Annual Report & Accounts 2012 - Thwaites Brewery · 2018. 4. 26. · Daniel Thwaites PLC Report &...

Annual Report & Accounts 2012

Daniel Thwaites PLC is the North of England’s major independent family brewer.

Founded in 1807, Thwaites has a rich heritage providing welcoming hospitality and award-winning beers that are brewed with skill and care from the highest quality ingredients.

Based at the Star Brewery in Lancashire, we have an estate of 350 pubs, a small but growing group of coaching inns and four-star regional hotels and spas, trading under the Shire Hotels & Spas banner.

In addition, we supply a full range of drinks to many independently owned pubs, clubs and restaurants in the North of England and beyond, and a wide range of bottled beers to most major supermarkets.

Contents

1 Financial Highlights

2 Chairman’s Statement

4 Operating Review

11 Financial Review 13 Risks & Uncertainties

15 Corporate Social Responsibility

17 Board of Directors

18 Report of the Directors

20 Corporate Governance

22 Auditor’s Report

23 Group Profi t & Loss Account

24 Group Balance Sheet

25 Group Cash Flow Statement

27 Parent Balance Sheet

28 Accounting Policies

30 Notes to the Accounts

46 Notice of Meeting

49 Long Serving Employees

50 Shareholder Information

51 Annual General Meeting

Daniel Thwaites PLC Report & Accounts 2012

1

Financial Highlights

• Turnover up 8% to £137.2m

• Operating profi t (before exceptional items) up 1% to £12.4m

• Exceptional provision to settle £50m of fi xed interest rate swap contracts of £11.9m

• Property revaluation defi cit of £14.7m (£3.7m impairment to profi t and loss account)

• Dividend maintained at 4.46p per share

• Net Debt increased by £5.0m to £45.0m

Turnover £m

2008 2009 2010 2011 2012

161.4 158.5

135.2126.7

137.2

EBITDA £m

(before exceptionals)

2008 2009 2010 2011 2012

28.4 27.2

21.4 20.2 20.3

Operating profi t £m


2008 2009 2010 2011 2012

15.616.9

13.312.3 12.4

Net debt £m

2008 2009 2010 2011 2012

142.3 136.0

48.8 40.0 45.0

Adjusted earnings per share pence


2008 2009 2010 2011 2012

12.314.1

5.7

8.6

6.8

Earnings (loss) per share pence

2008 2009 2010 2011 2012

23.7

(1.6)

11.48.6

(13.0)

Profi t before tax £m


2008 2009 2010 2011 2012

11.3

5.77.0 6.7

9.9

Profi t (loss) before tax £m

2008 2009 2010 2011 2012

9.9

1.0

9.07.0

(8.9)


2

Chairman’s Statement

ResultsI am pleased to report that we have made steady progress in what has been another challenging year for the economy. Group turnover for the year of £137.2m represents an 8.3% increase on last year. Operating profi t (before exceptional items) of £12.4m represents a 1% increase on last year.

During the year we have increased the level of investment in our pub estate, and made a number of acquisitions. This has resulted in net debt increasing from £40.0m at 31 March 2011 to £45.0m at 31 March 2012, well within our banking facilities.

Exceptional itemsThe results for the year include two exceptional items totalling £15.6m before tax.

In response to the continuing challenges of the property market, particularly in the North West, we have undertaken a thorough review of the valuations of our property portfolio and have reduced the overall book value by £14.7m to £274m, a reduction of 5% of the total fi xed asset value. This downward revaluation of £14.7m represents a reduction against previous upward revaluations of £11.0m and a £3.7m reduction against original cost which has been charged to the profi t and loss account.

When The Staff ord Hotel was sold for £77.5m in 2009, these proceeds were used to pay down the majority of our unsecured bank debt, leaving £75m of fi xed interest rate swaps on which we were committed to paying the diff erence between LIBOR and the fi xed rates for periods of up to 22 years. During the last financial year the structure of these financial instruments resulted in the fi xed interest rate swaps increasing to £95m, on which interest of £2.9m was

paid in the year. Due to the continued turmoil in the financial markets and the adverse impact upon the valuation of our swap contracts, we have undertaken a review of our longer term funding requirements, including the costs of the new brewery, and have taken the decision to pay off swap contracts that are not highly likely to be used against future borrowings. We have therefore made a provision for the termination costs of £50m of our swap contracts for £11.9m before tax, which will be paid after the year end.

New breweryIn July 2011 we announced our intention to move from our brewery site and build a new brewery. We are working with Sainsburys and Blackburn with Darwen Council to seek to develop our existing city centre site. Since July we have been searching openly for a new site and our search has entered its feasibility stage. We expect this medium term project to take up to four years and that reinvestment in our brewing activities will underpin the long term growth in profi tability of our Beer Company.

Acquisitions and disposalsThe company’s strategy is focused on growing our Beer Company, improving the quality of our tenanted pub estate, developing our managed operation, Thwaites Inns of Character and continuing to maintain the quality of our Shire Hotels and Spas.

During the year we acquired three good quality tenanted pubs and the Fleece at Cirencester which we have since developed into a Thwaites Inn of Character. We sold 11 pubs from the bottom end of our estate, and an inn that did not fi t the Inns of Character model.

On 16 January 2012 we acquired the Free Trade business of Hyde’s Brewery. The sales and technical services team transferred across to us together with their customer accounts which have been successfully integrated into our existing free trade business.

Political interventionOur industry continues to be impacted by government intervention in the form of increased regulation and taxes. The duty escalator introduced by the Labour government has been supported by the current coalition government and is creating unsustainable pressures and long term damage to the pub industry. This year we have paid £52m of tax in the form of beer duty, VAT, corporation tax, PAYE and National Insurance. This equates to 38% of our turnover and is contributing to further pub closures. We are lobbying our politicians to do away with the duty escalator as well as supporting action for reduced VAT in the pub trade.

DividendAn interim dividend of 1.10p (2011: 1.10p) was paid in January 2012 and the Board recommends a fi nal dividend of 3.36p (2011: 3.36p). This would make total dividends for the year the same as last year at £2.8m, which we feel is appropriate in these times of continuing economic uncertainty.

Board We have carried out a review of the Board in order to simplify its structure. Consequently in October 2011, Tony Spencer stepped down from the Board, but continues in his role as Managing Director of Shire Hotels. I would like to thank Tony for his contribution to the Board over the last fi ve years.

PeopleI would like to welcome all those who have joined

us during the year, not least those that joined us from Hyde’s, and wish them every success with the Company.

I would also like to thank all our staff , customers, suppliers and shareholders for their continued commitment and support during the challenging conditions that we continue to face.

OutlookMany of our pub customers are suff ering declining real incomes which means that discretionary spend remains under pressure. As a result we are fi nding that they are becoming more event and weather sensitive. In the hotels our corporate customers are continuing to control costs carefully. Whilst we remain positive about our prospects over the medium term and the actions we are taking to underpin those, the ongoing recession and continuing political uncertainty in Europe are likely to ensure that the trading environment will be tough in the coming year.

Mrs Ann Yerburgh, Chairman 26 June 2012

Chairman’s Statement

3

Above: The Fleece at Cirencester following its relaunch. Below: The Eagle and Child, Ramsbottom.

OverviewWe have made encouraging progress against a backdrop of continuing economic uncertainty, high input cost inflation and the squeeze on consumer spending.

Our strategy remains focused on the four key parts of the business and we have plans to continue to invest in them to underpin our future growth.

Beer Co and Pubs

Thwaites Beer Co

Our focus on cask ale continues to show signifi cant progress with volumes up 20% year on year for our core ales. In particular, Wainwright has continued to grow, with its volumes 80% up on the previous year. Our ales are winning awards, with Lancaster Bomber winning a gold award, and Wainwright a silver award at the European Beer Star awards in Nuremburg in June 2011. We have developed our branding, and we launched a re-branded Lancaster Bomber in May 2012 with a new striking design inspired by the brand’s heritage.


4

Operating Review

Revenue EBITDA Operating Number of profit Pubs

90

.7

98.

6

13.3

13.2

7.9

7.9 36

1

341

Subsection heading (if not duplicating page heading)

5

Building on the success of our ‘Signature Ale’ range which was fi rst introduced in 2011, the 2012 range has been launched, covering a wide spectrum of brewing styles and ABV strengths. This year the range will be brewed in ‘Crafty Dan’ – our new small craft brewery which was commissioned in November 2011. We have had excellent feedback on the variety of beers that we have produced. Furthermore, the range was recognised at the prestigious Design Eff ectiveness Awards in February 2012, where the packaging design received a Gold award. The success of the range has created demand for the introduction of ‘Quarterly Favourites’, bringing back in 2012, the most popular of the 2011 range for quarterly periods to provide consumers with increased choice on our bars.

We have maintained the development and growth of our free trade business, and on 16 January 2012 we acquired the free trade interests of Hyde’s Brewery Limited. The Hyde’s sales and technical service teams transferred across together with some 250 customers, the geographic spread of which complemented our existing customer base. This business has been fully integrated and has helped contribute to our total free trade volumes increasing by 11% year on year. The high levels of service that we are able to off er together with the popularity of our cask and keg ales is helping to sustain this growth against a declining market.

During the year we have expanded the distribution of our ales, led by Wainwright, into the national pub companies, with volumes increasing by 12% year on year.

The announcement, in July 2011, of our intention to build a new brewery will have a signifi cant impact on the development of our beer company. Our current brewery, which was opened in 1966, has had substantial ongoing investment, but is reaching the end of its economic life and does not provide the fl exibility and cost structure needed for us to continue to grow our beer company in the longer term. We are working in partnership with Sainsburys who have agreed to purchase our existing site, subject to planning permission for a new supermarket. The search for a new site is underway and we are carrying out detailed feasibility studies. However, given the planning and construction processes, it is likely that any move will be three to four years away.

Above: ‘Crafty Dan’ opens in November 2011. Below: Re-branded vehicle fl eet.


6

Thwaites PubsWe have an estate of around 350 pubs, which following the completion of our managed house transfer programme in April 2011, operate largely on a tenancy basis. Our pub estate covers a broad area from Cumbria to the Midlands, and from North Wales to Yorkshire.

Our strategy over recent years has been to invest in developing the quality of our pub estate with an extensive refurbishment programme and to acquire good quality pubs whilst churning the bottom end of our estate. We have looked to fi nd innovative solutions to tenant recruitment and provide comprehensive support packages to help our tenants maintain their profi tability during these challenging times for the pub industry. We were absolutely delighted that these eff orts have been recognised by the industry culminating in us winning the Publican Awards 2012, Tenanted Pub Company of the year.

During the year we completed 85 development projects at a cost of £3.8m, and we have a similar number of projects in the pipeline for the coming year. We are very pleased with the results of our investment programme, which are making returns ahead of our hurdle rate of 20%, and of equal importance is helping to generate additional, more sustainable incomes for our publicans. In addition, we have continued to roll out the new signage and branding that we introduced last year and have rebranded 40% of our estate. This exercise will be completed over the next three years.

In what has been yet another diffi cult year in the tenanted trade, we have seen the results of our

investment programme and support packages for tenants have a clear impact on volumes with year on year beer volumes falling by 2% compared to a 9% fall in the previous year.

We have a range of fl exible agreements in order to ensure as many of our pubs as possible continue trading. In particular, during the year, we launched our ‘WayInn’ agreement, which provides a lower risk entry to the pub market for individuals who either do not have the necessary funds to invest in taking on a tenancy or are risk averse. This revenue sharing model has now been rolled out into 10 pubs.

Our annual tenanted awards ceremony was held in April 2012, and we were again delighted by the quality of the submissions and made awards in 7 categories. Our congratulations go to the Black Bull, Starling, Bury which won our Pub of the Year Award.

We have continued to churn the bottom end of our pub estate actively during the year, and sold 11 pubs that were not well placed to make satisfactory future returns at a net loss of £0.2m after disposal costs.

