employment and it would be short sighted to abandon it.
We had a very busy year of investment into the tenanted pubs with 6 major schemes and a further 44 schemes of up to £100,000. In total a quarter of our pubs received investment of one sort or another. Transformational schemes were delivered at The Duke, Blackpool, The Buck, Clitheroe, The Victoria and The Grey Horse, both in Accrington.
Brewery
Our award-winning craft brewery continues to go from strength to strength. This year we launched a new Pale Ale in keg, Paradise No. 3, at an ABV of 4.3% it plays to an attractive segment of the market with a strong design and stand out on the bar, the initial feedback has been most encouraging.
Understanding our Inns
We own and manage a growing portfolio of inns and we will continue to look to expand this segment of our business in the future through the acquisition of high-quality properties in outstanding locations.
Our Inns are positioned at the premium end of the market, they have a busy bar at their core, a home cooked food offering and high quality, comfortable accommodation - they focus on providing outstanding hospitality and offer an attractive and more personal alternative to the mid-market hotel chains.
This segment of the market has performed strongly over the past few years and is positioned for continued growth as customers look for something special that is authentic and honest, delivered by operators who can provide a quality experience consistently.
Inns performance
Our strategy this year was to moderate price increases in the Inns in the face of general pressures on the disposable income of our customers to protect the volume of sales. This helped the inns to increase sales by 11% on the previous year, and it was most encouraging to see strong growth in our drink sales. Last year we hoped for a rebound in the profitability of the inns this year and so it was encouraging to record that EBITDA increased by 15% overall, a strong performance.
The market for our inns is an attractive one, and when the conditions are right, they trade very well. The biggest scheme of the year was an upgrade of eleven bedrooms at the Manor House at The Red Lion, Burnsall, which was delivered at the start of April. We are in the process of delivering schemes at The Golden Lion, Settle and The Fleece, Cirencester which will put those two properties in a strong position to trade well this summer.
The government sponsorship scheme to attract workers from overseas has played an important role over the past few years in bolstering our teams both in our kitchens and front of house, for roles that we could not fill from within the United Kingdom. It was disappointing therefore that the government increased the threshold for skilled worker roles from £26,200 to £38,700 from April 2024.
We received planning permission to convert Lendal House in York, which we acquired in October 2021, into 7 bedrooms to complement The Judge's Lodging and when the York accommodation market strengthens, we look forward to delivering that project.
Understanding our Hotels & Spas
We own and operate ten hotels which are spread across England. Our hotels are positioned towards the premium end of the market and most have leisure and spa facilities. In recent years we have invested in them to amplify the individual character of each hotel in its local area, supported by a great food and drink offering with local nuances. Our vision, similar to our inns, is to create a collection of interesting, characterful contemporary hotels, that are the best in their local area.
Hotels & Spas performance
Turnover increased by 3%, driven wholly by an increase in occupancy, as we found it difficult to increase the average room rate during the year. Overall rooms yield also increased by 3%, our spas continued to be a positive influence on the overall sales mix, and their sales were up by 15% year on year. The increase in turnover was sufficient to cover the increase in our costs and profits were flat year on year.
In September 2022 we closed Langdale Chase for a major refurbishment which was scheduled to reopen in November 2023. The project was delivered on time and largely to budget and has reopened to strong reviews and coverage in the press. We were pleased that it was placed third in the Times Top 100 Hotels in the UK, and the best hotel in the North.
During the year we invested in bedrooms and meeting rooms at Aztec Hotel & Spa and in solar panels on the roofs of Aztec Hotel & Spa, Kettering Hotel & Spa and Solent Hotel & Spa. Investment in energy saving is at the heart of our investment programme where it makes sense and we can deliver a reasonable return on capital, the initial signs from these schemes are positive and they are delivering mid-teens returns on capital employed.
Summary and future developments
The Company has delivered top line growth of 6% in the past year, which has converted to operating profit (before property disposals) growth of 4%. This has been delivered against a backdrop of large swings in our costs, particularly utility costs, embedded inflation and pressure on people's discretionary spend.
A lot of focus this year has been directed towards the development of Langdale Chase, which was shut for the key trading period and was a drag to performance this year. However, we are pleased with the development that we have undertaken and it is now open, trading profitably and contributing to our overall results. We look forward to it making a meaningful contribution in the coming years.
The pubs are trading well and whilst we have more closed than we would like, our disposal programme has slowed considerably, and we are positive about their future prospects We have prospective operators identified and signed up to continue reopening many of our closures over the next few months. Our investments in the pubs are working and making us good returns, ahead of our hurdle rates. Our customers continue to look for more premium products and our drinks range, food offering and pubs, inns and hotels cater to that trend.
We have a strong development pipeline right across the business, but are not looking to significantly increase our debt levels. If anything, we would like to reduce them slightly so that when opportunities arise to make acquisitions, we are in a strong position to do so.
