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THWAITES (DANIEL) PLC - Half-year Report

·10-min read

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021

CHAIRMAN’S STATEMENT

OVERVIEW

We started the six-month period to 30 September 2021 having been in lockdowns or periods of significant restrictions to trade for over six months, with most of our properties closed and the majority of our staff on furlough under the Job Retention Scheme.

On 12 April 2021 we reopened those properties with outdoor trading space, which was all of our hotels and about two thirds of the pubs and inns. The remaining properties reopened on 17 May, with limited capacity due to social distancing measures, which were removed on 19 July.

Trade has recovered quickly and has surpassed our early expectations, after months of lockdown our customers were very keen to return to our pubs and hotels, they were very welcome and we were delighted that they could enjoy our hospitality once again.

The majority of our staff returned to work during April and May, and they have had to deal with a number of supply chain issues, staff shortages and intermittent outbreaks of Covid. I am incredibly proud of the way that our teams have responded to the challenge of getting going once again and they have all done an incredible job in helping the business to recover quickly and get back on track.

RESULTS

Turnover for the half year was £47.8m, which is a 119% increase compared to turnover last year of £21.8m, which was impacted by three months of lockdown. Turnover was only 10% down compared to the same period in 2019, which is a good result considering that trade was restricted during the first three months of the period.

An operating profit of £9.3m compares to an operating loss of £1.4m last year and an operating profit of £9.5m in 2019. This has been achieved with the help of significant support from the UK Government for the hospitality sector in the form of reduced business rates, business grants, the Job Retention Scheme, and the reduction in VAT on accommodation, food and soft drinks.

Base rates have remained at their historic low of 0.1% throughout the period. However, the widely reported price inflation, has resulted in expectations that the Bank of England will increase interest rates in the near future and this has had a positive impact on the fair value of our interest rate swaps. This has resulted in a decrease in the provision of £0.5m at the half year (2020: £1.8m increase in the provision due to COVID-19 uncertainties), and this positive movement is shown in our profit and loss account.

Net debt has been an area of special focus and at 30 September 2021 it was £61.4m (2020: £66.6m); a decrease of £5.2m compared to last year, but more significantly I am pleased that it represents a decrease of £17.4m during this half year, reduced from £78.8m at 31 March 2021. At its current level the business has considerable headroom against its total banking facilities of £90m as we enter a period of trading uncertainty coming into the winter.

PUBS AND INNS

We started the year with all our tenanted pubs closed, although a number of pubs offered basic take away services during lockdown. On 12 April, those pubs with outdoor trading space (about two thirds of the estate) were allowed to reopen, providing table service only. The creativity of our tenanted pub operators to maximise the number of customers they could serve by converting carparks, pavements and spare land into trading space, together with erecting tents and marquees and other structures to deal with inclement weather was truly inspiring, demonstrated real community spirit and epitomised why pubs are at the heart of their communities.

Those pubs that put real and obvious effort into reopening were rewarded with strong sales as customers were keen to return to their local pubs after months of lockdown, this coincided with some good spring weather which made for busy gardens and outside areas.

The remaining pubs opened on 17 May, when indoor trading was permitted, albeit with social distancing measures in place until 19 July.

Beer volume sales continued to recover through the period, and by September they were at 97% of 2019 levels. We have seen a shift in consumer behaviour since reopening, with a move to more premium products as people seek to treat themselves after the turmoil of the last eighteen months.

Our pub estate benefits from being largely based in community and rural locations with very little town and city centre presence.

We have continued our regular maintenance spending on our pubs over this period, but there have been limited capital expenditure projects in order to minimise the disruption to trading during this period of recovery.

Our Inns are ideally located in rural and honeypot locations which are very attractive to the domestic leisure market at the moment. They have performed very strongly since reopening and the increased demand for UK leisure breaks has led to record levels of room occupancy and average room rates. Sales for the period were at 98% of 2019 levels, a creditable performance given that their capacity was severely constrained for seven weeks of the period.

HOTELS & SPAS

The hotels & spas have limited outdoor trading space and in general do not have passing footfall, so whilst they reopened on 12 April, they did not trade in any material way until 17 May. Thereafter, leisure sales recovered quickly, although corporate sales were very slow to pick up as many organisations were still encouraging their staff to continue working from home.

We saw a slight reduction in demand for leisure breaks as we came into September, but at the same time we started to see an increase in corporate activity. On 19 July, the removal of restrictions banning significant group gatherings saw us host a large number of weddings over the summer, many of which were re-bookings from weddings that would have taken place if allowed over the past 18 months.

Sales for the period are at 89% of 2019 levels, although they have been growing steadily as the year has progressed, by September sales were running 15% ahead of 2019.

ACQUISITIONS AND DISPOSALS

On 5 October, just after the period end, we were delighted to announce the acquisition of the Red Lion at Burnsall. This is an iconic coaching inn sitting alongside the River Wharfe in the Yorkshire Dales. The property has 25 bedrooms together with five holiday cottages, each with two bedrooms, a large outdoor area, a busy bar and restaurant and function facilities.