During the year we acquired 3 tenanted pubs, The Anglers in Haverthwaite, The Kings Arms in Burton on Kendal and The Malt Shovel in Barkby in Leicestershire. Each of these pubs has been integrated successfully into our pub estate and is trading well. We continue to seek to acquire further good quality tenanted pubs with balanced income streams.

In April 2012 we announced that we had agreed a deal to buy The Foresters Arms at Shevington Moor, Wigan, which would be run by Prospect Brewery, which is our fi rst pub operating partnership with a micro-brewery. The pub has undergone a complete refurbishment and reopened as the Silver Tally on 1 June 2012.

The combined eff ect of continued investment in our core properties, disposing of pubs in the tail of our estate and acquiring good quality tenanted pubs will ensure over the medium term that we have a high quality, sustainable pub business.

Hotels and Inns

Thwaites Inns of CharacterIn 2009 we transferred a small group of managed houses with bedrooms into a newly formed Inns division which we manage internally. These inns have a busy bar as the hub, together with a quality food off ering and comfortable accommodation.

Our strategy is to develop this division over the next few years. We completed our fi rst acquisition on 4 April 2011, of The Fleece, Cirencester, which is located in the Cotswolds. The property underwent a substantial refurbishment which was completed at a cost of £1.1m. The Fleece incorporates a

7

Opposite, top: The Red Lion, Ellesmere. Above: The Lister Arms, Malham.

Revenue EBITDA Operating Number of profit Hotels/Inns

36.0 38

.6

8.3

8.5 5.

7 5.9

14 14

Winner

WINNERWINNERTENANTED PUBTENANTED PUBCOMPANY OFCOMPANY OF

THE YEARTHE YEAR

Starbucks franchise, which is our second franchise following the success of the Starbucks incorporated into the Lodge on the Park in Bristol in 2008.

Following its refurbishment, the Fleece was awarded the AA 5* Inn status, only the 27th inn in the UK to achieve this.

The Millstone at Mellor was also the proud winner of the Hotel of the Year award in the Lancashire Life Food and Drink awards 2011-12.

During 2011 we transferred the Golden Lion in Settle from our pub estate back under the management of the Inns division, where it underwent a £0.5m refurbishment and is now trading very successfully. We have identifi ed a further two tenanted pubs which we will transfer into the inns estate following refurbishment during 2012.

In January 2012, we sold the Fernhurst, and Star Lodge, Blackburn, as it did not fi t easily with our Inns of Character. We are actively continuing to seek suitable properties to acquire and develop into our inns estate across a broad geographic area.

Shire Hotels and SpasWe own and operate six full service four star regional hotels, which are geographically spread across the north and south of England.

Over the last two years we have experienced a steady recovery in the performance of the hotels with like for like sales increasing by 4% last year, however, it has been clearly evident that the rate of economic recovery has been faster in the south than the north of England.

With business confi dence remaining at a low level the residential conference market has continued to be weak, therefore we have focused on the leisure sectors to improve room occupancy and have repositioned our food and drink off erings. We have developed our weddings business and seen a steady increase in bookings. At The Kettering Park Hotel and Spa we have constructed a new al fresco wedding feature which is proving very popular.

We have seen our spa memberships increase to over 6,000 by introducing a package of different membership options, this increase is particularly pleasing in a market that has seen many people cancelling memberships to save money.

We are committed to maintaining the high quality of our hotel properties with an ongoing refurbishment programme. Plans for 2012 include the launch of a revised restaurant off ering, the implementation of new customer facing IT systems and the continued refurbishment of bedrooms.


8

Above: The Fleece at Cirencester. Opposite: The ‘al Fresco’ wedding feature at Kettering Park Hotel.

Operating Review

9

Summary and outlookWe are pleased with the results we have achieved in the year ended 31 March 2012, in what continues to be an extremely challenging economic environment. The current year has started well, with results in line with expectations, and we are cautiously optimistic about the impact of the various national events over this summer.


10

Awards

Publican Awards 2012Best Tenanted/Leased Pub Company (200 plus sites)

European Beer Star Awards 2011Lancaster Bomber – gold medal in English style bitter category

Wainwright – silver medal in English style golden ale category

International Beer Challenge 2011Old Dan – bronze medal in design and packaging category

Brewing Industry International Awards 2011Wainwright – Gold AwardSmooth – Gold AwardFlying Shuttle – Bronze Award

Design Eff ectiveness Awards 2012Signature Range – gold in drinks packaging category

Thwaites Awards for Excellence 2012 Black Bull in Bury – Pub of the Year & Best Investment Award. The Eagle and Child, Ramsbottom – Best Newcomer & Best Food Award.

Lancashire Life Food & Drink Awards 2011-12 The Millstone, Mellor – Hotel of the Year.

Operating Review – continued

Winner

ResultsTurnover for the year ended 31 March 2012 increased by 8.3% to £137.2m. Turnover in the Beer Company and Pubs increased by 8.7% to £98.6m due to 14% growth in Free Trade, due to a combination of the acquisition of Hydes Brewery’s Free Trade business, and organic growth, an 18% growth in sales to the National Pub companies and a 2% growth in the sales in the pub estate. Turnover in the Hotels and Inns increased by 7.2%, due an increase of 4% in the Hotels and an increase of 20% in the Inns.

Operating profi t, before exceptional items, increased by 1% to £12.4m.

Business ReviewThe key issues facing the Group are covered in the Chairman’s Statement, Risks and Uncertainties section and the Operating Review. The KPI’s used by the Group to monitor its overall fi nancial position can be summarised as follows:

2012 2011

Group Turnover 137.2 126.7 EBITDA 20.3 20.2 Operating Profi t (before exceptionals) 12.4 12.3Profi t Before Tax (before exceptionals) 6.7 7.0Net Debt 45.0 40.0 (Loss) Earnings Per Share (13.0) 8.6 Adjusted Earnings Per Share 6.8 8.6 Beer Co and Pubs Revenue 98.6 90.7 EBITDA 13.2 13.3 Operating Profi t 7.9 7.9 Average No. of Pubs 341 361 Hotels and Inns Revenue 38.6 36.0 EBITDA 8.5 8.3 Operating Profi t 5.9 5.7 Average No. Hotels and Inns 14 14

The principal non-fi nancial indicators monitored by management are:

Beer Co and PubsProduction indices, warehousing and logistics indices, utility indices, beer quality, health and safety incidents, beer volumes by sector and tenant recruitment.

Hotels and InnsRoom occupancy rates, customer complaints, health and safety incidents, spa memberships, and wedding and event numbers.

Exceptional itemsExceptional items amount to £15.6m before tax, and comprise a property impairment charge of £3.7m and a provision for the settlement of fi xed interest rate swaps of £11.9m.

The total property impairment amounts to £14.7m, of which £11.0m is a reduction against the revaluation reserve and the remaining £3.7m is a reduction against historic cost and is charged to the profi t and loss account. In the current challenging property market, we have carried out a full review of our property portfolio and believe that we have taken a realistic view of valuations.

When the Stafford Hotel was sold for £77.5m in September 2009, the proceeds were used to settle the majority of the Company’s unsecured bank debt, leaving £75m of fi xed interest rate swaps on which the company was committed to paying the diff erence between LIBOR and the fi xed rates for periods up to 22 years. During the year the structure of these fi nancial instruments resulted in the notional value of the fi xed interest rate swap contracts increasing from £75m to £95m, on which interest of £2.9m was paid in the year. Due to the continued turmoil in the fi nancial markets and the adverse impact upon the valuation of our swap contracts, we have undertaken a review of our longer term funding requirements, including the costs of the new brewery, and have taken the decision to pay off swap contracts that are not highly likely to be used against future borrowings. We have therefore made a provision for the termination costs of £50m of our swap contracts for £11.9m before tax, which will be paid after the year end.

11

Financial Review


12

Interest payableNet interest payable increased by £0.3m to £6.2m, due to an increase in the notional value of fi xed interest rate swaps from £75m to £95m during the year and an increase in net debt from £40.0m to £45.0m. Interest costs are high compared to the level of net debt due the impact of £95m of fi xed interest rate swaps. The Group will continue to incur a raised level of interest cost on the swaps until LIBOR increases to pre-recessionary levels, although this cost will reduce next year as a result of the exceptional provision that has been made to settle £50m of the swap contracts.

TaxationThe tax charge on profi t for the year before exceptional items was £2.4m, an eff ective rate of 36% (2011: 24%), due to a reduction in capital allowances.

The tax credit on exceptional items of £3.1m is a result of allowable losses created by the crystallisation of the £11.9m swaps provision.

Earnings per shareEarnings per share after exceptional items fell from 8.6p to a loss per share of 13.0p. Earnings per share before exceptional items decreased from 8.6p to 6.8p.

DividendsAn interim dividend of 1.10p has been paid and the Board recommends a fi nal dividend of 3.36p, which will make a total of 4.46p for 2012 (2011: 4.46p).

Cash fl ow and fi nancingThe Group’s net borrowing increased by £5.0m, from £40.0m at 31 March 2011 to £45.0m at 31 March 2012.

The Group made contributions to the pension scheme of £2.5m (2011: £2.7m). Whilst this scheme was closed in August 2009, the Group is committed to funding the defi cit on the scheme which was £18.2m at 31 March 2012, an increase of £8.5m from £9.7m at 31 March 2011.

The Group is currently in the process of renewing its existing bank facilities of £30m, which in addition to £45m of long term debt means the total facilities are

£75m. These total facilities of £75m should be sufficient to meet the short term needs of the Group, although further facilities will be required once the plans for the new brewery are fi nalised.

PropertyDuring the year we sold 11 pubs and an Inn for a total of £4.0m, generating a loss against book value, and after disposal costs, of £0.2m. We also acquired 3 pubs and an Inn at a cost of £3.2m.

In line with our accounting policy, 20% of our properties were subject to a formal revaluation, and an impairment review was carried out on the rest of the property estate. This resulted in a reduction in the total value of our property portfolio of £14.7m of which £11.0m was a reduction in the revaluation reserve and £3.7m was charged to the profi t and loss account.

Treasury policy and fi nancial risk managementTreasury policies are subject to Board approval. All borrowings are in sterling and comprise a mixture of fi xed interest loans and facilities carrying LIBOR related fl oating rates. The Group has interest rate swaps for £95m where it is committed to paying the diff erence between LIBOR and fi xed interest rates. As noted above a provision of £11.9m has been made to settle £50m of these interest rate swap contracts.

Financial Review – continued

13

Risks and Uncertainties

Risks

Economic

The company’s business operations are sensitive to economic conditions and in particular to consumer spending. Delays in economic recovery could aff ect consumer spending and therefore our revenue.

There is an on-going risk of increases in the costs of key inputs including raw materials, utilities and distribution costs.

Our tenants and customers our also aff ected by the economic climate, giving rise to a higher risk of tenant defaults and business failures.

Property values are also impacted by the economic uncertainty, along with our ability to make disposals at appropriate values.

Regulatory

In recent years the government has increased its focus on alcohol consumption as public concern over alcohol related social problems and the associated health issues has increased. There is a risk that further legislation, including additional tax, may adversely impact the business.

The beer tie continues to be the subject of much scrutiny in the UK. Despite the EU’s block exemption, it could remain so in the future. Changes to the tied model could impact our strategy and relationships with tenants.

A failure to comply with health & safety legislation (including food safety, fi re legislation) could lead to injury, illness or the loss of life of our tenants, customers or employees, with a resulting reputational impact.

The company operates several pension schemes including a defi ned benefi t pension scheme. Although the defi ned benefi t scheme is now closed to new entrants, there remains a signifi cant pension liability on the balance sheet. There is a risk that a change in legislation could impact cash fl ow by requiring higher contributions.

Mitigation

Our business is diverse encompassing brewing, pubs, hotels and inns, with off ers targeted at diff erent customer groups, as well as geographically spread. The Board regularly review the impact of the economic conditions on the company’s strategic plans.

