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Morning Briefing for pub, restaurant and food wervice operators

Tue 11th Jun 2019 - Thwaites reports like-for-likes up 4% as pubs offset hotel performance, Ebitda up 1.5%
Thwaites reports like-for-likes up 4% as pubs offset hotel performance, Ebitda up 1.5%: North west brewer and retailer Daniel Thwaites has reported like-for-like sales increased 4% for the year ending 31 March 2019. Turnover rose 5.0% to £96.9m, compared with £92.2m the previous year. Ebitda increased 1.5% to £20.5m, compared with £20.2m the year before. Operating profit was level with last year at £12.9m as the performance of its hotels suffered year-on-year, offsetting gains elsewhere. Pre-tax profit fell to £4.5m compared with £9.8m the previous year as the company suffered from an “adverse mark-to-market valuation on our swap contracts of £2.5m and one-off pension costs of £1.2m associated with legislation to equalise historic pension benefits”. With a capital investment programme of £22.5m, net debt increased to £69.7m compared with £63.7m the year before. The board recommended a final dividend of 3.36p (2018: 3.36p). Executive chairman Rick Bailey said: “The company has had a good year and sales have increased in all areas. We have come to the end of several long-term projects and completed a three-year period of investment. As a result our businesses are in extremely good order and in a strong position to continue to grow sales. We have continued to invest in developing properties and have completed several large projects, including the £6.5m refurbishment of the Beverley Arms and the completion of our new brewery and offices. In addition, we substantially completed the accelerated programme of refurbishment in our hotels as well as the usual number of schemes in the tenanted estate. Overall, the investments we made in the year continue to exceed our hurdle rates and are performing well. In September we took on the operation of Funny Girls in Blackpool under licence from the administrator. The business includes a cabaret show venue, a nightclub and two pubs. The business has made a loss in the period as we have worked to resolve some of the issues that resulted in its financial difficulties. We have made good progress in stabilising the operation and have a plan in place to put the business on a firmer footing. We expect it to be profitable in the financial year to 31 March 2020. We didn’t acquire any properties in the year and will only do so where outstanding opportunities present themselves. Our freehold estate of tenanted pubs numbers about 240 and we have continued to dispose of pubs that no longer suit our requirements. We disposed of nine pubs during the year despite which operating profit increased 6% year-on -year and average Ebitda per pub increased 9%. During the year we completed 18 development projects at a cost of £2.3m and continued to make returns ahead of our hurdle rate of 20%. Major projects in the year have been completed at The Millstone in Darwen, the Queen Anne in Bury, the Britannia in Oswaldtwistle and the Holcombe Tap in Ramsbottom. We own and operate ten hotels. At the start of the year we restructured our hotel teams with the objective of mitigating some of these cost increases and improving the focus on service and sales, particularly to our front-of-house teams. We continued the accelerated programme of refurbishment in the hotels, which has largely come to an end. The hotels are in materially better condition than they were a few years ago, although these refurbishments have increased the depreciation charges. In the current year we will see less disruption as we have few schemes planned. We are finalising our development plans for Langdale Chase, which we acquired in 2017, and subject to planning permission the work will start in early 2020. The performance of the hotels has been disappointing with a combination of increased costs and various factors contributing to disruption. This, together with increasing competition in Bristol and Southampton, meant operating profits dropped 20%. In response to this and the other challenges we see in the market we are looking at every area of the business to find ways to streamline costs and grow sales. The pubs and inns each had a strong year, which was offset by the performance of hotels and spas. Despite the issues we face, we aren’t prepared to compromise the quality of offering we provide. After years of significant capital investment, this next year is a time for consolidation and to focus on fine-tuning our core business. We have a reduced capital investment programme but are ever mindful to maintain the quality of our properties. The excellent weather over Easter and in the early part of our new financial year means we have got off to a good start, which is encouraging. The business is in good health with talented and motivated teams and we are well positioned to grow and make further progress in the year to come.”

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