We have also continued to divest of pubs that no longer suit our requirements and sold eleven properties in the period. We also sold our old Blackburn brewery site, that we vacated in 2018, during the period. We received total proceeds from these disposals of £4.5m, making a profit on disposal of £0.3m.

EARNINGS PER SHARE

Earnings per share for the period were 10.7p per share, which compares to loss per share of 8.2p per share in 2020, due to the period of lockdown and restrictions last year.

DIVIDEND

The Board does not recommend the payment of an interim dividend (2020: £Nil) as whilst the business has recovered strongly over the period, the results have been achieved with financial support from the UK Government. The Board will continue to review future dividend policy in line with the recovery of the business and the degree of future uncertainty.

SUMMARY AND OUTLOOK

All credit must be given to our teams across the business for their success in making the most of the opportunity that has presented itself since re-opening in the spring. Our decision to reinstate quality cues within our properties at the earliest opportunity and remove measures that constrain our operational capacity has been vindicated by strong trading and an excellent set of interim results.

Our conservative approach and a focus on our balance sheet, in particular in reducing our level of net debt puts the business in a strong position to face into a winter with lingering Covid cases and consequently potential government reactions.

There are many headwinds, largely outside our control, which are creating a level of uncertainty as we look to the future. The lack of availability of new team members is disrupting both our ability to fully man our properties as well as our supply chains. Inflation is rising more quickly than in recent years with the national minimum wage set to increase by 6.6% next April. Lastly, in the next six months we will see the withdrawal of government support, which has been critical in achieving this set of interim results.

The announcement of changes to draught beer duty in the budget are welcome, but this reduction will be more than offset by inflationary rises elsewhere. As an industry we have campaigned for a permanent reduction in VAT to 12.5% for pubs and the hospitality industry as well as root and branch reform of business rates, both of which would be major investments in the long-term health of our sector, help it to recover from the past 18 months of closures and provide confidence and employment, particularly for young people.

The changes that we have made in recent years to orientate the business to larger scale properties towards the more premium end of the market, means that we are as well placed as any and better than most to navigate our way through any difficulties that are thrown at us. I have no doubt that the Company and our teams will together put the era of Covid behind us and continue to build on our success.

Richard Bailey

Chairman

3 November 2021

Profit and Loss Account for the six months ended 30 September 2021

Unaudited


Unaudited


Audited



6 months
ended
30 September 2021
GBP’m

6 months
ended
30 September 2020
GBP’m

12 months ended
31 March
2021
GBP’m


Turnover


47.8


21.8


32.2

Operating profit (loss) before property disposals

9.0

(1.4)

(9.6)

Property disposals

0.3
______

-
______

0.2
______

Operating profit (loss)

Net interest payable
Gain (loss) on interest rate swaps measured at fair value

9.3

(2.0)

0.5

(1.4)

(2.0)

(1.8)

(9.4)

(3.9)

1.6

Finance charge on pension liability

(0.3)

(0.3)

(0.7)

______

______

______

Profit (loss) on ordinary activities
before taxation

7.5

(5.5)

(12.4)

Taxation

(1.2)

0.7

1.9

______

______

______


Profit (loss) on ordinary activities after taxation


6.3


(4.8)


(10.5)

______

______

______




Earnings (loss) per share




10.7 p




(8.2) p




(17.8) p

Balance Sheet as at 30 September 2021


Unaudited


Unaudited


Audited



30 September 2021
GBP’m

30 September 2020
GBP’m

31 March
2021
GBP’m

Fixed assets
Tangible assets
Investments


285.2
0.8
______


294.7
0.7
______


291.0
0.6
______

286.0

295.4

291.6

Current assets

Stocks

0.7

0.6

0.5

Trade and other debtors

10.6

11.0

10.4

Cash at bank and in hand

8.1

2.9

0.3

______

______

______

19.4

14.5

11.2

Creditors due within one year

Trade and other creditors
Loan capital and bank overdraft

(17.7)
(3.5)

(13.1)
-

(9.8)
(11.6)

______

______

_____



Net current (liabilities) assets

(21.2)

(1.8)

(13.1)

1.4

(21.4)

(10.2)

______

______

______

Total assets less current liabilities

284.2

296.8

281.4

Creditors due after one year
Loan capital
Interest rate swaps


(66.0)
(15.9)


(69.5)
(22.2)


(67.5)
(17.5)

______

______

______



Net assets excluding pension liability

(81.9)

202.3

(91.7)

205.1

(85.0)

196.4

Pension liability

(19.5)

(32.4)

(19.9)

______

______

______

Net assets including pension liability

182.8

172.7

176.5

______

______

______

Capital and reserves

Called up share capital
Capital redemption reserve

14.7
1.1

14.7
1.1

14.7
1.1

Revaluation reserve

73.6

75.8

74.8

Profit and loss account

93.4

81.1

85.9

______

______

______

Equity shareholders’ funds

182.8

172.7

176.5

______

______

______

NOTES:-

1. Basis of preparation

The interim accounts, which have not been audited, have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2021.

2. Taxation

The taxation charge is based on the estimated tax rate for the year.

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