All sections of the business are reminded of the need to keep cost base low, and our purchasing team negotiates to protect against signifi cant cost increases on major inputs.

The fi nancial health of our tenants is monitored and support off ered where appropriate. New tenants are subject to detailed credit reviews.

The long term value of our properties is regularly assessed. Decisions around investment and disposal are made on a site by site basis.

We are committed to acting responsibly and promote safe drinking campaigns in our marketing. We ensure that our training covers all aspects of licensing legislation.

Our tenanted code of practice has further improved the transparency and openness of our tied agreements.

We have a range of policies and procedures in place to ensure compliance with regulatory requirements in relation to health & safety. Independent risk assessments and audits are carried out, and recommendations acted upon. We record and investigate all incidents.

Management continue to closely monitor developments in relation to pension scheme funding. The company has a plan in place and is committed to reducing the defi cit.


14

Risks

Operational

Business operations could be adversely aff ected by any lengthy interruption in supply or large cost increases from suppliers which cannot be passed on to customers.

We are reliant on information systems and technology for all areas of the business which could adversely aff ect operations if they were to fail for any length of time.

The Group operates in highly competitive markets and our ability to compete eff ectively very much depends on our success in distinguishing the quality of our products and services from those off ered by others.

Financial

It is vital that we ensure that sufficient andappropriate bank facilities are in place to meet the needs of the business.

We are reliant on maintaining sound systems of internal control to prevent the risk of fraud or material error in the fi nancial statements.

People

Our business is highly reliant on the people we employ. Labour or skill shortages, high employee turnover or failure to recruit and retain the best employees and tenants may impact our ability to deliver our operational and strategic objectives.

Mitigation

We have a detailed risk mitigation and management plan in our production and distribution activities. We review the fi nancial position of our major suppliers to assess the risk of them ceasing to be able to trade.

An IT disaster recovery plan is in place, which is regularly updated and tested. We are currently in the process of investing signifi cantly in the company’s IT and will be moving to a new system in 2013.

We regularly review and invest in our brands and marketing in order to distinguish our products and services, and are committed to ensuring quality throughout.

Business decisions are taken with regard to theirimpact on banking arrangements. We meet regularly with our bankers and provide them with appropriate information on the performance of the business. A signifi cant proportion of our debt is long term, by way of debentures with the Prudential.

As we move towards the implementation date for the new ERP system, we are performing a full review of our internal control systems to ensure that they remain suitable.

We aim to recruit the best people with the right skills and off er training and development opportunities to ensure that we retain them.

Riosks and Uncertainties – continued

15

Corporate Social Responsibility

The Board ensures that the Group works to improve performance across a wide range of Corporate Social Responsibility activities by identifying the key CSR issues, agreeing actions for improvement and measuring performance against these objectives.

Our CSR activities can be summarised in the following areas:

EnvironmentWe recognise that our activities aff ect the environment in a number of ways including use of energy (gas, electric, fuel) and water, noise, odour and greenhouse gas emissions, packaging and production waste and use of raw materials.

In order to measure the environmental impact the brewery has on the environment, the site continues to monitor utility usage against production volumes using the following KPI’s:• Electricity (kWh per barrel brewed/packaged)• Natural Gas (KWH per barrel brewed/packaged)• Water (m3 per barrel)• Trade Effl uent (COD, SS and volume)

The brewery participates in the Climate Change Levy scheme and is a member of a Climate Change Agreement (CCA) for the Brewing sector which drives to reduce gas and electricity consumption in line with production levels.

We have identifi ed and installed a range of energy saving measures across all areas of the business including:

• Hotels & Inns: installation of low energy lighting, energy effi cient air conditioning, centrally controlled heating, water saving devices in toilet cisterns, power perfector monitoring devices, water saving shower heads, low energy hand dryers and use of equipment with self-standby modes. From April 2012 we have moved our electricity supply in the hotels to renewable energy sources.• Pubs: we are rolling out a programme to ensure all our properties have an appropriate level of loft and other insulation. We have also distributed an ‘energy saving’ information brochure to our tenants. • Brewery: a copy of our Brewery Environmental Statement can be found on our website.

Support for the communities in which we operateThe communities in which we operate are vitally important to us, particularly in our North West heartland. During the year we continued to support the development of Blackburn Youth Zone, a facility for young people in the Blackburn area to meet and develop their sporting and social skills in a safe and supportive environment, and our 2012 chosen local charity, The East Lancashire Hospice.

We encourage our pubs to become the centre of their communities and the Group supports their work in sponsoring local events. In the last fi nancial year, through raffl es, auctions and other fundraising activities, our pubs raised money for a range of charitable causes. We plan to introduce a ‘Best Charity Fundraising Pub’ award in our annual awards for excellence scheme. Our free trade teams spread this support outside our tied estate by sponsoring many sporting clubs in their areas.

Support for our tenantsWe pride ourselves on working with our tenants to give them the best chance of success. In partnership with an award winning training provider we off er a wide ranging training programme specifi cally designed for the licensed and leisure trade, to accompany a comprehensive support package carried out in the pub with our Area Business Managers.

From January 2012, new codes of practice have been introduced to ensure that new tenants understand fully what to expect when taking on a tenancy.

Responsible retailingAlcohol misuse and underage drinking and their associated health and social problems are matters of legitimate concern in the UK today. We take these issues seriously and are committed to ‘responsible retailing’ to reduce their impact.

We are supporters of ‘Drinkaware’ (drinkaware.co.uk), an independent UK alcohol awareness charity that provides consumers with information about the eff ects of alcohol on their lifestyle. Through education programmes, grants, expert information and resources it aims to promote responsible drinking and help reduce alcohol misuse.


16

We encourage our tenanted pub estate to support and sign up to ‘Best Bar None’ (BBN) schemes where they exist, and promote membership of their local Pubwatch schemes.

The Group is a member of the British Beer and Pub Association (BBPA). We are committed to pursuing the BBPA’s objectives of supporting the interests of the British Beer and Pub industry, including working with the Government to promote responsible drinking.

We are committed to acting as a responsible retailer and promote our belief that the safest and most responsible place to consume alcohol is in a well-managed community pub, off ering a relaxed and safe environment.

Food safety and supplyIn the year to March 2012, we spent £4.0m on purchasing food, sourcing over 3,700 lines from more than 40 suppliers. We are determined to ensure

that the goods we buy are produced ethically, and are socially and environmentally sustainable. We strive to maintain consistently high standards of food quality and hygiene. We ensure that our food suppliers have appropriate accreditation with regards to food hygiene and quality.

Our pubs, hotels and inns source locally wherever possible, supporting the local community. By keeping our external suppliers under review we are able to minimise food and delivery miles. In our brewery operations, we are one of the fi rst companies to experiment with the use of UK produced low carbon malt.

PeopleOur people are the core of our business and our future success will be delivered through them. The family ethos has remained evident as the Company has grown. Many employees stay with Daniel Thwaites for many years as recognised by the list of long serving employees included on page 49.

We respect our employees by encouraging their development and training, and provide a safe working environment. We are committed to ensuring that all employees receive equal treatment regardless of nationality, race, religion, ethnic origin, sex, disability or age.

Prince Edward meets volunteers at Blackburn Youth Zone.

Corporate Social Responsibility – continued

17

Board of Directors as at 31 March 2012

Chairman

Mrs Ann YerburghAnn Yerburgh (64) was appointed to the Board in March 1974 and was appointed Chairman in August 2000.

Executive Directors

R.A.J. Bailey, BA, A.C.A.Chief Executive Offi cerRichard Bailey (38) joined the Board as a non-executive director in November 2002. He joined the company as Business Development and Strategy Director in November 2009 and was appointed Chief Executive in March 2011. He qualifi ed as a Chartered Accountant with KPMG and has a BA in Economics from Durham University. He previously worked in the fi nancial services industry with Catalyst Corporate Finance and Société Générale.

K.D. Wood, MEng, A.C.AFinance DirectorKevin Wood (46) joined the Board as Finance Director in March 2010. He qualifi ed as a Chartered Accountant with Pricewaterhouse Coopers, and has a MEng in Chemical Engineering from Nottingham University. He was previously Finance Director of Accsys Technologies plc and held senior fi nance roles with Arla Foods, Express Dairies and Lloyds Pharmacy.

Independent Non Executive Directors

Peter Boddy, BA, MBAPeter Boddy (47) joined the board as a non-executive director in October 2007 and was subsequently appointed Chairman of the remuneration committee in 2010. He previously held executive Board positions with Maxinutrition Limited, Fitness First UK, Megabowl Limited and Big Steak Pub Co. He has an MBA from Warwick Business School and a BA in Economics from De Montfort University.

Rupert Thompson, MA, MBARupert Thompson (53) joined the Board as a non-executive director in September 2010. He has an MA from St Andrews University and an MBA from Warwick University and has wide experience in pub operations, brand marketing and strategic analysis. He is currently Chairman of Hogs Back Brewery and of The Beer Academy, and a non executive director of Thatchers Cider. Previous roles include Chief Executive of Refresh Group Limited, Brewing and Tenanted Director of Morland Plc and Brand Director at Bass Brewers Limited.

Non Executive Director

Arabella Yerburgh, BSc, MAArabella Yerburgh (37) joined the Board as a non-executive director in September 2010. Arabella holds an MA in Curating Contemporary Design from Kingston University and has a background in design, brand consultancy and marketing.

Company Secretary

Susan Woodward, ACISSusan Woodward (50) was appointed Company Secretary in December 2004. She joined the company in 1978, and is a qualifi ed Chartered Secretary.


18

Report of the Directors

The directors of Daniel Thwaites PLC submit their report and accounts for the fi nancial year ended 31st March 2012.

ActivitiesThe principal activities of the Group are the brewing and packaging of beer, the distribution of wines and spirits, and the operation of hotels, inns and public houses.

Business review and future developmentsThis report should be read in conjunction with the Chairman’s Statement, Operating and Financial Reviews, Risks and Uncertainties and Corporate Social Responsibilities section on pages 2 to 16, which are incorporated in this report by reference and which provide further details of the Group’s activities during the year and likely future developments.

DividendsThe directors have recommended a fi nal dividend of 3.36p to be paid on 30th July 2012 to shareholders on the register at close of business on 6th July 2012. This makes a total dividend for the year of 4.46p.

DirectorsThe names of the directors currently holding offi ce are set out below:

Mrs Ann Yerburgh, DL* (Chairman)R A J Bailey, BA, ACA (Chief Executive Offi cer)K D Wood, MEng, ACA (Group Finance Director)† P A Boddy, BA, MBA*† R G R Thompson, MA, MBA*A M R Yerburgh, BSc, MA

*Member of the Remuneration Committee†Independent Non-Executive Director

The following resigned from the Board during the year:A H Spencer (24th October 2011).

In accordance with the Company’s Articles of Association, Mr R A J Bailey and Mrs A J M Yerburgh retire by rotation and, being eligible, off er themselves for re-election.

None of the directors had any material interest during the year in any contract of signifi cance in relation to the Group’s business.

Risks and uncertainties In accordance with the Companies Act 2006, a review of the business providing a comprehensive analysis of the main trends and factors likely to aff ect the development, performance and position of the business, including environmental, employee and social and community issues, together with the Group’s Key Performance Indicators and a description of the principal risks and uncertainties facing the business is detailed in the following sections of this Annual Report:

• Chairman’s Statement (page 2)• Operating Review (page 4)• Financial Review (page 11)• Risks and Uncertainties (page 13)• Corporate and Social Responsibility (page 15)

All the information set out in those sections is incorporated by reference into, and is deemed to form part of, this report.

The Corporate Governance Report (page 20) is incorporated by reference into, and is deemed to form part of, this report.

Directors’ indemnityThe directors have the benefit of the indemnity provision contained in the Company’s Articles of Association. This provision, which is a qualifying third party indemnity provision, was in force throughout the current fi nancial year and remains in force at the date of this report.

