REG - Wetherspoon (JD) PLC - Preliminary Results
18/03/2022 07:00
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RNS Number : 2096F Wetherspoon (JD) PLC 18 March 2022
18 March 2022
J D WETHERSPOON PLC
PRELIMINARY RESULTS
(For the 26 weeks ended 23 January 2022)
FINANCIAL HIGHLIGHTS - All Comparisons against FY20
· Revenue £807.4m (2020:
£933.0m)
-13.5%
· Like-for-like sales
-11.8%
Before exceptional items (pre-IFRS 16):
· Loss before tax -£21.3m (2020: profit £57.9m)
· Operating profit £0.5m (2020: profit
£76.6m)
· Earnings per share -16.0p (2020: 44.3p)
Before exceptional items (post-IFRS 16):
· Loss before tax -£26.1m (2020: profit £51.6m)
· Operating profit £1.6m (2020: profit
£80.8m)
· Earnings per share -19.7p (2020: 39.3p)
After exceptional items (pre-IFRS 16):
· Loss before tax -£8.2m (2020: profit £42.0m)
· Operating profit £0.8m (2020: profit
£76.6m)
· Earnings per share -7.8p (2020: 30.5p)
After exceptional items (post-IFRS 16):
· Loss before tax -£13.0m (2020: profit £35.7m)
· Operating profit £1.9m (2020: profit £80.8m)
· Earnings per share -9.0p (2020: 25.5p)
Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc,
said:
"Following a traumatic two years for many businesses and people, the ending of
Covid restrictions has brought a return to more normal trading patterns in
recent weeks. As indicated above, trade for the last three weeks was 2.6%
below the equivalent period in 2019, reflecting an improving trend.
"Contrary to some reports, the company has a full complement of staff and is
fully stocked, with some minor exceptions.
"Inflationary pressures in the economy have been widely publicised. Nearly 70%
of the company's properties are freehold, with interest rates fixed for the
next decade. Most of the company's leasehold pubs have rent reviews which are
fixed at levels below the current level of inflation. There is pressure on
input costs from food, drink and energy suppliers, mitigated to an extent, by
a number of long-term contracts. Overall, the company expects the increase in
input prices to be slightly less than the level of inflation.
"The government is reported to have spent over £400 billion on Covid
measures, around nine times the annual defence budget. The expenditure has
been financed by the creation of "new money" by the Bank of England, which has
led to significant inflation and higher taxes.
"Draconian restrictions, which amount to a lockdown-by-stealth, are, of
course, kryptonite for hospitality, travel, leisure and many other businesses.
The company is confident of a strong future if restrictions are avoided. The
readiness of the leaders of all the UK's main political parties to resort to
lockdowns, and extreme restrictions, which were not contemplated in the UK's
2019 plans for pandemics, is the main threat to the future of the hospitality
industry, but also to the economy."
Enquiries:
John Hutson Chief Executive
Officer 01923 477777
Ben Whitley Finance
Director 01923 477777
Eddie Gershon Company
spokesman 07956 392234
Photographs are available at: newscast.co.uk
Notes to editors
1. J D Wetherspoon owns and operates pubs throughout the UK
and Ireland. The Company aims to provide customers with good-quality food and
drink, served by well-trained and friendly staff, at reasonable prices. The
pubs are individually designed and the Company aims to maintain them in
excellent condition.
2. Visit our website jdwetherspoon.com
3. This announcement has been prepared solely to provide
additional information to the shareholders of J D Wetherspoon, in order to
meet the requirements of the UK Listing Authority's Disclosure and
Transparency Rules. It should not be relied on by any other party, for other
purposes. Forward-looking statements have been made by the directors in good
faith using information available up until the date that they approved this
statement. Forward-looking statements should be regarded with caution
because of inherent uncertainties in economic trends and business risks.
4. The annual report and financial statements 2021 has been
published on the Company's website on 7 October 2021.
5. The current financial year comprises 53 trading weeks to 31
July 2022.
6. The next trading update will be issued on 4 May 2022
CHAIRMAN'S STATEMENT
Financial performance
The company was founded in 1979 - and this is the 39th year since
incorporation in 1983.
The table below outlines some key aspects of our performance during that
period.
