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Daniel Thwaites Plc - Interim Results


Thwaites (Daniel) Plc


Half-year Report




In a difficult retail environment, the company has benefited from the investments made last year, a stronger UK leisure market and some improvement in corporate hotel demand.

Turnover for the half year of GBP53.4m (2018: GBP49.9m) represents a 7% increase, operating profit has increased by 9% to GBP8.7m (2018: GBP8.0m).

The current political and economic uncertainty has resulted in a current expectation that interest rates will fall in the short to medium term and this has had a negative impact on the fair value of our interest rate swaps. This has required an increase in the provision of GBP4.0m at the half year (2018: GBP0.6m reduction in the provision), and this negative movement is shown in our profit and loss account.

Net debt at 30 September 2019 was GBP61.6m (2018: GBP70.2m); reduced by GBP8.6m due to a reduced capital investment programme and the disposals of some non-core properties.



Our tenanted pubs have had a good first half to the year despite mixed weather compared to last year’s summer heatwave. The investments we have made over recent years mean that our pubs’ balanced income streams provide resilience in the face of the ups and downs of the British climate.

Turnover has risen by 2% on a like for like basis and operating profit is level with last year. We have completed 12 investment schemes in the first half of the year, investing GBP1.3m and continue to make good returns on our investments.

Major refurbishments schemes have been carried out at Blue Bell, Carlton in Lindrick; Boot & Shoe, Elswick and Malt Shovel, Barkby.

Our Inns have had an excellent summer, with turnover up by 19% and operating profit up by 45%. They too are benefiting from investment and their premium positioning puts them in an area of growth. The major investment made last year at the Beverley Arms, and the year before at The Crown in Pooley Bridge have contributed to this strong performance.



In the hotels & spas sales for the first half of the year have grown by 5%, with operating profits growing by 3%. The hotels have experienced a strong leisure market from UK tourism over the summer as well as improvements in corporate bedroom and meeting room demand.

The reorganisation of our hotel management structure that was completed in the first half of last year is delivering the intended efficiency gains and renewed focus of our operations teams. This has helped to drive the increase in sales and improve operating margins which has helped to absorb previously highlighted cost increases, in particular from wage costs associated with the national living wage, auto-enrolment and natural market inflation from candidate shortages in key positions.

The performance has also benefited from a reduced level of disruption from lower levels of capital expenditure following the significant refurbishment programme we completed last year, although we have spent GBP1.6m in the period.



During the period we launched our new core beer range which is only available in our own properties. The range consists of five cask beers, Original, Gold, Amber, IPA and Mild, which have been very well received by our customers such an extent that our new brewery at Mellor Brook is operating at full capacity.



When we sold our Free Trade business to Marston’s in 2015 we retained our investment in one large free trade account in Blackpool. Over a number of years, we had advanced loans to the business, secured over its freehold assets. Funny Girls comprised a popular cabaret venue and a nightclub based in the historic art deco Odeon cinema in the heart of the town, together with two pubs.

In September 2018 administrators were appointed to the business, which was marketed for sale, but as no buyer was found we assumed ownership of it in January 2019 in settlement of our outstanding debt. The former owner of the business approached us to buy part of the business back, and we sold the Odeon cinema to him in August 2019. This alleviated significant distraction, whilst retaining ownership of the pubs.

In addition to selling Funny Girls, we sold three pubs and a parcel of land adjacent to one of our pubs for a total of GBP5.1m generating a profit of GBP0.8m.



The basic earnings per share for the period was 2.7p per share (2018: 8.5p). This movement is largely due to the year on year non-cash movement in the fair value of our interest rate swaps, which was negative this year against a positive last year. The underlying earnings per share, excluding the impact of the interest rate swap movement is 9.5p (2018: 7.5p).



The Board recommends an interim dividend of 1.10p (2018: 1.10p) to be paid on 2 January 2020 to shareholders on the register on 6 December 2019.



As previously announced, Mark Fisher was appointed as an independent non-executive director on 1 June 2019. Mark is currently Chief Development Officer of Merlin Entertainments plc, where he has been a member of the senior management team for over 18 years. We were delighted that he agreed to join us and are excited by the new perspective that he brings.



For the past few years our priority has been a large capital investment programme to reposition our properties and improve the quality of our assets.

Our plan this year has been to drive sales, control costs and invest carefully in order to fully understand how the business trades without the disruption it absorbed during the recent investment programme.

The Company has posted a strong performance for the first half and the focus on our core businesses, whilst disposing of those that were non-core has strengthened its financial position.

We will continue to adopt the same approach for the rest of the year, being ready to move forward once clarity on a new government and Brexit comes, and in a strong position to be agile should opportunities to acquire new assets arise.