EmployeesIt is the policy of the Group to keep employees regularly informed on matters of importance and interest. The directors also give attention to all aspects of health and safety within the Group as well as giving disabled persons full and fair consideration in respect of employment, training, career development and promotion. There are also opportunities for employees who become disabled to continue in their employment or to be retained for other positions within the Group.

Employee share option scheme Share schemes were introduced in 1998 which allowed certain employees and full time directors of the Group options to acquire shares. These are exercisable between three and ten years from the date of grant, subject to certain performance criteria being met. The existing schemes have now matured.

Supplier payment policyGroup companies agree the terms of payment in advance with each of their main suppliers linked to the date of delivery of goods or provision of services and the receipt of a correct invoice. It is Group policy to pay all other suppliers’ invoices on or before the end of the following month.

At 31st March 2012 the Company had an average of 24 days purchases outstanding in trade creditors.

Charitable and political contributionsThe Group made a charitable contribution of £25,000 to Blackburn Youth Zone during the year. The Group made no political contributions.

Close company provisions In the opinion of the directors the Company is a close company within the defi nition of the Corporation Tax Act 2010.

Directors’ responsibilities in relation to the Company’s Auditor

The directors who held offi ce at the date of approval of this Directors’ Report confi rm that:

• so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and

• each director has taken all the steps that he or she ought to have taken as a director (i) to make himself or herself aware of any relevant audit information and (ii) to establish that the Company’s auditor is aware of that information.

AuditorIn accordance with section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG Audit Plc as Auditor of the Company is to be proposed at the forthcoming Annual General Meeting.

By order of the Board

Mrs S I Woodward Secretary26 June 2012

Report of the Directors

19


20

Corporate Governance

The Board has put in place a framework for Corporate Governance which it believes is appropriate to the Company. Your Board is committed to maintaining the highest standards, but is not required to comply with all aspects of the principles of good governance set out in the Combined Code on Corporate Governance. The following statement describes how the Board has applied the principles of Corporate Governance.

The Board and Committees The Board is headed by the Chairman and includes two executive and three non-executive directors. All appointments to the Board are for a specifi ed term. All directors are subject to re-election by rotation, one third of their number each year and their re-election is subject to shareholder approval. All newly appointed directors stand for re-election at the Annual General Meeting following their appointment. All the directors of the Company are resident in the UK and bring a wide range of skills and experience to the Board. The Board meets regularly throughout the year and has matters referred to it for approval including Group strategy, annual budgets, the rolling fi ve year fi nancial plan, general treasury and risk management policies.

Major capital investment, acquisitions and disposals are authorised by the Board and they also monitor the post investment performance.

There is an established procedure whereby directors, in furtherance of their duties, may take independent professional advice at the expense of the Company. The Board ensures that all directors continually update the skills and knowledge required to fulfi l their role both on the Board and on board committees. All directors have access to the advice and services of the Company Secretary.

The Board has not established an Audit Committee as the directors consider that the current arrangement with the external auditor is eff ective. The Board regularly monitors and reviews the auditor’s independence, objectivity and eff ectiveness. The Auditor meets with the non-executive directors prior to the commencement of the audit and attends the board meeting at which the annual accounts are approved. The Board gives full consideration to all reports received from the Auditor.

As all Board appointments are formally considered by the Board, there is no need for a Nominations Committee.

Remuneration reportThe Remuneration Committee meets regularly and, having taken the relevant advice, determines on behalf of the Board the remuneration package of the executive directors and other senior executives of the Group. The Remuneration Committee aims to ensure that remuneration packages are competitive and designed to attract, retain and motivate directors and executives of the right calibre.

In particular, the Committee has regard to the levels of remuneration in the Group and in specifi c sectors and businesses with which Group companies compete and is also sensitive to salary levels in the wider community. The Group operates performance related reward policies, designed to provide the correct balance between fi xed and variable remuneration.

Statement of Directors’ responsibilities in relation to the Annual Report and the fi nancial statements

The directors are responsible for preparing the Annual Report and the fi nancial statements in accordance withapplicable law and regulations.

Company law requires the directors to prepare fi nan-cial statements for each fi nancial year. Under that law the directors have elected to prepare the Group and Parent Company fi nancial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the directors must not approve the fi nancial statements unless they are satisfi ed that they give a true and fair view of the state of aff airs of the Group and the Parent Company and of the profi t or loss for that period.

In preparing these fi nancial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

Corporate Governance

21

• state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the fi nancial statements; and

• prepare the fi nancial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.

The directors are responsible for maintaining proper accounting records that are suffi cient to show and ex-plain the Parent Company’s transactions and disclose with reasonable accuracy at any time the fi nancial position of the Parent Company and the Group and to enable them to ensure that the fi nancial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and fi nancial informationincluded on the Company’s website. Legislation in the UK governing the preparation and dissemination offi nancial statements may diff er from legislation in other jurisdictions.

Internal controlThe Board acknowledges its ultimate responsibility for all aspects of the system of internal control and risk management and for reviewing its eff ectiveness. During the year both the internal control and risk management systems have been reviewed by the Board.

In establishing these systems, the directors have considered the nature of the Group’s business with regard to the risks to which the business is exposed, the likelihood of such risks occurring and the costs of protecting against them. The system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The primary responsibility for the day to day operation of the systems of internal control and

the identifi ed primary risks facing the Group is delegated to the Executive Directors.

The following key features of the system, which have remained unchanged during the year, are:

• reports to the Board from operating divisions on a regular basis;

• comprehensive annual budgeting with results reported monthly against budget;

• forecasts regularly updated and reported to the Board;

• cash fl ow forecasting on a rolling fi ve year basis;

• capital expenditure feasibility reports with post completion appraisals;

• physical and computer security issues and contingency planning;

• well-structured fi nancial and administration functions reporting regularly to the Board; and

• risk management review and monitoring of those risks.

Investor relationsCommunications with shareholders are given a high priority with information provided regularly in interim and annual fi nancial statements and any issues of concern can be addressed to the Board by any shareholder. All shareholders are encouraged to attend the Annual General Meeting where they are given an opportunity to question the Chairman and the Board.


22

Independent Auditor’s Reportto the Members of Daniel Thwaites PLC

We have audited the fi nancial statements of Daniel Thwaites PLC for the year ended 31st March 2012 set out on pages 23 to 45. The fi nancial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose.To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorAs explained more fully in the Directors’ Responsibilities Statement set out on pages 20-21, the Directors are responsible for the preparation of the fi nancial statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit and express an opinion on the fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the fi nancial statementsA description of the scope of an audit of the fi nancial statements is provided on the APB’s web-site at www.frc.org.uk/apb/scope/private.cfm

Opinion on fi nancial statementsIn our opinion the fi nancial statements:

• give a true and fair view of the state of the Group’s and the Parent Company’s aff airs as at 31st March 2012 and of the Group’s loss for the year then ended;• have been properly prepared in accordance with UK Generally Accepted Accounting Practice; and• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006In our opinion the information given in the Directors’ Report for the fi nancial year for which the fi nancial statements are prepared is consistent with the fi nancial statements. Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or• the parent company fi nancial statements are not in agreement with the accounting records and returns; or• certain disclosures of directors’ remuneration specifi ed by law are not made; or• we have not received all the information and explanations we require for our audit.

S Dunn (Senior Statutory Auditor)for and on behalf of KPMG Audit Plc, Statutory AuditorChartered AccountantsEdward VII Quay, Navigation Way, Ashton-on-Ribble, Preston, PR2 2YF26 June 2012

Group Profi t and Loss Account

23

Group Profi t and Loss Account for the year ended 31 March 2012

2012 2012 2012 2011 £m £m £m £m Before exceptional Exceptional Note items items Total Total

Turnover 1 137.2 - 137.2 126.7Cost of Sales (103.1) - (103.1) (93.1)

Gross profi t 34.1 - 34.1 33.6Distribution costs (14.9) - (14.9) (13.9)Administrative expenses (6.8) - (6.8) (7.4) Property impairment - (3.7) (3.7) -

Operating profi t (loss) 2 12.4 (3.7) 8.7 12.3Property disposals (0.2) - (0.2) 0.1

Profi t (loss) before interest 12.2 (3.7) 8.5 12.4Net interest payable 4 (6.2) (11.9) (18.1) (5.9)Net interest on pension liability 9 0.7 - 0.7 0.5

(Loss) profi t on ordinary activitiesbefore taxation 1 6.7 (15.6) (8.9) 7.0Taxation on (loss) profi t for the year 5 (2.4) 3.1 0.7 (1.7)

(Loss) profi t on ordinary activitiesafter taxation 21 4.3 (12.5) (8.2) 5.3

(Loss) earnings per share 2012 2011

Basic 7 (13.0)p 8.6pDiluted 7 (13.0)p 8.6p

Statement of Total Recognised Gains and Losses for the year ended 31 March 2012

Note of Historical Cost Profi ts and Lossesfor the year ended 31 March 2012

(Loss) profi t on ordinary activites after taxation (8.2) 5.3Defi cit on revaluation of land and properties (11.0) (4.1)Recognised actuarial (loss) gain on pension schemes less related taxation (10.8) 2.7Total recognised (losses) gains for the year (30.0) 3.9

(Loss) profi t on ordinary activites before taxation (8.9) 7.0Diff erence between the historical cost depreciation charge andthe actual depreciation charge for the year 0.1 0.1Realisation of property revaluation gains of prior years 0.9 1.2Historical cost (loss) profi t on ordinary activities before taxation (7.9) 8.3

Historical cost (loss) profi t on ordinary activities after taxation (7.2) 6.6


24

Group Balance Sheet at 31 March 2012

2012 2011 Note £m £m

Fixed assetsGoodwill 10 0.2 -Tangible assets 11 274.5 287.2Investments 12 9.8 11.4 284.5 298.6

Current assetsStocks 14 4.9 4.5Debtors 15 18.7 16.0Cash and bank balances 3.4 10.0 27.0 30.5

Creditors due within one yearBank loans and overdrafts 16 (3.4) -Trade and other creditors 18 (21.7) (23.8) (25.1) (23.8)

Net current assets 1.9 6.7Total assets less current liabilities 286.4 305.3

Creditors due after one yearLoan capital 16 (45.0) (50.0)

Provisions for liabilities and chargesProvisions for liabilities 19 (16.5) (6.1)Net assets excluding pension liability 224.9 249.2

Net pension liability 9 (18.2) (9.7)Net assets including pension liability 206.7 239.5

Capital and reservesCalled up share capital 20 15.8 15.8Revaluation reserve 21 84.6 96.6Profi t and loss account 21 106.3 127.1Equity shareholders’ funds 22 206.7 239.5

The accounts on pages 23 to 45 were approved by the Board of Directors on 26th June 2012 and signed on its behalfby

R.A.J Bailey K.D. Wood

Chief Executive Offi cer Finance Director

Company Registered No. 51702

Group Cash Flow Statement

25

Group Cash Flow Statement for the year ended 31 March 2012

2012 2011 £m £m

Cash fl ow from operating activities 14.4 19.8Returns on investments and servicing on fi nance (6.3) (6.3)Tax paid (0.5) (1.3)Capital expenditure and fi nancial investment (8.3) (0.6)Acquisitions and disposals (1.5) -Equity dividends paid (2.8) (2.8)Cashfl ow before fi nancing (5.0) 8.8Financing - decrease in debt (2.0) (5.5)(Decrease) increase in cash (7.0) 3.3

Reconciliation of net cash fl ow to movement in net debt(Decrease) increase in cash (7.0) 3.3Cash outfl ow from decrease in debt 2.0 5.5Movement in net debt in the year (5.0) 8.8Net debt at beginning of year (40.0) (48.8)Net debt at end of year (45.0) (40.0)

At 31st Other At 31st March Cash non cash March 2012 fl ows changes 2011 £m £m £m £m

Analysis of changes in net debt:Cash at bank and in hand 3.4 (6.6) - 10.0Bank overdrafts (0.4) (0.4) - -Debt due within one year (3.0) 2.0 (5.0) -Debt due after one year (45.0) - 5.0 (50.0) (45.0) (5.0) - (40.0)