Summary accounts for the years 1984-2022
Financial year Total number of Pubs (Sites) Total sales (Loss)/profit (Loss)/Profit Earnings Earnings Free cash flow Free cash flow
before tax and exceptional items (Pre-IFRS16) before tax and exceptional items (Post-IFRS16) per share before exceptional items (Pre-IFRS16) per share before exceptional items (Post-IFRS16) per share
£000 £000 £000 pence pence £000 pence
1984 1 818 (7) - 0 -
1985 2 1,890 185 - 0.2 -
1986 2 2,197 219 - 0.2 -
1987 5 3,357 382 - 0.3 -
1988 6 3,709 248 - 0.3 -
1989 9 5,584 789 - 0.6 - 915 0.4
1990 19 7,047 603 - 0.4 - 732 0.4
1991 31 13,192 1,098 - 0.8 - 1,236 0.6
1992 45 21,380 2,020 - 1.9 - 3,563 2.1
1993 67 30,800 4,171 - 3.3 - 5,079 3.9
1994 87 46,600 6,477 - 3.6 - 5,837 3.6
1995 110 68,536 9,713 - 4.9 - 13,495 7.4
1996 146 100,480 15,200 - 7.8 - 20,968 11.2
1997 194 139,444 17,566 - 8.7 - 28,027 14.4
1998 252 188,515 20,165 - 9.9 - 28,448 14.5
1999 327 269,699 26,214 - 12.9 - 40,088 20.3
2000 428 369,628 36,052 - 11.8 - 49,296 24.2
2001 522 483,968 44,317 - 14.2 - 61,197 29.1
2002 608 601,295 53,568 - 16.6 - 71,370 33.5
2003 635 730,913 56,139 - 17.0 - 83,097 38.8
2004 643 787,126 54,074 - 17.7 - 73,477 36.7
2005 655 809,861 47,177 - 16.9 - 68,774 37.1
2006 657 847,516 58,388 - 24.1 - 69,712 42.1
2007 671 888,473 62,024 - 28.1 - 52,379 35.6
2008 694 907,500 58,228 - 27.6 - 71,411 50.6
2009 731 955,119 66,155 - 32.6 - 99,494 71.7
2010 775 996,327 71,015 - 36.0 - 71,344 52.9
2011 823 1,072,014 66,781 - 34.1 - 78,818 57.7
2012 860 1,197,129 72,363 - 39.8 - 91,542 70.4
2013 886 1,280,929 76,943 - 44.8 - 65,349 51.8
2014 927 1,409,333 79,362 - 47.0 - 92,850 74.1
2015 951 1,513,923 77,798 - 47.0 - 109,778 89.8
2016 926 1,595,197 80,610 - 48.3 - 90,485 76.7
2017 895 1,660,750 102,830 - 69.2 - 107,936 97.0
2018 883 1,693,818 107,249 - 79.2 - 93,357 88.4
2019 879 1,818,793 102,459 - 75.5 - 96,998 92.0
2020 872 1,262,048 (34,095) (44,687) (27.6) (35.5) (58,852) (54.2)
2021 861 772,555 (154,676) (167,166) (110.3) (119.2) (83,284) (67.8)
2022 859 807,395 (21,255) (26,064) (16.0) (19.7) (34,509) (27.2)
Notes
Adjustments to statutory numbers
1. Where appropriate, the earnings per share (EPS), as disclosed in the
statutory accounts, have been recalculated to take account of share splits,
the issue of new shares and capitalisation issues.
2. Free cash flow per share excludes dividends paid which were included in the
free cash flow calculations in the annual report and accounts for the years
1995-2000.
3. The weighted average number of shares, EPS and free cash flow per share
include those shares held in trust for employee share schemes.
4. Before 2005, the accounts were prepared under UKGAAP. All accounts from
2005 to date have been prepared under IFRS.
5. Apart from the items in notes 1-4, all numbers are as reported in each
year's published accounts.
6. From financial year 2020 data is based on both pre-IFRS16 numbers and
post-IFRS16 numbers following the transition from IAS17 to IFRS16.
7. Free cash flow is defined in note 8 and in the Company's accounting
policies. The calculation of free cash flow can be found on the cash flow
statement.
