THWAITES (DANIEL) PLC
Annual Financial Report
DANIEL THWAITES PLC
RESULTS FOR YEAR ENDED 31 MARCH 2022
CH AIRMAN’S STATEMENT
After another challenging year Daniel Thwaites has emerged from the COVID-19 pandemic in a strong financial position. Our priority for the past two years has been to take decisive action to control our cost base and debt levels to protect the business for a time when we could put restrictions and a loss of liberty behind us.
The Company and our teams have risen to this task in the most impressive fashion and I am immensely proud of the way in which they have responded. Our decision to reinstate quality cues within our properties at the earliest opportunity after government restrictions were removed has been vindicated by strong trading, profitability being restored and the business generating significant cashflows. This has allowed us to initiate investments for the future, start to make acquisitions and confidently set ourselves back on a path for growth which the pandemic temporarily disrupted.
Once more our family values, and the strong culture within the business has helped us to come through all that has been thrown at us. Well publicised issues with recruitment coupled with natural attrition to our teams from repeated lockdowns and closure has meant that for much of the year we have had significant numbers of vacancies across all of the business. This has been extremely testing for our teams and the way that they have responded by going the extra mile, being inventive and resourceful is humbling.
Different parts of the business have pulled at different speeds throughout the year, with outdoor areas playing a hugely important role for our pubs, despite there being no prolonged period of sunny weather last summer. Likewise, the leisure facilities in our hotels and spas and the honeypot locations of our inns have been very helpful in a strong staycation market. As a result, despite long periods of disruption the business has traded well and has been able to capitalise on its premium levels of service and positioning, which in turn has produced a strong set of results.
Results
For the second year running the business was not able to trade without some form of government restrictions for 23 weeks. We started the year with the business shut, opening with outdoor trading space only on 12 April, which accounted for about half of our pubs and all of our inns and hotels.
The remaining properties opened on 17 May, with limited capacity due to social distancing measures, which were removed on 19 July. Trading throughout the key summer period was very encouraging and in the first half of the year the pubs and the inns traded strongly, particularly those with good outside areas, which benefited from investments made in anticipation of people wanting to get out and about but nervous of indoor areas.
The leisure market for our hotels was also strong and we were able to achieve strong growth in room rates in both the hotels and inns as a result of the strong summer staycation market. The corporate hotel market began to pick up once the summer leisure business tailed off in September, and this built steadily over the following month.
On 10 December we embarked upon Plan B measures in the face of trying to pre-empt the unknown Omicron variant. These measures mandated and advised the use of face masks in most public settings as well as COVID passes and guidance to work from home. Although hospitality settings were excluded for customers who were seated the measures destroyed confidence and the all-important Christmas season was largely lost.
Plan B measures were ended on 27 January, with the business starting to rebuild itself once more between 27 January and its year end on 31 March.
Despite these material levels of disruption, the financial performance has been resilient given the circumstances, with turnover increasing to £96.0m (2021: £32.2m; 2020: £98.1m) and an operating profit of £12.3m (2021: £(9.6)m; 2020: £12.6m). The earnings per share was 20.6p (2021: (17.8)p; 2020: 5.6p).
Net Debt at 31 March 2022 was £61.6m (2021: £78.8m; 2020: £65.4m), broadly similar to that at the interim results at 30 September 2021 despite the disruption to the winter season.
The Bank of England has now started to respond to higher inflation arising from the unprecedented amounts of monetary and fiscal stimulus funded through central government debt in response to the pandemic, and subsequently the actions of Russia in Eastern Europe.
Interest rates have now risen from their all-time low of 0.1% to 1% with market speculation that they will rise further. Increases in interest rates and the discount rate used to value the Company’s pension scheme and swap liabilities have a positive impact on their mark to market valuations. As a result, we have seen a gain of £3.8m on our swap liabilities and a decrease in our pension liabilities of £30.0m, such that the pension scheme is now showing a surplus of £10.1m for the first time in many years.
The profits retained for the year together with these mark to market gains provided a net asset value per share at the year-end of £3.62 (2021: £3.00; 2020: £3.02).
Acquisitions, Developments and Disposals
During the year we acquired The Red Lion at Burnsall to join our Inns. This is an iconic coaching inn, sitting alongside the River Wharfe in the Yorkshire Dales, and we have exciting plans to develop its 25 bedrooms and 5 holiday cottages in the coming year.
In addition, we have acquired a number of staff houses to assist us in recruiting team members in some of our more rural locations and we believe that this gives us an advantage in these local markets, particularly in Cumbria and the Yorkshire Dales.
The Company has sold 15 bottom end pubs and our old brewery site in Blackburn, with total proceeds of £7.5m.
Dividend
The Board understands that the dividend plays an important role for shareholders and that one has not been paid whilst the Company was making losses and sought to protect its financial health for the future. Now that the Company is making profits once more the Board recommends reinstating a final dividend. There is still much uncertainty about the pace and strength of any recovery, as well as an increasingly challenging domestic economic picture. The Board is mindful of maintaining a dividend distribution that is prudent and sustainable, with a view to increasing it as conditions permit, as a result the Board recommends a final dividend of 2.2 pence per share.
People
I have written above of the way that our teams have pulled us through the last two years, and we would not be in the strong position that we are without them. I was delighted that we recently held our Pride of Thwaites Awards, which celebrates and recognises the outstanding contribution that they make. Whilst I am immensely grateful to all of our team members, I would like to highlight the role that the area business managers of our tenanted pubs have played over the past two years. It has been far from easy and we have asked much of them, however they are justly our winners of our Team of the Year Award.
I would also like to thank our shareholders, who have supported the business so strongly over the past two years. I am pleased that we have been able to restart paying them a dividend and hopeful that we are embarking on a path of dividend growth.
Outlook
It is possible that the interruption of COVID may have been contained within the past two sets of financial results, certainly we all hope that is the case. From 1 April 2022 government financial support was largely withdrawn and the business is now trading with a new set of challenges.
Our new headwinds are of a different nature, largely outside our control, which we are working our way through. Staffing our properties, particularly our kitchens, continues to be a major issue and everywhere you turn inflation of our everyday goods is rampant, a dynamic that has not been present for many years.
Supply chain issues are continuing to cause major problems with on-going out-of-stock products and shortages. Investment schemes are experiencing long lead times and cost increases, both of underlying goods and from the exchange rate impact of a weak pound. Together these are threatening to undermine the feasibility of some projects that for the time being are expensive to deliver and so hamper our ability to invest.
As we grapple with these issues the country now, more than ever, needs its businesses to be trading freely and investing to help to pay off our national debt. The government is in a position to help businesses firstly by seeing through its promised reform of business rates and secondly by opening up the labour market by relaxing measures to allow some foreign workers to come into the country in a controlled manner through short term employment licenses. We continue to lobby the government strongly in both areas as well as other tax reforms to lessen the burden on pubs.
None of these issues are ours alone, we are only able to manage our own destiny and are confident in our ability to do so. To that end we continue to improve the quality of our estate and our offering and our recent trading over Easter has been promising. Our properties are well invested and attractive, ready to make the most of the coming summer season. Our customers are becoming more adventurous and people’s new socialising habits are becoming clearer.
Like us, our customers are ready to put the pandemic behind them, meet their friends and family and rediscover that time spent with others, and the enjoyment of our pubs, inns and hotels makes life a little brighter.