26

Group Cash Flow Statement for the year ended 31 March 2012

2012 2011 Note £m £m

Reconciliation of operating profi t to net cash infl owfrom operating activitiesOperating profi t before property impairment 12.4 12.4Non cash items

- Depreciation 8.1 7.8- Others including profi t or loss on sale of plant and equipment 0.2 0.5

Defi ned benefi t operating profi t charge less contributions paid (2.5) (2.6)Movement in working capital

- Stocks (0.4) -- Debtors (1.4) 0.5- Creditors (2.0) 1.2

Net cash infl ow from operating activites 14.4 19.8

Returns on investments and servicing of fi nanceInterest paid (6.6) (6.4)Interest and investment income received 0.3 0.1Net cash outfl ow (6.3) (6.3)

Capital expenditure and fi nancial investmentPayments to acquire tangible fi xed assets (14.1) (8.5)Receipts from sales of tangible fi xed assets 4.0 6.1Trade loans advanced (1.0) (0.8)Trade loans repaid 2.8 2.6Net cash outfl ow (8.3) (0.6)

AcquisitionsPayments to acquire trade and assets 10 (1.5) -Net cash outfl ow (1.5) -

FinancingRepayment of unsecured bank loans (2.0) (5.5)Net cash outfl ow (2.0) (5.5)

Parent Balance Sheet

27

Parent Balance Sheet at 31 March 2012

Restated (note 13) 2012 2011 Note £m £m

Fixed assetsGoodwill 10 0.2 -Tangible assets 11 274.5 287.2Investments 12 9.8 11.4Investment in subsidiary undertakings 13 10.4 10.4 294.9 309.0

Current assetsStocks 14 4.9 4.5Debtors 15 18.7 16.0Cash and bank balances 3.3 9.9 26.9 30.4

Creditors due within one yearBank loans and overdrafts 16 (3.4) -Trade and other creditors 18 (21.7) (23.8) (25.1) (23.8)

Net current assets 1.8 6.6Total assets less current liabilities 296.7 315.6

Creditors due after one yearLoan capital 16 (45.0) (50.0)Loans to subsidiaries 13 (11.2) (11.2)

Provisions for liabilities and chargesProvisions for liabilities 19 (16.5) (6.1)Net assets excluding pension liability 224.0 248.3

Net pension liability 9 (18.2) (9.7)Net assets including pension liability 205.8 238.6

Capital and reservesCalled up share capital 20 15.8 15.8Revaluation reserve 21 52.2 62.6Profi t and loss account 21 137.8 160.2Equity shareholders’ funds 22 205.8 238.6

The accounts on pages 23 to 45 were approved by the Board of Directors on 26th June 2012 and signed on its behalfby

R.A.J Bailey K.D. Wood

Chief Executive Offi cer Finance DirectorCompany Registered No. 51702


28

Accounting Policies

Basis of preparationThe fi nancial statements have been prepared and approved by the Directors in accordance with UK Generally Accepted Accounting Principles (GAAP). The accounting policies set out below, have, unless otherwise stated, been applied consistently to all periods presented in these fi nancial statements.

The Company’s business activities, together with the factors likely to aff ect its future development, performance and position are set out in the Operating Review on pages 4-10 and the Risks and Uncertainties summary on pages 13-14. The fi nancial position of the Company, its cash fl ows, liquidity position and borrowing facilities are described in the Financial Review on pages 11-12. As a consequence, the directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.

Going concernThe Group is currently in the process of renewing its existing bank facilities of £30m. The Directors believe that this process will reach a satisfactory outcome, and have a reasonable expectation that the company has adequate resources to continue in operational existence for the forseeable future and for this reason they continue to adopt the going concern basis in preparing the annual fi nancial statements.

Basis of consolidationThe consolidated accounts include the accounts of Daniel Thwaites PLC and all of its subsidiary undertakings made up to 31st March 2012.

Subsidiary undertakings are accounted for using the acquisition method. Under this method the Group Profi t and Loss Account and Cash Flow Statement include the results and cash fl ows of subsidiaries from the date of acquisition to the period end.

TurnoverTurnover represents amounts recognised by the Group in respect of goods and services supplied, exclusive of Value Added Tax and trade discounts. Revenue principally consists of food, drink and accomodation sales, which are recognised at the point at which goods or services are provided, rental income which is recognised on a straight line basis over the lease term and machine income, where net takings are recognised as earned.

Dividends on shares presented within equityDividends are only recognised as a liability to the extent that they are declared prior to the year end. Unpaid dividends that do not meet these criteria are disclosed in the notes to the fi nancial statements.

InvestmentsThe Group’s long-term trade loans are recognised as investments within fi xed assets and are stated at cost less amounts provided for impairment losses.

In the Company’s fi nancial statements, investments in subsidiary undertakings are stated at cost less amounts written off for impairment losses.

Acquisitions and GoodwillBusiness combinations are accounted for using the acquisition method. Goodwill arising on acquisition is capitalised and represents the excess of the fair value of the consideration given over the fair value of the identifi able net assets and liabilities acquired. Goodwill is amortised over its estimated useful economic life.

Financial instrumentsFinancial instruments are classifi ed and accounted for, according to the substance of the contractual arrangement, as fi nancial assets, fi nancial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

The Group uses interest rate swaps to hedge its exposure to movements in interest rates on both current and highly probable forecast future borrowings. To the extent that the Group has an excess of interest rate swaps over current and highly probable forecast future borrowings a provision is established for the cost of servicing those excess swaps.

Receipts and payments on interest rate instruments are recognised on an accruals basis and included within net interest payable.

Fixed assetsTangible fi xed assets are stated at cost or valuation less accumulated depreciation.

Depreciation is calculated on a straight line basis over the expected useful life of the asset. Freehold and long leasehold land is not depreciated. Freehold and long leasehold buildings are depreciated to write off the cost or valuation, less estimated residual value, over periods up to fi fty years. Plant and equipment assets are depreciated over their expected useful lives which range from three to twenty fi ve years.

Residual value is based on prices prevailing at the date of acquisition or subsequent valuation. Where, because of high estimated residual value, no depreciation is charged, an annual review for impairment is performed. Both residual values and useful lives are reviewed and adjusted, if appropriate, at each fi nancial year end.

Accounting Policies

29

The profi t or loss on disposal of properties is the diff erence between the net amount realised and book value. Valuation diff erences realised on disposal are transferred from the revaluation reserve to the profi t and loss account reserve.

Land and properties include properties revalued by external valuers and the Group’s own professionally qualifi ed staff . Each year 20% of all operational properties are revalued by external valuers in conjunction with the Group’s own professionally qualifi ed staff . Each of these properties will therefore be revalued once every fi ve years and the revaluations incorporated in the fi nancial statements.

The brewery freehold industrial buildings are stated at historic cost, less provision for depreciation.

The carrying amounts of the Group’s assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the fi xed asset may not be recoverable. If any such indication exists, the asset’s recoverable amount is estimated.

A revaluation loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Revaluation losses are recognised in the profi t and loss account unless it arises on a previously revalued fi xed asset. A revaluation loss on a revalued fi xed asset is recognised in the profi t and loss account if it is caused by a clear consumption of economic benefi ts. Otherwise revaluations are recognised in the statement of total recognised gains and losses until the carrying amount reaches the asset’s depreciated historic cost. Thereafter, revaluation losses are recognised in the profi t and loss account unless it can be demonstrated that the recoverable amount of the asset is greater than its revalued amount, in which case the loss is recognised in the statement of total recognised gains and losses to the extent that the recoverable amount of the asset is greater than its revalued amount.

Revaluation gains are recognised in the profi t and loss account only to the extent (after adjusting for subsequent depreciation) that they reverse revaluation losses on the same asset that were previously recognised in the profi t and loss account. All other revaluation gains are recognised in the statement of total recognised gains and losses.

StocksStocks are consistently valued at the lower of cost and net realisable value. Cost comprises materials, labour and production overheads.

Deferred taxationDeferred tax is recognised in respect of timing diff erences that have originated but not reversed at the balance sheet date. Timing diff erences are diff erences between the Group‘s taxable profi t and its fi nancial profi t as stated in the fi nancial statements. These timing diff erences arise primarily from the diff erences between accelerated capital allowances and depreciation.

No provision is made for deferred tax on asset revaluations or when fi xed assets are disposed of where it is more likely than not that the taxable gain will be rolled over.

Deferred tax is calculated on a non-discounted basis at the tax rates anticipated to apply in the periods in which the timing diff erences are expected to reverse.

Employee share ownership trust (ESOP) Own shares held by the ESOP trust are treated as a deduction in arriving at shareholders’ funds. Other assets and liabilities of the ESOP trust are included in the Group Balance Sheet.

Pensions In respect of the Group’s defi ned benefi t pension schemes, assets are measured using market values and liabilities are measured using the projected unit actuarial method and are discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Any increase in the present value of the liabilities expected to arise from employee service in the year is charged to operating profi t. The expected return on assets and the increase during the year in the present value of liabilities arising from the passage of time are included in interest payable. Actuarial gains and losses are recognised in the Statement of Total Recognised Gains and Losses. The schemes’ net defi cit is recognised on the Balance Sheet net of related deferred tax.

The Group also operates a defi ned contribution pension scheme. Contributions are charged to the profi t and loss account as incurred.

Operating leases Operating lease rentals are charged to the profi t and loss account on a straight line basis over the lease term.


30

Notes to the Accounts

1. Turnover and segmental analysis

Turnover comprises sales to external customers, rents and other trading income, excluding value added tax.

2012 2011 2012 2011 2012 2011 £m £m £m £m £m £m

Segmental analysisTurnover, profi t and capitalemployed of continuingoperations:Beer Company and Pubs 98.6 90.7 7.6 8.0 170.6 175.2Hotels and Inns 38.6 36.0 6.0 5.8 111.2 114.0Group central charges - - (6.9) (6.8) - - 137.2 126.7 6.7 7.0 281.8 289.2Exceptional items - - (15.6) - - - 137.2 126.7 (8.9) 7.0 281.8 289.2Net pension liability - - - - (18.2) (9.7)Provisions - - - - (11.9) -Net debt - - - - (45.0) (40.0) 137.2 126.7 (8.9) 7.0 206.7 239.5

2. Operating profi t 2012 2011 £m £m

Operating profi t is arrived at after charging:Depreciation 8.1 7.8Operating leases - plant and equipment 0.4 0.4Operating leases - property 0.1 0.1Exceptional item - property impairment 3.7 -

The total property impairment amounts to £14.7m, of which £3.7m is a reduction against historic cost and is charged to the profi t and loss account, and the remaining £11.0m is a reduction against revaluation reserve.

3. Auditor’s remuneration 2012 2011 £’000 £’000

Fees payable to KPMG Audit Plc:Statutory audit fees 52.5 51.0Tax advisory services 18.9 19.3Pension scheme services 15.2 37.5Other services 22.3 45.5

Turnover Profi t before tax Net assets


31

5. Taxation 2012 2011 £m £m

The tax charge comprises:

Current taxUK corporation tax at 26% (2011: 28%) - 1.6Adjustments in respect of prior years - (0.2)Total current tax - 1.4

Deferred taxOrigination and reversal of timing diff erences 0.3 (0.3)Tax losses (1.4) -Adjustment in respect of change in tax rate to 24% (0.4) (0.4)Adjustment in respect of prior years - 0.1 (1.5) (0.6)

Adjustment in respect of pension liability 0.8 0.9Tax on profi t for the year (0.7) 1.7

The diff erence between the total current tax charge and the amount calculatedat the standard rate of corporation tax in the UK of 26% (2011: 28%) is explained below: 2012 2011 £m £m

(Loss) profi t on ordinary activities before tax (8.9) 7.0

Current tax on profi t on ordinary activities at standard rate of corporation tax (2.3) 2.0Fixed asset timing and other diff erences 0.9 (0.4)Losses on property disposals not subject to tax 0.1 -Losses carried forward 1.3 -UK corporation tax for the year - 1.6Adjustments in respect of prior years - (0.2)Current tax charge for the year - 1.4

Factors that may aff ect future tax charges:No provision has been made for deferred tax on gains covered by rollover relief or on property revaluations. Such tax would only become payable if the assets were sold without it being possible to claim rollover relief. Details of the unprovided amounts are disclosed in note 19.