8. 2022 results are for the 6 month period ended 23 January 2022.
Background
As previously reported, in the first half of the financial year, which ended
on 23 January 2022, sales were adversely affected by Covid-19 restrictions,
and labour costs were high, due mainly to Covid-related absences.
Like-for-like sales were -11.8%, compared to the six-month period ended 26
January 2020, before the pandemic, and were -12.4% for the first four weeks of
the second half of the financial year, ending 20 February 2022, compared to
the same period in FY20.
Since sales were affected by Covid from about February/March 2020, culminating
in a pub closure on 20 March 2020, sales from 21 February 2022 are compared
with sales from a similar period in 2019.
In the most recent three-week period, to 13 March 2022, sales improved, being
2.6% lower than the equivalent period in 2019.
Cash sales per week during this three-week period have been approximately 10%
above the depressed levels of December 2021, our busiest month of the year,
indicating an improving trend.
Detailed comparisons with 'normal' trading periods, before Covid, maybe of
limited value. We have, even so, compared sales, profits and margins, below,
with the first half of FY20, before the pandemic.
Total sales were £807.4m, a decrease of 13.5%, compared to the 26 weeks ended
26 January 2020.
Like-for-like sales, as indicated above, decreased by 11.8%. Like-for-like bar
sales decreased by 12.7%, food sales by 11.1% and slot/fruit machine sales by
9.8%. Hotel room sales increased by 6.6%.
The unaudited pre-IFRS16 operating profit, before exceptional items, was
£0.5m (2020: £76.6m). The operating margin, before exceptional items, was
0.1% (2020: 8.2%).
The unaudited pre-IFRS16 loss before tax and exceptional items was £21.3m
(2020: £57.9m profit). This included property losses of £1.8m (2020:
£0.2m).
Property losses arose from the disposal of four pubs and the closure of two
pubs. The disposals resulted in a cash inflow of £2.1m.
Losses per share, including shares held in trust by the employee share scheme,
before exceptional items, were 16.0p (2020: earnings per share of 43.3p).
Total capital investment was £64.7m (2020: £128.5m). £26.6m was invested in
new pubs and pub extensions (2020: £23.7m), £18.9m in existing pubs and IT
(2020: £34.1m) and £19.2m in freehold
reversions of properties where Wetherspoon was the tenant (2020: £70.7m).
The company increased investment levels, which are still substantially below
the pre-pandemic period, on the basis that the adverse effects of Covid-19
were likely to diminish in the near future.
Exceptional items
There was a pre-tax exceptional gain of £13.0m (2020: £15.9m loss). £12.7m
of the gain related to interest rate swaps. The company has interest rate
swaps in place for approximately the next 10 years at an average rate of
1.24%, excluding the banks' margin.
Free Cash Flow
There was a free cash outflow of £16.6m (2020: £49.0m inflow), after capital
payments of £19.5m for existing pubs (2020: £34.5m), £7.1m for share
purchases for employees (2020: £9.3m) and payments of tax and interest. Free
cash outflow per share was 27.2p (2020: 46.7p inflow).
The effect of IFRS16 on a hypothetical leasehold pub
As previously indicated, in order to illustrate the differences between old
and new accounting, the example below shows how a leasehold pub would be
affected. The following assumptions have been made:
n a 25-year lease, at a rent of £100k per annum, rising by 7.5% at each
five-year rent review
n capital development costs of £1m funded by equity, without debt
n £30k of capital reinvestment per annum from year 6 to year 25
n pub EBITDA profits of £160k per annum
n head office costs and tax excluded from calculations
Year 1 5 10 15 20 25 Total
£000 £000 £000 £000 £000 £000 £000
Pub EBITDAR 260 260 268 276 284 294 6,904
Accounting Profit 100 100 100 100 100 100 2,500
pre IFRS16
(before head office costs & corporation tax)
Accounting Profit 60 65 81 101 125 154 2,500
post IFRS16
(before head office costs & corporation tax)
Cash earnings 160 160 130 130 130 130 3,400
As the table illustrates, "cash earnings" are the same in both examples,
however accounting earnings vary greatly.
Pre-IFRS16 treatment results in stable accounting profit of £100k, reflecting
stable cash earnings, whereas post-IFRS16 treatment gives rise to erratic
accounting profits, which vary from £60k to £154k, over the term of the
lease.