There is plenty of opportunity within the business to grow our profitability without acquisitions and we are wholly focused on delivering that this coming year.
Financial Review
Results
Turnover for the year ended 31 March 2024 increased by 6% to £115.5m (2023: £108.8m), whilst operating profit was 7% lower at £11.5m (2023: £12.3m), due to lower profits on disposal of properties.
The measurement of the interest rate swaps at fair value resulted in a gain in the profit and loss account of £1.3m (2023: £6.6m).
Profit before taxation for the year was £9.1m (2023: £15.1m).
Business Review
The key issues facing the Group are covered in the Chairman's Statement and Strategic Report. The KPIs used by the Group to monitor its overall financial position can be summarised as follows:
| 2024 | 2023 |
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Group | £m | £m |
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Turnover
| 115.5
| 108.8
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EBITDA | 18.0 | 19.1 |
Depreciation | 6.5 | 6.8 |
Operating profit | 11.5 | 12.3 |
Profit before tax | 9.1 | 15.1 |
Net debt
| 70.8
| 66.7
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Earnings per share (pence) | 12.4 | 21.9 |
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Pubs and Inns |
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| £m | £m |
Turnover | 63.0 | 57.7 |
EBITDA | 17.1 | 17.6 |
Depreciation | 3.2 | 3.2 |
Operating profit (before Group central charges) | 13.9 | 14.4
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Average number Tenanted Managed |
204 14 |
211 14 |
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Hotels & Spas |
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| £m | £m |
Turnover | 52.5 | 51.1 |
EBITDA | 9.1 | 9.3 |
Depreciation | 2.9 | 3.1 |
Operating profit (before Group central charges) | 6.2
| 6.2
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Average number
| 10 | 10 |
The principal non-financial indicators monitored by management are:
Pubs and Inns
Utility consumption, health and safety incidents, beer volumes, customer ratings and tenant recruitment.
Hotels
Utility consumption, room occupancy rates, customer ratings, health and safety incidents, spa memberships and wedding and event numbers.
Interest rate swaps measured at fair value
The Group holds derivative liabilities in the form of interest rate swaps for £45m which are recognised as a financial liability. The movement in the fair value of these interest rate swaps during the year resulted in a gain in the profit and loss account for the year ended 31 March 2024 of £1.3m (2023: £6.6m). See note 18 to the financial statements for further details.
Interest payable
Net interest payable increased to £5.2m (2023: £4.1m) due to higher debts levels and higher interest rates.
Taxation
There is a tax charge of £1.8m on the profit for the year, an effective rate of 19.8%.
Earnings per share
Earnings per share of 12.4p (2023: 21.9p).
Dividend
An interim dividend of 0.85p has been paid and the Board recommends a final dividend of 2.5p per share, which will make a total of 3.35p for 2024 (2023: 3.15p).
Cash ?ow and ?nancing
The Group's net borrowing increased by £4.1m, from £66.7m at 31 March 2023 to £70.8m at 31 March 2024 due to capital expenditure.
The Group has £45m of long-term debt, £29m of bank loans and cash balances of £3.2m at 31 March 2024. The Group has three-year revolving credit bank facilities which were renewed in the first quarter of 2023.
Pensions
On 31 December 2023 the Daniel Thwaites Supplementary Pension Scheme was merged into the Daniel Thwaites 1959 Pension Scheme, in order to simplify the calculation of benefits and reduce future costs. At 31 March 2024 the scheme had a surplus, before tax, of £34.9m which was an increase of £2.7m from the combined surplus of £32.2m, before tax, at 31 March 2023.
The Group did not pay any contributions into the scheme in the year and the scheme paid all its administration costs.
Property
During the year we sold eleven pubs and two ancillary properties for a total of £3.8m generating a profit against book value, after disposal costs, of £0.2m.
In line with our accounting policy, 20% of our properties were subject to a formal revaluation, and additionally an impairment review was carried out on the rest of our property estate. This resulted in an increase in the total value of our property portfolio of £2.0m, of which £2.2m was added to the revaluation reserve and £0.2m deducted from cost and charged to the profit and loss account.
Treasury policy and ?nancial risk management
Treasury policies are subject to Board approval. All borrowings are in sterling and comprise a mixture of fixed interest loans and facilities carrying SONIA related floating rates. The Group has interest rate swaps for £45m where it is committed to pay the difference between SONIA and fixed interest rates. At 31 March 2024 a financial liability of £2.6m has been recognised in respect of these interest rate swap contracts.
Going Concern
At 31 March 2024 the Company had total borrowing facilities of £82m, which were made up of the long-term loan of £45m, revolving credit facilities of £35m, and overdraft facilities of £2m. When compared to net debt of £70.8m at 31 March 2024, this gave headroom of £11.2m.
The Company has generated positive operating cashflows over the period, such that it has invested £18.3m in capital expenditure during the year and has comfortably met all of its banking covenants. Its financial modelling shows that it is expected to be cash generative and meet its banking covenants for at least the next twelve months from the date of signing the financial statements.