4. Interest payable 2012 2011 £m £m

Interest payable:On variable rate loans and overdrafts (including interest rate swaps) 3.3 3.1On fi xed rate loans 3.2 3.2 6.5 6.3Interest receivable and similar income (0.3) (0.4) 6.2 5.9Exceptional item - provision for interest rate swaps 11.9 - 18.1 5.9

A provision of £11.9m has been made for the cost of servicing interest rate swap contracts which are not highly likely to be matched against future borrowing requirements.


32

6. Dividends paid

Dividend 2012 2011 per share £m £m

2010 fi nal - 2.12011 interim 1.10p - 0.72011 fi nal 3.36p 2.1 -2012 interim 1.10p 0.7 - 2.8 2.8

8. Staff costs 2012 2011 £m £m

Wages and salaries 22.8 21.6Social security costs 1.9 1.8Other pension costs 1.0 1.0 25.7 24.4

2012 2011 2012 2011

The average number of personsemployed by the Group was:Beer Company and Pubs 336 313 21 63Hotels and Inns 551 656 572 438 887 969 593 501

7. Earnings per share 2012 2011 £m £m

(Loss) profi t attributable to ordinary shareholders (8.2) 5.3

Number Number ‘000 ‘000

Weighted average number of ordinary shares in issue during the year 62,999 62,999Potential dilutive eff ect of performance related share options - 12Diluted weighted average share capital 62,999 63,011

Pence Pence

Basic (loss) earnings per share (13.0) 8.6Diluted (loss) earnings per share (13.0) 8.6Adjusted basic earnings per share (before exceptional items) 6.8 8.6Adjusted diluted earnings per share (before exceptional items) 6.8 8.6

The directors have recommended a fi nal dividend in respect of 2012 of 3.36p per share for approval at the Annual General Meeting. This amounts to £2.1m but has not been refl ected in the fi nancial statements. The dividend is payable on 30th July 2012 to shareholders on the register on 6th July 2012.

Full time Part time

Notes to the Accounts – continued


33

9. Pension schemes

Defi ned contributionEligible employees are able to join the Group’s defi ned contribution scheme, the assets of which are held separately from those of the Group in an independently administered fund. The pension charge to the profi t and loss account represents contributions payable by the Group and amounts to £0.9m (2011: £0.9m).

Defi ned benefi tThe Group operates two defi ned benefi t schemes which have been closed to new entrants since 1st April 2001 and closed to future accrual with eff ect from 31st August 2009. The schemes are funded by contributions from the Group and, prior to closure, also from the employees. The assets of the schemes are held separately from the assets of the Group in trustee administered funds.

The last full actuarial valuation was carried out as at 1st January 2009 and has been updated at 31st March 2012 by a qualifi ed actuary.

The expected return on assets is derived from the assumptions of long term returns on each asset class, as set out later.

The main assumptions used by the actuary were: 2012 2011

Expected return on assets 7.4% 7.5%Rate of increase in pensions in payment 3.5% 3.5%Rate of increase in pensions in deferment 2.75% 2.75%Discount rate 5.0% 5.5%Price infl ation (RPI) 3.5% 3.5%Price infl ation (CPI) 2.75% 2.75%Cash commutation (proportion taken on retirement) 50% 50%Mortality (1959 Scheme) SAPS MC U1.0% SAPS MC U1.0%Mortality (Supplementary Scheme) SAPS L MC U1.0% SAPS L MC U1.0%

Life expectancies under the 1959 Scheme mortality assumptions are shown below:

2012 2011 Years Years

Current pensioners (at 65) - males 86 86Current pensioners (at 65) - females 89 89Pensioners retiring in 20 years (at 65) - males 88 88Pensioners retiring in 20 years (at 65) - females 91 91

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below: Change in Impact on assumption scheme liabilities

Discount rate decrease 0.25% increase 5.0%Cash commutation (proportion taken on retirement) decrease 25% increase 3.0%Rate of mortality (change to life expectancy) increase 1 year increase 2.0%


34


9. Pension schemes - continued

The fair value of the assets in the schemes and their expected rates of return were as follows:

2012 2011 2012 2011 % % % %

Equities 8.0 8.0 66.0 73.8Hedge funds 8.0 n/a 10.2 -Bonds 4.25 5.25 11.8 10.9Gilts 3.25 4.25 0.8 4.1Other 0.5 0.5 0.3 0.3Fair value of schemes’ assets 89.1 89.1Present value of schemes’ liabilities (113.1) (102.2)Defi cit in schemes (24.0) (13.1)Related deferred tax asset 5.8 3.4Net pension liability (18.2) (9.7)

2012 2011 2012 2011 2012 2011Movement in defi cit in the year £m £m £m £m £m £m

At the beginning of the year 89.1 83.3 (102.2) (103.7) (13.1) (20.4)Current service cost - - (0.1) - (0.1) -Past service cost - - - - - -Curtailment gains - - - - - -Contributions by employer 2.5 2.7 - - 2.5 2.7Contributions by members - - - - - -Interest on pension liabilities - - (5.5) (5.6) (5.5) (5.6)Expected return on scheme assets 6.2 6.1 - - 6.2 6.1Benefi ts paid (3.5) (3.3) 3.5 3.3 - -Actuarial (loss) gain (5.2) 0.3 (8.8) 3.8 (14.0) 4.1At the end of the year 89.1 89.1 (113.1) (102.2) (24.0) (13.1)

Expected long termrate of return Value

Pension liabilitiesScheme assets Net defi cit

The diff erence between assets and liabilities is extremely volatile; it can alter very signifi cantly depending on the date at which the measurements were carried out.

The net pension liability is the responsibility of the Parent Company.


35

9. Pension schemes - continued 2012 2011 £m £m

Group Profi t and Loss Account:Pension costs charged against operating profi t: Current service cost in respect of defi ned benefi ts schemes (0.1) (0.1)Charge in respect of defi ned contribution scheme (0.9) (0.9) (1.0) (1.0) Net interest on pension liability:Expected return on pension scheme assets 6.2 6.1Interest on pension scheme liabilities (5.5) (5.6) 0.7 0.5

Total charge (0.3) (0.5)

Actual return on scheme assets 1.0 6.4

Amounts recognised in the statement of total recognised gains and losses:

Actuarial (loss) gain (14.0) 4.1

Deferred tax 3.2 (1.4)Recognised actuarial (loss) gain on pension schemes less related tax (10.8) 2.7

The cumulative amount of actuarial gains and losses recognised in the statement of total recognised gains and losses, prior to allowing for the eff ect of the restricted surplus, is a £37.1m loss (2011: £23.1m loss). The cumulative amount recognised after allowing for the eff ect of the restricted surplus is a £36.3m loss (2011: £22.3m loss). Note that these amounts refer to the cumulative amounts recognised in accounting periods ending on or after 31st March 2003 only.

2012 2011 2010 2009 2008 £m £m £m £m £m

Historical pension scheme informationFair value of schemes’ assets 89.1 89.1 83.3 56.8 71.4Present value of schemes’ liabilities (113.1) (102.2) (103.7) (70.6) (74.3)Defi cit in schemes (24.0) (13.1) (20.4) (13.8) (2.9)

Experience adjustments on scheme assets (5.2) 0.3 (20.7) (21.6) (7.8)Experience adjustments on scheme liabilities 0.8 0.7 0.4 (0.1) (0.3)


36


Relationship between the reporting entity and the trustees (managers) of the defi ned benefi t schemes

The pension assets are held in separate trustee administered schemes to meet long term pension liabilities to past and present employees. The trustees of the schemes are required to act in the best interests of the schemes’ benefi ciaries. The appointment of trustees to the schemes is determined by the schemes’ trust documentation. The Group is responsible for the appointment and removal of the trustees except for the four member nominated trustees of the Daniel Thwaites 1959 Pension Scheme and two member nominated trustees of the Daniel Thwaites Supplementary Pension Scheme who are elected by the membership and can only be removed with the consent of all the trustees.

Future funding obligations in relation to defi ned benefi t schemes

The most recently completed triennial actuarial valuation of the Group’s main retirement benefi t schemes was performed by an independent actuary for the trustees of the schemes and was carried out as at 1st January 2009. Following the valuation, the Group has agreed to contribute £2.1m per annum payable monthly to the Daniel Thwaites 1959 Pension Scheme for a period of 2 years from 1 May 2010, followed by £3.0m per annum payable monthly for a period of 4 years from 1 May 2012. The Group will review the level of contributions on completion of the triennial valuation as at 1 January 2012, taking into account aff ordability. The Group will also pay the amount of the PPF levy as requested. The Group has agreed with the trustees that it will aim to eliminate the defi cit over the next six years.

Following the valuation of the Daniel Thwaites Supplementary Pension Scheme, the Group has agreed to contribute £0.3m per annum payable monthly to the Scheme for a period of 10 years and 6 months from 1 May 2010 in order to eliminate the defi cit over this period. The Group will also pay the amount of the PPF levy as requested.

The Group consider that the contribution rates agreed with the Trustees at the last valuation date are suffi cient to eliminate the defi cits over the agreed periods and to cover the expenses of running the Schemes. The next triennial valuations are due to be completed as at 1 January 2012, and are currently in progress.

The schemes provide death-in-service benefi ts which are insured and the Group pays these insurance premiums directly as requested.

9. Pension schemes – continued


37

Goodwill £m

Group and ParentCost: At 31st March 2011 -Acquisitions 0.2At 31st March 2012 0.2

AmortisationAt 31st March 2011 -Charge for the year -At 31st March 2012 -

Net book value 31st March 2012 0.2Net book value 31st March 2011 -

10. Goodwill

On 16th January the company acquired the ‘free trade interests division’ of Hyde’s Brewery Limited for cash consideration of £1.5m. The fair value of the assets acquired comprised fi xed assets £0.1m, trade debtors £0.8m and investment loans of £0.4m, giving rise to goodwill of £0.2m. The assets acquired generated turnover of £1.0m and operating profi t of £0.1m from 16th January to 31 March 2012. Goodwill is being amortised over 5 years, being the period over which the substantial benefi ts of the tied trade loans is expected to be realised.


38


Freehold Land and industrial Plant and Fixtures properties premises machinery and fi ttings Total £m £m £m £m £m

GroupCost or valuation:At 31st March 2011 236.2 7.8 39.5 127.3 410.8Capital expenditure 5.2 - 2.2 6.9 14.3Disposals (3.3) - (0.4) (3.2) (6.9)Revaluation (14.8) - - - (14.8)At 31st March 2012 223.3 7.8 41.3 131.0 403.4

Accumulated depreciation:At 31st March 2011 1.2 3.9 28.3 90.2 123.6Charge for the year 0.2 0.2 1.5 6.2 8.1Disposals - - (0.4) (2.3) (2.7)Revaluation (0.1) - - - (0.1)At 31st March 2012 1.3 4.1 29.4 94.1 128.9

Net book value 31st March 2012 222.0 3.7 11.9 36.9 274.5


2012 2011 £m £m

Land and properties at cost or valuation:Freehold 191.2 202.8Long leasehold 32.1 33.4 223.3 236.2

Cost or valuation of land and properties:As valued 2012 38.8 -As valued 2011 42.6 48.0As valued 2010 and prior 129.4 84.0At cost 12.5 104.2 223.3 236.2

The historical cost of land and properties shown above:Cost 138.7 139.6Accumulated depreciation (1.3) (1.2)Net book value 137.4 138.4

11. Tangible fi xed assets

As at 31st March 2012, in accordance with Group policy, 20% of the pub and inns estate were revalued by external valuers, Messrs. Fleurets, Chartered Surveyors. The valuation was to the basis of Existing Use Value in respect of these properties in accordance with the RICS Valuation Standards, Sixth Edition. In addition, an impairment review was carried out on the remainder of the estate, by the Company’s own professionally qualifi ed staff .