As a result, it will be difficult for investors to understand the performance
of the business, using IFRS16 accounting standards, at any given point in the
lease, from an examination of the profit and loss account.
In appendix 1, below, we have provided profit and loss, balance sheet and cash
flow statements, using pre-IRFS16 accounting methodology, for those who find
the new accounting too complex or unhelpful.
Dividends and return of capital
The board has not recommended the payment of an interim dividend (2020: £0).
There have been no share buybacks in the financial year to date (2020:
£6.5m).
Financing
As at 23 January 2022, the company's total net debt, excluding derivatives,
was £920.4m (2020: £804.5m), an increase of £115.9m. The half year-end
net-debt-to-EBITDA ratio was 25.63 times (2020: 3.54 times).
Although debt has increased by £116m since H1 2020, trade creditors have
reduced by £72m and £109m has been invested in new pubs and freehold
reversions.
The company has an agreement with its lenders, who have been extremely
supportive throughout the pandemic, that waives its debt covenants until
October 2022 and replaces them with a minimum liquidity requirement of £75m.
At the half-year-end liquidity was £159.1m.
There has been no change in the total finance facilities of £1,083.0m during
the period.
As referred to above, the company has fixed its SONIA (SONIA is a replacement
for LIBOR) interest rates in respect of £770m until November 2031. The
weighted average cost of the swaps, excluding the banks' margin, is currently
1.61%. The total cost of the company's debt, including the banks' margin was
4.28%. The cost of the swaps is illustrated in the table below:
Swap Value Start Date End Date Weighted Average %
£770m 30-Jul-21 30-Jul-23 1.61%
£770m 31-Jul-23 30-Jul-26 1.10%
£770m 31-Jul-26 30-Jun-28 1.33%
£770m 01-Jul-28 29-Mar-29 1.32%
£770m 31-Mar-29 30-Nov-31 1.02%
Property
The company opened four pubs during the first six months and sold or closed
six, resulting in a trading estate of 859 pubs at the half year end.
The half-year depreciation charge, excluding depreciation of "right-of-use"
assets (a new charge to the profit and loss account, post-IFRS16) was £37.2m
(2021: £38.7m).
As at 24 July 2011, the company's freehold/ leasehold split was 43.4%/56.6%.
As at 23 January 2022, as a result of investment in freehold reversions
(relating to pubs where the company was previously a tenant) and freehold pub
openings, the split was 67.8%/32.2%. As at 23 January 2022, the net book value
of the property, plant and equipment of the company was £1.4 billion,
including £1.1 billion of freehold and long-leasehold property. The
properties have not been revalued since 1999.
Taxation
The current corporation tax credit for the year is £1.5m (2020: £13.6m
charge). The 'accounting' tax credit, which appears in the income statement,
is £1.0m (2021: £9.5m charge).
The accounting tax credit comprises two parts: the actual current tax credit
(the 'cash' tax) and the deferred tax credit (the 'accounting' tax). The tax
losses arising in the financial year will be carried forward for use against
profits in future years, meaning that the cash tax benefit will be received in
future years. Therefore, a 'deferred tax' benefit is created which will
reverse in future years when the cash tax benefit of the losses is realised.
The company is seeking a refund of historic excise duty from HMRC, totalling
£495k, in relation to goods sent to the Republic of Ireland, when Wetherspoon
pubs first opened in that country. The company has been charged excise duty on
the same goods twice, as they were purchased in the UK, and excise duty was
paid in full. Irish excise duty was then paid in addition.
Owing to a paperwork error, in the early days of our business in the Republic,
which the company has sought to rectify, it has, to date, been unable to
reclaim this duty, even though it is transparently clear that the duty has
been paid.
Scotland Business Rates
Business rates are supposed to be based on the value of the building, rather
than the level of trade of the tenant. This should mean that the rateable
value per square foot is approximately the same for comparable pubs in similar
locations. However, as a result of the valuation approach adopted by the
government "Assessor" in Scotland, Wetherspoon often pays far higher rates per
square foot than its competitors.
