Thwaites (Daniel) Plc Half-year Report
02 November 2022 - 8:00PM
UK Regulatory
TIDMTHW
INTERIM RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2022
CHAIRMAN'S STATEMENT
OVERVIEW
The Company has turned in a respectable performance over the last six months, a
period in which we have operated under the shadow of war in Europe and have
also looked to stabilise the business as support from the pandemic has been
withdrawn.
RESULTS
Turnover for the half year was £57.9m, which is a 21% increase compared to
turnover last year of £47.8m, which had disruption from closure and a benefit
from government support on VAT and Business Rates. Our turnover is 8% ahead of
the same period in 2019, the last clean set of trading results.
An operating profit of £9.9m for the half year compares to £9.3m last year and
£9.5m in 2019. The business has emerged successfully from a couple of difficult
years and whilst there are some very significant challenges ahead it is
financially stable.
Interest rates have started to rise, and rates in the UK gilt market have seen
an even more rapid adjustment higher, such that they are now materially higher
than the Bank Rate. Inflation has not proven to be as transitory as the Bank of
England had forecast and it seems that we may be entering a new period where
interest rates will be higher than we have experienced during the past decade
of cheap money, perhaps reverting to the historic norm of a 3-6% rate band.
This has had a positive impact on the mark to market fair value of our interest
rate swaps, resulting in a decrease in the provision of £7.6m at the half year
(2021: £0.5m), and this positive movement is shown in our profit and loss
account.
Net debt at 30 September 2022 was £61.1m (2021: £61.4m); a decrease of £0.3m
compared to last year, and down from £61.6m at 31 March 2022. The business has
considerable headroom against its total banking facilities of £83m.
PUBS AND INNS
Customers have been keen to get back into their local pubs, but the trading
picture is extremely mixed with a polarisation in performance. Some pubs are
trading very well, others are not and it is difficult to discern a pattern. The
summer was not as busy this year as last year, which benefitted from a
staycation boom that has not repeated to the same extent this year, although
hot weather in August was helpful.
Beer volumes have not recovered to pre-pandemic levels and there seems to have
been a structural volume decline of around 12%, which may yet recover. This is
due to several factors, but the main ones appear to be reduced opening hours
from staff shortages and a change in customer habits, either going out less or
going home earlier. There is also work to be done to encourage some of the
older customers to rediscover the pub and wean themselves off cheap supermarket
offers.
At the same time pubs face a broad front of increasing costs, particularly from
energy and whilst the government's intervention over the winter is extremely
helpful, it is not in itself a solution to longer term structural taxation
issues. Pubs are critical community assets and are overtaxed; the government's
review of business rates, due in the spring, must give them further relief and
other ways must be found through duty or VAT to provide them a sustainable
platform.
Our inns have performed very strongly over the past few years, but they are
facing a challenging market and whilst they traded up year on year their costs
have risen dramatically, particularly for food, meaning that margins are being
squeezed. In addition, the staycation market was much weaker this summer as
many people opted for overseas holidays.
HOTELS & SPAS
The hotels & spas have delivered a robust performance in sales, which are up by
27% year on year, however due to all of the factors already mentioned relating
to increases in their cost base and the withdrawal of government support,
profitability dropped by 4%. Sales are up approximately 13% on 2019, with
profits broadly flat in comparison, a statistic that paints the picture for the
rest of the market at the moment.
It has been encouraging to see demand from corporate customers recover, which
forms an important part of the hotel sales mix, and spa and treatment sales
have been another highlight as customers continue to treat themselves when they
visit us. Weddings have also performed well, as people have started to catch up
on celebrations that were postponed during the pandemic.
ACQUISITIONS, DEVELOPMENTS AND DISPOSALS
We have made no acquisitions during the period although we continue to look at
opportunities for high quality properties.
We have closed Langdale Chase and embarked upon the development and
repositioning of this hotel, which we acquired in 2017 and is situated on the
banks of Lake Windermere. This is a major undertaking and a significant
investment, due to reopen in November 2023, and we are very excited about its
prospects.
We have also continued to divest of pubs that no longer suit our requirements
and sold four properties in the period. We received total proceeds from these
disposals of £2.7m, making a profit on disposal of £1.3m.
EARNINGS PER SHARE
Earnings per share for the period is 22.6p per share, which compares to 10.7p
per share in 2021. The earnings per share has benefitted in each year from mark
to market gains on our interest rate swaps, these are unlikely to continue at
the same rate in the future.
DIVID
The Board is pleased to reinstate of an interim dividend at a rate of 0.75p per
share to be paid on 10 January 2023 to shareholders on the register on 9
December 2022. The Board will continue to review future dividend policy against
the significant economic headwinds that the business continues to face.