At the same date one of the hotel properties was revalued by external valuers, Christie & Co., Surveyors, Valuers and Agents. The property was valued to the basis of Existing Use Value as a fully operational individual hotel unit and the ancillary properties were valued at Market Value in accordance with the RICS Valuation Standards, Sixth Edition.


39

Freehold Land and industrial Plant and Fixtures properties premises machinery and fi ttings Total £m £m £m £m £m

ParentCost or valuation:At 31st March 2011 236.2 7.8 39.5 127.3 410.8Capital expenditure 5.2 - 2.2 6.9 14.3Disposals (3.3) - (0.4) (3.2) (6.9)Revaluation (14.8) - - - (14.8)At 31st March 2012 223.3 7.8 41.3 131.0 403.4

Accumulated depreciation:At 31st March 2011 1.2 3.9 28.3 90.2 123.6Charge for the year 0.2 0.2 1.5 6.2 8.1Disposals - - (0.4) (2.3) (2.7)Revaluation (0.1) - - - (0.1)At 31st March 2012 1.3 4.1 29.4 94.1 128.9



2012 2011 £m £m

Land and properties at cost or valuation:Freehold 191.2 202.8Long leasehold 32.1 33.4 223.3 236.2

Cost or valuation of land and properties:As valued 2012 38.8 -As valued 2011 42.5 48.0As valued 2010 and prior 128.2 83.9At cost 13.8 104.3 223.3 236.2

The historical cost of land and properties shown above:Cost 171.1 173.6Accumulated depreciation (1.3) (1.2)Net book value 169.8 172.4

11. Tangible fi xed assets - continued


40


Trade loans and other investments £m

Group and ParentCost:At 31st March 2011 12.1Additions 1.9Disposals and repayments (3.2)At 31st March 2012 10.8

Provision for diminution in value:At 31st March 2011 0.7Increase in year 0.3At 31st March 2012 1.0

Net book value 31st March 2012 9.8

Net book value 31st March 2011 11.4

12. Investments

Shares in Loans to subsidiaries subsidiaries £m £m

Cost less amounts written off :At 31st March 2011 10.4 (11.2)Movements - -At 31st March 2012 10.4 (11.2)

At 31st March 2012 there are no trading subsidiary undertakings. To avoid a statement of excessive length, details of investments which are not signifi cant have been omitted.

In the prior year, loans from subsidiaries of £11.2 were netted against shares in subsidiaries of £10.4m to leave a net investment in subsidiary undertakings of £(0.8)m presented within fi xed assets in the Parent Company Balance Sheet. On further consideration, the Directors believe these amounts are better presented separately and as such, the loans from subsidiaries of £11.2m have been reclassifi ed to be shown as creditors due after one year. This adjustment results in a restatement of the comparative fi gures in the Parent Company Balance Sheet and has no impact upon the Group Profi t and Loss Account, the Statement of Total Recognised Gains and Losses, the Group Balance Sheet, the Group Cash Flow Statement, the Parent Company loss for the year or shareholders’ funds as previously reported.

13. Investment in subsidiary undertakings

2012 2011 £m £m

Group and ParentRaw materials and consumables 1.6 1.5Work in progress 0.5 0.3Finished goods and goods for resale 2.8 2.7 4.9 4.5

14. Stocks


41

Group and Parent 2012 2011 £m £m

Due within one yearTrade debtors 15.7 13.3Other debtors 0.4 0.7Corporation tax 0.9 0.4Prepayments and accrued income 1.6 1.5 18.6 15.9Due after one yearPrepayments and accrued income 0.1 0.1 18.7 16.0

2012 2011 £m £m

Group and Parent

Bank overdrafts 0.4 -

Bank loans - revolving credit facilities 3.0 5.0Term loan 45.0 45.0 48.4 55.0

Borrowings are repayable as follows: 2012 2011 £m £m

After fi ve years 45.0 45.0Between two and fi ve years - -Between one and two years - 5.0 45.0 50.0On demand or within one year 3.4 - 48.4 50.0

Borrowing facilities: 2012 2011 £m £m

The Group has the following undrawn committed borrowing facilities available:Expiring within one year 28.3 1.8Expiring after two years - 25.0 28.3 26.8

15. Debtors

16. Loan capital and other borrowings

The term loan is secured by a fi rst fl oating charge over all of the assets of the Parent Company and certain subsidiaries and bears interest at an average fi xed rate of 7.03% per annum. The term loan is repayable by ten equal annual instalments commencing on 16th December 2025.

In accordance with the terms of its borrowing facilities, the Group is required to comply with certain fi nancial covenants. As at, and for the year ended 31 March 2012, the Group has complied with the terms of those fi nancial covenants.


42


Group and Parent 2012 2011 £m £m

Due within one yearTrade creditors 11.0 11.9Other taxation and social security 2.9 3.5Other creditors 2.9 2.4Accruals and deferred income 4.9 6.0 21.7 23.8

18. Trade and other creditors

Carrying value Fair value

17. Financial instruments

Financial instruments are classifi ed and accounted for according to the substance of the contractual arrangement as either fi nancial assets, fi nancial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. All fi nancial assets and liabilities are denominated in sterling.

The Financial Review on pages 11-12 provides an explanation of the Group’s funding, liquidity and interest rate management policies. Amounts disclosed exclude short term assets and liabilities except cash and liquid resources, overdrafts and current instalments of loan capital.

The interest rate profi le of the Group’s borrowings was as follows:

Analysis of interest rate profi le: Fixed Floating Weighted average Weighted average rate rate of fi xed of fi xed borrowings borrowings borrowings borrowings £m £m Interest rate Period in years

At 31st March 2012 45.0 3.4 7.03% 17At 31st March 2011 45.0 5.0 7.03% 18

As at 31 March 2012, the Group has interest rate swap contracts with a notional value of £95m. £45m of these swap contracts are hedged against current variable rate borrowings and highly probable forecast future borrowings. The eff ect of the Group’s interest rate swaps is therefore to treat £3.4m of variable rate borrowings as fi xed. A provision of £11.9m has been made during the year for the £50m of interest rate swap contracts which are not highly likely to be matched against future borrowing requirements.

The fair value of loan capital is calculated by discounting all future cash fl ows at the Group’s current incremental rate of borrowing.

Carrying and fair values of primary fi nancial instruments: 2012 2011 2012 2011 £m £m £m £m

Trade loans 9.8 11.4 9.8 11.4Cash and short term borrowings 3.0 10.0 3.0 10.0Loan capital (48.0) (50.0) (71.2) (76.5)Interest rate swaps (11.9) - (22.6) (10.6)


43

Deferred Provision Total Taxation for interest £m £m Rate Swaps £m

Group and ParentAt 31st March 2011 6.1 - 6.1(Credit) charge for the year (1.5) 11.9 10.4At 31st March 2012 4.6 11.9 16.5

Deferred taxation

19. Provisions for liabilities and charges

Deferred taxation is provided in the accounts at 24%.The elements of deferred taxation are as follows: 2012 2011 £m £m

Accelerated capital allowances 6.0 6.1Tax losses (1.4) - 4.6 6.1

Unprovided deferred taxation: 2012 2011 £m £m

Rolled over gains 2.1 2.3Revaluation of fi xed assets - - 2.1 2.3

The 2012 Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014. A reduction in the rate from 26% to 25% (eff ective from 1 April 2012) was substantively enacted on 5 July 2011, and a further reduction to 24% (eff ective from 1 April 2012) was substantively enacted on 26 March 2012.

This will reduce the company’s future current tax charge accordingly. The deferred tax liability at 31 March 2012 has been calculated based on the rate of 24% substantively enacted at the balance sheet date.

It has not yet been possible to quantify the full anticipated eff ect of the announced further 2% rate reduction, although this will further reduce the company’s future current tax charge and reduce the company’s deferred tax liability accordingly.

Provision for interest rate swaps

A provision of £11.9m has been made during the period for the cost of servicing interest rate swap contracts which are not highly likely to be matched against future borrowing requirements. The provision is expected to be utilised within one year, following the Board’s decision to terminate the Group’s surplus swap contracts.


44


21. Statement of movements on reserves Revaluation Profi t and loss reserve account £m £m

Group

At 31st March 2011 96.6 127.1Loss for the year - (8.2)Recognised actuarial loss on pension schemes less related tax - (10.8)Dividends paid - (2.8)Transfer on disposal of properties (0.9) 0.9Defi cit on revaluation (11.0) -Revaluation element of depreciation charge (0.1) 0.1At 31st March 2012 84.6 106.3

At 31st March 2012 the market value of own shares held in the ESOP trust was £nil (2011: £nil).

Parent

At 31st March 2011 62.6 160.2Loss for the year - (9.8)Recognised actuarial loss on pension schemes less related tax - (10.8)Dividends paid - (2.8)Transfer on disposal of properties (0.9) 0.9Defi cit on revaluation (9.4) -Revaluation element of depreciation charge (0.1) 0.1At 31st March 2012 52.2 137.8

The loss after taxation dealt with in the accounts of the Parent was £9.8m (2011: profi t £4.2m).

Under Section 408 of the Companies Act 2006, a separate profi t and loss account for the Parent Company is not presented.

Share options are exercisable up to 3rd September 2017 at prices between £1.45 and £4.58 per ordinary share depending upon the date of grant.

At 31st March 2012 719,500 share options with a weighted average exercise price of £3.36 were exercisable(2011: 764,500 at £3.34).

2012 2011 2012 2011 £m £m £m £m

Ordinary shares of 25p each 20.0 20.0 15.8 15.8

2012 2011

Number of options outstanding under the Executive Share Option Scheme: At the beginning of the year 764,500 1,067,500Lapsed during the year (45,000) (303,000)At the end of the year 719,500 764,500Weighted average exercise price of options £3.36 £3.34

20. Called up share capital Authorised Allotted and Fully Paid


45

2012 2011 £m £m

Group At the beginning of the year 239.5 238.4Total recognised (loss) gain for the year (30.0) 3.9Dividends paid (2.8) (2.8)At the end of the year 206.7 239.5

Parent At the beginning of the year 238.6 237.7Total recognised (loss) gain for the year (30.0) 3.7Dividends paid (2.8) (2.8)At the end of the year 205.8 238.6

22. Reconciliation of movement in shareholders’ funds

2012 2011 2012 2011 £m £m £m £m

Contracted for but not in the accounts 0.8 1.9 0.8 1.9

2012 2011 2012 2011 £m £m £m £m

Annual payments under operating leases terminating:Within one year - 0.2 - -One to fi ve years 0.4 0.2 - -Over fi ve years - - 0.1 0.1 0.4 0.4 0.1 0.1

2012 2011 £’000 £’000

Aggregate amount:Directors’ emoluments 882.2 1,162.5Compensation payments - 286.2Company pension contributions to money purchase schemes 41.8 60.1 924.0 1508.8

Highest paid director:Aggregate emoluments 228.5 220.9Compensation payments - 286.2Relocation expenses 99.0 -Company pension contributions to money purchase schemes 17.5 15.3

23. Future capital expenditure

24. Lease commitments

25. Directors’ remuneration

Group Parent

Plant and equipment Property

Retirement benefi ts are accruing to one director under the Group’s defi ned benefi t pension schemes (2011: one), and two directors under the Group’s defi ned contribution pension scheme (2011: three).


46

Notice of Meeting

Notice is hereby given that the Annual General Meeting of the Company will be held at North Lakes Hotel & Spa, Ullswater Road, Penrith, Cumbria, CA11 8QT on Thursday 26th July 2012 at 12.00 noon for the transaction of the following business:

Ordinary BusinessTo consider and, if thought fi t, pass the following resolutions which will be proposed as ordinary resolutions.