This is highlighted (in the tables below) by assessments for the Omni Centre,
a modern leisure complex in central Edinburgh, where Wetherspoon has been
assessed at more than double the rate per square foot of the average of its
competitors, and for The Centre in Livingston (West Lothian), a modern
shopping centre, where a similar anomaly applies.
As a result of applying valuation practice from another era, which assumed
that pubs charged approximately the same prices, the raison d'être of the
rating system - that rates are based on property values, not the tenants
trade- has been undermined.
Omni Centre, Edinburgh
Occupier Name Rateable Value (RV) Customer Area (ft²) Rates per square foot
Playfair (JDW) £218,750 2,756 £79.37
Unit 9 (vacant) £48,900 1,053 £46.44
Unit 7 (vacant) £81,800 2,283 £35.83
Frankie & Benny's £119,500 2,731 £43.76
Nando's £122,750 2,804 £43.78
Slug & Lettuce £108,750 3,197 £34.02
The Filling Station £147,750 3,375 £43.78
Tony Macaroni £125,000 3,427 £36.48
Unit 6 (vacant) £141,750 3,956 £35.83
Cosmo £200,000 7,395 £27.05
Average (exc JDW) £121,800 3,358 £38.55
The Centre, Livingston
Pub Name Rateable Value (RV) Customer Area (ft²) Rates per square foot
The Newyearfield (JDW) £165,750 4,090 £40.53
Paraffin Lamp £52,200 2,077 £25.13
Wagamama £67,600 2,096 £32.25
Nando's £80,700 2,196 £36.75
Chiquito £68,500 2,221 £30.84
Ask Italian £69,600 2,254 £30.88
Pizza Express £68,100 2,325 £29.29
Prezzo £70,600 2,413 £29.26
Harvester £98,600 3,171 £31.09
Pizza Hut £111,000 3,796 £29.24
Hot Flame £136,500 4,661 £29.29
Average (exc JDW) £82,340 2,721 £30.40
Similar issues are evident in Galashiels, Arbroath, Wick, Anniesland - and
indeed most Wetherspoon pubs in Scotland. In effect, the application of the
rating system in Scotland discriminates against businesses like Wetherspoon,
which have lower prices, and encourages businesses to charge higher prices. As
a result, consumers are likely to pay higher prices, which cannot be the
intent of rating legislation.
VAT equality
As we have previously stated, the government would generate more revenue and
jobs if it were to create tax equality among supermarkets, pubs and
restaurants. Supermarkets pay virtually no VAT in respect of food sales,
whereas pubs pay 20%. This has enabled supermarkets to subsidise the price of
alcoholic drinks, widening the price gap, to the detriment of pubs and
restaurants. Pubs also pay around 20 pence a pint in business rates, whereas
supermarkets pay only about 2 pence, creating further inequality.
Pubs have lost 50% of their beer sales to supermarkets in the last 35 or so
years. It makes no sense for supermarkets to be treated more leniently than
pubs, since pubs generate far more jobs per pint or meal than do supermarkets,
as well as far higher levels of tax. Pubs also make an important contribution
to the social life of many communities and have better visibility and control
of those who consume alcoholic drinks.
Tax equality is particularly important for residents of less affluent areas,
since the tax differential is more important there - people can less afford to
pay the difference in prices between the on and off trade.
How pubs contribute to the economy
Wetherspoon and other pub and restaurant companies have always generated far
more in taxes than are earned in profits. Wetherspoon generated total taxes in
FY19, before the pandemic, of £763.6m. This equated to one pound in every
thousand of UK government revenue
In the six months ended 23 January 2022, the company generated taxes of
£294.1m.
