Daniel Thwaites [AQSE:THW] has been brewing beer in Lancashire since 1807, and still uses shire horses to deliver its kegs to local public houses. An anachronism, in the era of funky, ‘edgy’, urban breweries. Its tagline: “where tradition meets innovation” rings true for this brewery that’s been in the business for nearly 220-years.
Although craft beer has become all-the-rage in the last decade, Thwaites has been craft brewing, before craft ale was a thing. But Thwaites isn’t just about beer and horses, the company also owns a portfolio of ten hotels, thirteen historic inns, and more than 270 pubs, mainly in the north of England.
Up-scaling and modernisation
The core of its operations is its brewery. Thwaites moved from its previous premises in Blackburn, to a new craft brewery in the Ribble Valley in 2018, which increased the company’s capacity. Though Thwaites does boast a state-of-the-art laboratory on-site, Thwaites ales are still hand-made with the company seeing automation and mass production as anathema.
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Despite maintaining traditional techniques and processes, Thwaites still produces 1.5 million pints a year, and there remains a thirst for Thwaites products. In its last results for the six-months to end-September 2023, published in November, Thwaites reported a 4% increase in turnover year-on-year to GBP60.3m. Beer remains a profitable business, with Thwaites reporting operating profits of GBP8.8m, albeit behind the same period in 2022, due to property disposals.
Although rising interest rates have affected many businesses, Thwaites insulated itself from the worst effects of inflation and high interest rates through buying interest rate swaps, which the company said: “[have] had a positive impact on the mark-to-market fair value of our interest rate swaps, resulting in a decrease in the provision of GBP2.1m at the half year (versus 2022: GBP7.6m), and this positive movement is shown in our profit and loss account.”
Trading within banking covenants
Nevertheless, Thwaites’ net debt rose 15.5% y-o-y to GBP70.6m. However, Thwaites’ management said: “The business has comfortable headroom against total banking facilities of GBP82m and is trading well within its banking covenants.”
Thwaites pubs started strongly in 2023, though this tailed off as a result of the bad summer weather, but it made up on lost time in the Indian summer. The inns portfolio performed very strongly over the summer months with sales up 10% y-o-y and profits up 12%. The hotels and spas had slightly depressed trade, as a result of the cost-of-living crisis and consumers reining in their spending, but still saw a steady growth in sales, up on a like-for-like basis by 2% y-o-y and, said the company: “with a close eye on their cost base, particularly labour and utility costs”, profits increased by 5%.
The nature of the business means that brewers are always turning-over their portfolio of licenced premises, and Thwaites is no different. Although the brewer didn’t make any new acquisitions in the six-months to end-September 2023, Thwaites did temporarily close its Langdale Chase hotel in the Lake District for renovations. It reopened at the end of the year and was voted #3 in The Times and Sunday Times list of 100 best places to stay in the UK. The brewery sold six pubs over the half-year for GBP2.5m, making a GBP200,000 profit.
The company’s shares opened the week (20th May) at 76p, down 23.5%. Over the year-to-date Thwaites is down 26.8%. The company announced an interim dividend of 85p per share, up from 75p per share the year previously. Thwaites has a market capitalization of GBP44.7m.
Daniel Thwaites embracing technology, but staying true to its roots
Thwaites has been in the business for a long time. Some of its modern competitors such as BrewDog, the epitome of the funky, punky IPA house is having its own issues with shareholders and is stuck in a ‘will-they-won’t-they’ circle as to whether to IPO. However, Thwaites, like its shire horses, continues to plod forward.
Although Thwaites has heritage, it’s not averse to modernisation. Age doesn’t have to equal stagnation. The brewer is prepared to embrace new technology, but stay true to its roots. With its hospitality assets it has negotiated a path through tough economic climates, with a view of sunnier uplands on the horizon, to remain a relevant player in the hospitality trade. Thwaites’ focus on both tradition and innovation positions them well for the future, despite the recent dip in share price.