BOARD CHANGES
As previously announced, in line with the Yerburgh Family's Constitution, Oscar
Yerburgh passed on, by rotation, the role of family non-executive director to
his sister Rosy McKinley on 1 November 2022. I know that Oscar will continue to
take an active interest in the business, and is hugely supportive of, and
engaged in, its future development. I would like to thank him for his valuable
perspective and contribution to our board discussions over the past six years.
SUMMARY AND OUTLOOK
The Company has been sailing into strong headwinds in the first six months of
the year that are only strengthening. Despite that, our teams have continued to
deliver superb hospitality and service.
We have held the line in our relentless focus on quality, on which we will not
compromise. This has undoubtably cost us in the short term, in a market where
input costs are increasing, our margins are being eroded and our challenges
have been compounded by shortages of labour, which the government has done
nothing to address or alleviate. We have transitioned to a new world in which
we no longer rely on financial support from the government, and in doing so we
have absorbed cost increases, passed them on where we can and have held our
profits, which is a satisfactory performance.
The recent performance of the government has left people completely lost, and
between government turmoil and the relentless negativity of the media, customer
confidence is being rapidly eroded.
The cost of living is increasing, but people are beginning to adapt to
increasing costs, particularly on food, energy and mortgage rates. Although
this is likely to continue to present challenges, when people are in the mood
to go out and treat themselves, it seems that on average they are prepared to
spend a little bit more, a little bit less often.
The Company has fixed its own utility costs until March next year and is
watching the differential between spot energy prices and forward rates closely.
The fixed term loan with the Prudential offers us some protection against
rising interest rates, and they in turn alleviate pressure from both our
interest rate swaps and our legacy defined benefit pension schemes.
Despite the challenges that face us, we will find a way through the uncertain
and volatile world in which we find ourselves and whilst this winter is likely
to be extremely tough, we are investing for the future and are in a strong
financial position.
Richard Bailey
Chairman
2 November 2022
Profit and Loss Account for the six months ended 30 September 2022
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 2022 30 September 31 March
£'m 2021 2022
£'m £'m
Turnover 57.9 47.8 96.0
Operating profit before property disposals 8.6 9.0 12.3
Property disposals 1.3 0.3 1.0
______ ______ ______
Operating profit 9.9 9.3 13.3
Net interest payable (2.0) (2.0) (4.0)
Gain on interest rate swaps measured at fair 7.6 0.5 3.8
value
Finance income (charge) on pension asset (liability) 0.2 (0.3) (0.4)
______ ______ ______
Profit on ordinary activities before taxation 15.7 7.5 12.7
Taxation (2.4) (1.2) (0.6)
______ ______ ______
Profit on ordinary activities after taxation 13.3 6.3 12.1
______ ______ ______
Earnings per share 22.6 p 10.7 p 20.6 p
Balance Sheet as at 30 September 2022
Unaudited Unaudited Audited
30 September 30 September 31 March
2022 2021 2022
£'m £'m £'m
Fixed assets
Tangible assets 293.9 285.2 292.9
Investments 0.6 0.8 0.6
______ ______ ______
294.5 286.0 293.5
Current assets
Stocks 0.8 0.7 0.7
Trade and other debtors 8.0 10.6 5.5
Cash at bank and in hand 2.9 8.1 5.4
______ ______ ______
11.7 19.4 11.6
Creditors due within one year
Trade and other creditors (21.9) (17.7) (20.6)
Loan capital and bank overdraft (19.0) (3.5) (22.0)
______ ______ _____
(40.9) (21.2) (42.6)
Net current liabilities (29.2) (1.8) (31.0)
______ ______ ______
Total assets less current liabilities 265.3 284.2 262.5
Creditors due after one year
Loan capital (45.0) (66.0) (45.0)
Deferred tax (3.7) - (3.6)
Interest rate swaps (2.8) (15.9) (11.4)
______ ______ ______
(51.5) (81.9) (60.0)
Net assets excluding pension asset (liability) 213.8 202.3 202.5
Pension asset (liability) 10.8 (19.5) 10.1
______ ______ ______
Net assets including pension asset (liability) 224.6 182.8 212.6
______ ______ ______
Capital and reserves
Called up share capital 14.7 14.7 14.7
Capital redemption reserve 1.1 1.1 1.1
Revaluation reserve 74.8 73.6 75.1
Profit and loss account 134.0 93.4 121.7
______ ______ ______
Equity shareholders' funds 224.6 182.8 212.6
______ ______ ______
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 2022.
2. Taxation
The taxation charge is based on the estimated tax rate for the year.
END
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