The table below shows the tax revenue generated by the company, its staff and
customers in the last 10 years. Each pub, on average, generated £6.1m in tax
during that period:
2022 (HY) 2021 (FY) 2020 (FY) 2019 (FY) 2018 (FY) 2017 (FY) 2016 (FY) 2015 (FY) 2014 (FY) 2013 (FY) TOTAL
2013 to 2022
£m £m £m £m £m £m £m £m £m £m £m
VAT 118.1 93.8 244.3 357.9 332.8 323.4 311.7 294.4 275.1 253.0 2,604.5
Alcohol duty 74.0 70.6 124.2 174.4 175.9 167.2 164.4 161.4 157.0 144.4 1,413.5
PAYE and NIC 65.1 101.5 106.6 121.4 109.2 96.2 95.1 84.8 78.4 70.2 928.5
Business rates 23.3 1.5 39.5 57.3 55.6 53.0 50.2 48.7 44.9 46.4 420.4
Corporation tax 1.5 - 21.5 19.9 26.1 20.7 19.9 15.3 18.4 18.4 161.7
Corporation tax credit (historic capital allowances) - - - - - - - -2.0 - - -2.0
Fruit/slot Machine duty 5.7 4.3 9.0 11.6 10.5 10.5 11.0 11.2 11.3 7.2 92.3
Climate change levies 6.2 7.9 10.0 9.6 9.2 9.7 8.7 6.4 6.3 4.3 78.3
Stamp duty 1.6 1.8 4.9 3.7 1.2 5.1 2.6 1.8 2.1 1.0 25.8
Sugar tax 1.3 1.3 2.0 2.9 0.8 - - - - - 8.3
Fuel duty 0.8 1.1 1.7 2.2 2.1 2.1 2.1 2.9 2.1 2.0 19.1
Carbon tax - - - 1.9 3.0 3.4 3.6 3.7 2.7 2.6 20.9
Premise licence and TV licences 0.4 0.5 1.1 0.8 0.7 0.8 0.8 1.6 0.7 0.7 8.1
Landfill tax - - - - 1.7 2.5 2.2 2.2 1.5 1.3 11.4
Furlough Tax -3.8 -213.0 -124.1 - - - - - - - -340.9
Rebate
Eat out to help out - -23.2 - - - - - - - - -23.2
Local Government Grants -0.1 -11.1 - - - - - - - - -11.2
TOTAL TAX 294.1 37.0 440.7 763.6 728.8 694.6 672.3 632.4 600.5 551.5 5.4bn
TAX PER PUB (£000) 342 43 533 871 825 768 705 673 662 632 6.1m
TAX AS % OF NET SALES 36.4% 4.8% 34.9% 42.0% 43.0% 41.8% 42.1% 41.8% 42.6% 43.1% 37.3%
Note - this table is prepared on a cash basis. 2022 is for the 6 month period
ending 23 January 2022.
Corporate Governance
Wetherspoon has been a strong critic of the composition of the boards of
UK-quoted companies.
As a result of the "nine-year rule", limiting the tenure of NEDs and the
presumption in favour of "independent", part-time chairmen, boards are often
composed of short-term directors, with very little representation from those
who understand the company best - people who work for it full-time, or have
worked for it full-time.
Wetherspoon's review of the boards of major banks and pub companies, which
teetered on the edge of failure in the 2008-2010 recession, highlighted the
short "tenure", on average, of directors.
In contrast, Wetherspoon noted the relative success, during this fraught
financial period, of pub companies Fuller's and Young's, the boards of which
were dominated by experienced executives, or former executives.
As a result, Wetherspoon has increased the level of executive experience on
the Wetherspoon board by appointing four "worker directors".
All four worker directors started on the "shop floor" and eventually became
successful pub managers. Three have been promoted to area management roles.
They have worked for the company for an average of 24 years.
Board composition cannot guarantee future success, but it makes sensible
decisions, based on experience at the coalface of the business, more likely.
The UK Corporate Governance Code 2018 (the "Code") is a vast improvement on
previous codes, emphasising the importance of employees, customers and other
stakeholders in commercial success. It also emphasises the importance of its
'comply or explain' ethos, and the consequent need for shareholders to engage
with companies in order to understand their explanations.
A major impediment to the effective implementation of comply or explain seems
to be the undermanning of the corporate governance departments of major
shareholders.
For example, Wetherspoon has recently met a compliance officer from one major
institution who is responsible for around 400 companies - an impossible task,
since the written regulatory output of each company is vast, coupled with the
practical impossibility of meeting with so many companies in any meaningful
way.
As a result, it appears that compliance officers and governance advisors, in
practice, often rely on a "tick-box" approach, which is, itself, in breach of
the Code.
A further issue is that many major investors, in their own companies, for
sensible reasons, do not observe the nine-year rule, and other rules,
themselves. An approach of "do what I say, not what I do" is clearly
unsustainable.