The directors therefore have a reasonable expectation that the Group has sufficient resources to continue in operational existence, and meet its liabilities as they fall due, for the period of at least 12 months from the approval of these financial statements. Accordingly, the directors continue to adopt a going concern basis of preparation of these financial statements.
Kevin Wood
Finance Director
18 June 2024
EXTRACT FROM AUDITED FULL FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 MARCH 2024
GROUP PROFIT AND LOSS ACCOUNT
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Turnover |
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| 115.5 | 108.8 | |||||
Cost of sales |
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| (90.1) | (85.2) | |||||
Gross profit |
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| 25.4 | 23.6 | |||||
Distribution costs |
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| (5.4) | (4.4) | |||||
Administrative expenses |
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| (8.8) | (8.4) | |||||
Other operating income |
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| 0.1 | 0.1 | |||||
Operating profit before property disposals |
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| 11.3 | 10.9 | |||||
Property disposals |
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| 0.2 | 1.4 | |||||
Operating profit |
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| 11.5 | 12.3 | |||||
Net interest payable Gain on interest rate swaps measured at fair value |
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| (5.2) 1.3 | (4.1) 6.6 | |||||
Net finance income on pension asset |
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| 1.5 | 0.3 | |||||
Profit on ordinary activities before taxation |
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| 9.1 | 15.1 | |||||
Taxation on profit for the year |
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| (1.8) | (2.2) | |||||
Profit on ordinary activities after taxation |
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| 7.3 | 12.9 | |||||
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Basic and diluted earnings per share 12.4p 21.9p
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DANIEL THWAITES PLC
GROUP BALANCE SHEET At 31 March 2024 |
2024 £'m |
2023 £'m |
___________________________________________________________________________ | _______ | _______ |
Fixed Assets
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Tangible assets | 312.2 | 302.0 |
Investments ___________________________________________________________________________ | 0.8 _______ | 0.8 _______ |
| 313.0 | 302.8 |
Current assets
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Stocks | 0.9 | 0.9 |
Trade and other debtors | 6.7 | 5.9 |
Cash at bank and in hand ___________________________________________________________________________ | 3.2 _______ | 2.0 _______ |
Creditors due within one year | 10.8 | 8.8 |
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Trade and other creditors | (20.7) | (20.0) |
Loan capital and bank overdraft ___________________________________________________________________________ | - _______ | (1.7) _____ |
| (20.7) | (21.7) |
Net current liabilities ___________________________________________________________________________ |
(9.9) _______ |
(12.9) _______ |
Total assets less current liabilities | 303.1 | 289.9
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Creditors due after one year Deferred tax ___________________________________________________________________________ | (76.6) (10.6) ______ | (70.6) (9.5) _______ |
Net assets excluding pension asset ___________________________________________________________________________ |
215.9 _______ |
209.8 _______ |
Pension asset ___________________________________________________________________________ |
34.9 _______
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32.2 _______ |
Net assets including pension asset ___________________________________________________________________________ | 250.8 _______ | 242.0 _______
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Capital and reserves |
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Called up share capital | 14.7 | 14.7 |
Capital redemption reserve | 1.1 | 1.1 |
Revaluation reserve | 78.6 | 77.2 |
Profit and loss account | 156.4 | 149.0 |
___________________________________________________________________________ | _______ | ________ |
Equity shareholders' funds ___________________________________________________________________________ |
250.8 ________ |
242.0 ________ |
DANIEL THWAITES PLC
GROUP CASH FLOW STATEMENT
For the year ended 31 March 2024
__________________________________________________________________________ | 2024 £'m _______ | 2023 £'m _______ |
Cash flow from operating activities |
18.4 |
16.8 |
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Tax paid | (1.3) | (2.0) |
Cash flow from financing activities | 2.2 | (5.5) |
Cash flow from investing activities | (14.5) | (12.7) |
Equity dividends paid __________________________________________________________________________ | (1.9) _______ | (1.7) _______ |
Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year __________________________________________________________________________ Cash and cash equivalents at end of year Loan capital __________________________________________________________________________ Net debt
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2.9 0.3 _______ 3.2 (74.0) _______ (70.8)
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(5.1) 5.4 _______ 0.3 (67.0) _______ (66.7)
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Reconciliation of net cash flow to movement in net debt
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Increase (decrease) in cash | 2.9 | (5.1) |
Cash flow from increase in debt ___________________________________________________________________________ | (7.0) _______ | - _______ |
| (4.1) | (5.1) |
Net debt at beginning of year ___________________________________________________________________________ | (66.7) _______ | (61.6) _______ |
Net debt at end of year ___________________________________________________________________________ |
(70.8) ________ |
(66.7) ________ |
Note
The full Annual Report and Accounts 2024 are available on the website: www.thwaites.co.uk
 Aquis announcement Jun 24 |