1. To receive and adopt the accounts for the year ended 31st March 2012 and the reports of the directors and the auditor, and to declare a fi nal dividend.

2. To re-elect Mr R.A.J. Bailey as a director.

3. To re-elect Mrs A.J.M. Yerburgh as a director.

4. To confi rm the remuneration of the directors.

5. To re-appoint KPMG Audit Plc as auditor and authorise the directors to determine their remuneration.

Special BusinessTo consider, and if thought fi t, pass the following resolutions of which resolutions 6 and 8 will be proposed as ordinary resolutions and resolution 7 as a special resolution.

6. THAT, for the purposes of section 551 of the Companies Act 2006 (the Act) the directors of the Company be and are hereby generally and unconditionally authorised to exercise all powers

of the Company to allot equity securities (within the meaning of section 560 of the Act) up to an amount equal to the aggregate nominal amount of the authorised but unissued share capital of the Company provided that this authority shall expire (unless previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the next annual general meeting of the Company, save that the Company may before such expiry make an off er or agreement which would or might require relevant securities to be allotted after such expiry and the directors of the Company may allot relevant securities in pursuance of such an off er or agreement as if the authority conferred hereby had not expired.

This authority is in substitution for any and all authorities previously conferred upon the directors for the purposes of section 551 of the Act, without prejudice to any allotments made pursuant to the terms of such authorities.

7. THAT, subject to the passing of resolution 6 above, the directors of the Company be and are hereby empowered pursuant to section 570 of the Act to allot equity securities (within the meaning of section 560 of the Act) pursuant to the authority conferred by resolution 6 above as if section 561 of the Act did not apply to any such allotment provided that the power conferred by this resolution shall be limited to:

47

Notice of Meeting

7.1 the allotment of equity securities for cash in connection with an issue or off er of equity securities (including, without limitation, under a rights issue, open off er or similar arrangement) to holders of equity securities in proportion (as nearly as may be practicable) to their respective holdings of equity securities subject only to such exclusions or other arrangements as the directors of the Company may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws of any territory, or the requirements of any regulatory body or stock exchange in any territory; and

7.2 the allotment (otherwise than pursuant to resolution 7.1) of equity securities for cash up to an aggregate nominal amount of £787,500.

The power conferred by this resolution 7 shall expire

(unless previously renewed, revoked or varied by the Company in general meeting), at such time as the general authority conferred on the directors of the Company by resolution 6 above expires, except that the Company may at any time before such expiry make any off er or agreement which would or might require equity securities to be allotted after such expiry and the directors of the Company may allot equity securities in pursuance of such an off er or agreement as if the authority conferred hereby had not expired.

8. To authorise the Company generally and unconditionally to make market purchases (within the meaning of section 693(4) of the Act) of ordinary shares of 25 pence each in the capital of the Company provided that:

i. The maximum aggregate number of ordinary shares that may be purchased is 6,300,000, representing 10 per cent of the issued share capital of the Company; ii. the minimum price (excluding expenses) which may be paid for each ordinary share is 25 pence;

iii. the maximum price (excluding expenses) which may be paid for each ordinary share is an amount equal to 105 per cent of the average of the middle market quotations for an ordinary share of the Company (as derived from the PLUS Markets website) for the fi ve business days immediately preceding the day on which the purchase is made; and iv. unless previously renewed, varied or revoked, the authority conferred by this resolution shall expire at the earlier of the conclusion of the Company’s next Annual General Meeting and the date which is six months from the end of the Company’s next fi nancial year save that the Company may, before the expiry of the authority granted by this resolution, enter into a contract to purchase ordinary shares which will or may be executed wholly or partly after the expiry of such authority.

NOTESResolution 6 – Authority to allot relevant securitiesThe Company requires the fl exibility to allot shares from time to time. The directors are limited as to the number of shares they can at any time allot because allotment authority continues to be required under the Companies Act 2006 (the Act). Accordingly, resolution 6 would grant this authority (until the next Annual General Meeting or unless such authority is revoked or renewed prior to such time) by authorising the directors (pursuant to section 551 of the Act) to allot relevant securities up to an amount equal to the aggregate nominal amount of the authorised but unissued share capital of the Company as at 31 March 2012. The directors believe it to be in the interests of the Company for the Board to be granted this authority, to enable the Board to take advantage of appropriate opportunities which may arise in the future.


48

Notice of Meeting – continued

Resolution 7 – Disapplication of statutory pre-emption rightsThis resolution seeks to disapply the pre-emption rights provisions of section 561 of the Act in respect of the allotment of equity securities for cash pursuant to rights issues and other pre-emptive issues, and in respect of other issues of equity securities for cash up to an aggregate nominal value of £787,500, being an amount equal to approximately 5 per cent of the current issued share capital of the Company. If given, this power will expire at the same time as the authority referred to in resolution 6. The directors consider this power desirable due to the fl exibility aff orded by it.

Resolution 8 - Authority to make market purchases of sharesResolution 8 seeks authority for the Company to make market purchases of its own ordinary shares.If passed, the resolution gives authority for the Company to purchase up to 6,300,000 of its ordinary shares, representing 10 per cent of the Company’s issued ordinary share capital.

Resolution 8 specifi es the minimum and maximum prices which may be paid for any ordinary shares purchased under this authority. The authority will expire at the conclusion of the Company’s next Annual General Meeting in 2013 or, if earlier, the date which is six months from the end of the Company’s fi nancial year which commenced on 1st April 2012.

Any shares purchased under this authority will be cancelled.

As a member of the Company entitled to attend and vote at the meeting convened by this notice you are entitled to appoint another person as your proxy to exercise all or any of your rights to attend and to speak and vote in your place at the meeting. Your proxy need not be a member of the Company.

You may appoint more than one proxy in relation to the meeting convened by this notice provided that each proxy is appointed to exercise the rights attached to a diff erent share or shares held by you. You may not appoint more than one proxy to exercise rights attached to any one share.

By order of the Board Mrs S. I. Woodward, A.C.I.S.Secretary

Star Brewery,Blackburn26 June 2012

49

Over 20 YearsDavid Hitchon BrewingJohn Bland BrewingIan Stones BrewingAlan Grier Quality ControlGeoff rey Baxendale Quality ControlWilliam Jones BottlingRandolf Nelson PackagingPaul Taylor PackagingMichelle Holden PackagingCraig Hall PackagingAnne Farry Corporate Offi ce Shire HotelsHilary Carruthers Thorpe Park Hotel & SpaJudith Price Cottons Hotel & SpaAndrew Creighton North Lakes Hotel & Spa Christopher Armstrong North Lakes Hotel & SpaJennifer Bowness North Lakes Hotel & SpaMichael Riordan Aztec Hotel & SpaColin Morgan Parson’s CollarMichael Kearney Solent Hotel & SpaMark Bowers Cottons Hotel & SpaAntony Penny North Lakes Hotel & SpaHelen Waller Cottons Hotel & SpaGordon Jackson Thorpe Park Hotel & SpaRosemarie Kolek North Lakes Hotel & SpaSusan Capstick North Lakes Hotel & SpaClare Ross North Lakes Hotel & SpaSusan Stoddart North Lakes Hotel & SpaJean Marsden ReceptionJoseph Clinton Distribution FleetLee Cowell Distribution FleetMark Raszler Distribution FleetStephen Fox Distribution FleetMark Brynes Distribution FleetCharles Rawcliff e Distribution FleetKevin Davies EngineeringDavid Wall EngineeringMartin Tate EngineeringBarry Riley EngineeringJohn Booth EstatesLaura Waters EstatesDenise Routh FinanceBarbara Bentley FinanceJohn Cooper FinanceMichael Chester FinanceSarah Wright Human ResourcesCarol Manley Human ResourcesLynn Jepson Human ResourcesRobert Holt Human ResourcesCatherine Hughes IT Michael Jepson Pub Co

Jane Waterworth Corporate Offi ce, Shire HotelsJoseph O’Grady Trade Technical ServicesLouise Bradshaw Trade Technical ServicesPaul Shapley Trade Technical Services

Over 30 YearsPeter Booth BrewingMichael Oldham BrewingMansukh Gohil BrewingStephen Fielding BrewingJohn Williams BrewingGlyn Bennett BrewingLance Williams BrewingBrian Wolstenholme BrewingWilliam Holden BrewingIan Hacking Quality ControlJanet Almond LogisticsPaul Airey PackagingLeslie Halleron BottlingPaul Burns PackagingAlan Reid PackagingMelvyn Youds PackagingMandy Kelly CommercialKarl Chew Distribution WarehouseJames Morrison Distribution WarehouseJohn Trusdale Distribution FleetWilliam Mercer Distribution FleetJohn Cawley EngineeringFred Miller EngineeringAndrea Jepson FinanceSusan Woodward FinanceSusan Greenwood FinanceRobert Lowcock FinanceMartin Shearer SalesAnn Yerburgh GroupValerie Murtagh Cottons Hotel & SpaPeter Williams Solent Hotel & SpaMichael Haddow Corporate Offi ce Shire HotelsGail Dugan Human ResourcesBryn Makin Trade Technical ServicesIan Neville Trade Technical ServicesGraham Booth Trade Technical ServicesWilliam Sharples Trade Technical ServicesChristopher Kimmins Trade Technical ServicesAnthony Alstead Trade Technical Services

Over 40 YearsKeith Ferguson BrewingBarry Marsden Quality ControlStephen Shaw Estates Joan Batty Distribution Warehouse

Long Serving Employees

The Company values the signifi cant contribution made by all of its employees, including those who have been a loyal part of the team for over 20 years, a list of whom is recognised below:


50

Shareholder Information

Registered Offi ce Financial CalendarPenny StreetStar Brewery Annual General MeetingBlackburn Thursday 26th July 2012Lancashire 12.00 noon at North Lakes Hotel & Spa, PenrithBB1 6HL Telephone: 01254 686868 Announcement of half year resultsEmail: November [email protected] [email protected] Interim Dividend January 2013Company Secretary Mrs S.I. Woodward, A.C.I.S. Recent Dividends Final 2010/11 3.36pRegistrars Interim 2011/12 1.10pCapita Registrars The Registry Registered Number34 Beckenham Road 51702Beckenham Kent, BR3 4TU Telephone: 0871 664 0300 (Calls cost 10p per minute plus network extras) Website: www.capitaregistrars.co.uk AuditorKPMG Audit PlcEdward VII QuayNavigation WayAshton-on-RibblePreston, PR2 2YF

Share price informationThe Company’s share price is quoted daily in the Financial Times under the PLUS facility section.

Further information about the Company is available via the internet on the following websites:www.thwaites.co.ukwww.innsofcharacter.co.ukwww.shirehotels.com

51

Thursday 26th July 201212.00 noonat North Lakes Hotel & Spa, Ullswater Road,Penrith, Cumbria, CA11 8QT

Directions

FROM M6Leave M6 at Junction 40. At the roundabout at the top of the slip road take the A592 signed Penrith. The hotel is on your right, but access is via the mini roundabout at the top of the hill. Go right around the roundabout, turning back down the dual carriageway. Turn left into Cliff ord Road, followed by an immediate right into the hotel car park.

FROM A66Leave the A66 at the interchange with the M6 and follow the directions above.

Annual General Meeting

Penrith

Clifford Road

Castle H

ill Ro

ad

Norfolk Road (B5288)A592

A592

A592

Ullsw

ater

Rd.

North Lakes Hotel & Spa

A68

6

A6 B

ridg

e Lane

A6 K

emp

lay Bank

A66

A66

M6

J40

M6

Carlisle

A69

A1

Preston, ManchesterKeswick

Carlisle

Workington

Whitehaven

Windermere

Penrith

A596

A595

A69

A66 A66

A66

A591

A595

A6

A6

A74

A7

A6

M6

J44

J43

J42

J40


52

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