Further progress
As always, the company has tried to improve as many areas of the business as
possible, on a week-to-week basis, rather than aiming for 'big ideas' or grand
strategies.
Frequent calls on pubs by senior executives, the encouragement of criticism
from pub staff and customers and the involvement of pub and area managers,
among others, in weekly decisions, are the keys to success.
Wetherspoon paid £11.1m in respect of bonuses and free shares to employees in
the period ending 23 January 2022, of which 98.7% was paid to staff below
board level and 91.0% was paid to staff working in our pubs.
Wetherspoon has been the biggest corporate sponsor of 'Young Lives vs Cancer'
(previously CLIC Sargent), having raised a total of £19.7m since 2002. During
the pandemic, our contributions had been reduced, but since the reopening of
our pubs there have been great efforts seen and our contributions have bounced
back significantly.
Bonuses and Free Shares
As indicated above, Wetherspoon has, for many years (see table below),
operated a bonus and share scheme for all employees. Before the pandemic,
these awards increased, as earnings increased for shareholders.
Financial year Bonus and free shares (Loss)/Profit after tax(1) Bonus and free shares as % of profits
£m £m
2007 19 47 41%
2008 16 36 45%
2009 21 45 45%
2010 23 51 44%
2011 23 52 43%
2012 24 57 42%
2013 29 65 44%
2014 29 59 50%
2015 31 57 53%
2016 33 57 58%
2017 44 77 57%
2018 43 84 51%
2019 46 80 58%
2020 33 (30) -
2021 23 (136) -
2022 H1 11 (20) -
Total 448 581 48.5%(2)
(1)(Loss)/Profit is Pre-IFRS16 and before exceptional items
(2) Excludes 2020, 2021 and 2022
Length of Service
The attraction and retention of talented pub and kitchen managers is important
for any hospitality business. As the table below demonstrates, the retention
of managers has improved, even during the pandemic.
Financial year Average pub manager length of service Average kitchen manager length of service
(Years) (Years)
2013 9.1 6.0
2014 10.0 6.1
2015 10.1 6.1
2016 11.0 7.1
2017 11.1 8.0
2018 12.0 8.1
2019 12.2 8.1
2020 12.9 9.1
2021 13.6 9.6
2022 H1 13.8 10.3
Food Hygiene Ratings
Wetherspoon has always emphasised the importance of hygiene standards.
We now have 778 pubs rated on the Food Standards Agency's website (see table
below). The average score is 4.98, with 98.6% of the pubs achieving a top
rating of five stars. We believe this to be the highest average rating for any
substantial pub company.
In the separate Scottish scheme, which records either a 'pass' or a 'fail',
all of our 65 pubs have passed
Financial Year Total Pubs Scored Average Rating Pubs with highest Rating %
2013 771 4.85 87.0
2014 824 4.91 92.0
2015 858 4.93 94.1
2016 836 4.89 91.7
2017 818 4.89 91.8
2018 807 4.97 97.3
2019 799 4.97 97.4
2020 781 4.96 97.0
2021 787 4.97 98.4
2022 H1 778 4.98 98.6
Property litigation
As previously reported, Wetherspoon agreed on an out-of-court settlement with
developer Anthony Lyons, formerly of property leisure agent Davis Coffer
Lyons, in 2013 and received approximately £1.25m from Mr Lyons.
The payment relates to litigation in which Wetherspoon claimed that Mr Lyons
had been an accessory to frauds committed by Wetherspoon's former retained
agent Van de Berg and its directors Christian Braun, George Aldridge and
Richard Harvey. Mr Lyons denied the claim - and the litigation was contested.
The claim related to properties in Portsmouth, Leytonstone and Newbury. The
Portsmouth property was involved in the 2008/9 Van de Berg case itself.
In that case, Mr Justice Peter Smith found that Van de Berg, but not Mr Lyons
(who was not a party to the case), fraudulently diverted the freehold from
Wetherspoon to Moorstown Properties Limited, a company owned by Simon Conway.
Moorstown leased the premises to Wetherspoon. Wetherspoon is still a
leaseholder of this property - a pub called The Isambard Kingdom Brunel.
The properties in Leytonstone and Newbury (the other properties in the case
against Mr Lyons) were not pleaded in the 2008/9 Van de Berg case.
Leytonstone was leased to Wetherspoon and trades today as The Walnut Tree
public house. Newbury was leased to Pelican plc and became Café Rouge.
As we have also reported, the company agreed to settle its final claim in this
series of cases and accepted £400,000 from property investor Jason Harris,
formerly of First London and now of First Urban Group. Wetherspoon alleged
that Harris was an accessory to frauds committed by Van de Berg.
Harris contested the claim and has not admitted liability.
Before the conclusion of the above cases, Wetherspoon also agreed on a
settlement with Paul Ferrari of London estate agent Ferrari Dewe & Co, in
respect of properties referred to as the 'Ferrari Five' by Mr Justice Peter
Smith.
Press corrections
Wetherspoon has been the subject of a number of inaccurate media stories on a
variety of different subjects. After complaining to the organisations
concerned, the company obtained corrections and/or apologies from a number of
publications, including:
Daily Express The Daily Telegraph
Daily Mail The
Guardian
Daily Mirror
The Independent
Daily Star The
Times
Sky News
Forbes
The company has published a special edition of Wetherspoon News which includes
details of the apologies and corrections which can be found on the Company's
website
(https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/does-truth-matter_.pdf
(https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/does-truth-matter_.pdf)
)
Current trading and outlook
Following a traumatic two years for many businesses and people, the ending of
Covid restrictions has brought a return to more normal trading patterns in
recent weeks. As indicated above, trade for the last three weeks was 2.6%
below the equivalent period in 2019, reflecting an improving trend.
Contrary to some reports, the company has a full complement of staff and is
fully stocked, with some minor exceptions.
Inflationary pressures in the economy have been widely publicised. Nearly 70%
of the company's properties are freehold, with interest rates fixed for the
next decade. Most of the company's leasehold pubs have rent reviews which are
fixed at levels below the current level of inflation. There is pressure on
input costs from food, drink and energy suppliers, mitigated to an extent, by
a number of long-term contracts. Overall, the company expects the increase in
input prices to be slightly less than the level of inflation.
The government is reported to have spent over £400 billion on Covid measures,
around nine times the annual defence budget. The expenditure has been financed
by the creation of "new money" by the Bank of England, which has led to
significant inflation and higher taxes.
Draconian restrictions, which amount to a lockdown-by-stealth, are, of course,
kryptonite for hospitality, travel, leisure and many other businesses. The
company is confident of a strong future if restrictions are avoided. The
readiness of the leaders of all the UK's main political parties to resort to
lockdowns, and extreme restrictions, which were not contemplated in the UK's
2019 plans for pandemics, is the main threat to the future of the hospitality
industry, but also to the economy.
Appendix 1 - Unaudited primary financial statements (pre-IFRS16 accounting)
As outlined on page 2, the following unaudited financial statements are
included to aid understanding.
Pre-IFRS16 income statement (before exceptional items):
26 weeks ended 23 January 2022 26 weeks ended 24 January 2021 26 weeks ended 26 January 2020
£000 £000 £000
Revenue 807,395 431,072 933,021
Operating costs (806,903) (451,816) (856,461)
Operating profit/(loss) 492 (20,744) 76,560
Property losses (1,796) (1,320) (172)
Finance income 6 167 41
Finance costs (19,957) (24,275) (18,508)
Loss before tax (21,255) (46,172) 57,921
Income tax credit 1,007 2,510 (12,487)
Loss for the period (20,248) (43,662) 45,434
Pre-IFRS16 income statement reconciliation (before exceptional items):
26 weeks ended 23 January 2022 26 weeks ended 24 January 2021 26 weeks ended 26 January 2020
£000 £000 £000
(Loss)/profit for the period before IFRS16 (20,248) (43,662) 45,434
Operating costs 23,516 26,078 28,443
Amortisation and Depreciation
- ROU Assets (22,379) (23,042) (24,425)
- Lease Premiums - 86 192
Disposal of leases 3,449 1,088 347
Finance income 223 210 225
Finance costs (9,617) (11,015) (11,078)
Income tax credit - 3,887 1,189
Loss for the period (25,057) (46,370) 40,327
Pre-IFRS16 cash flow statement:
26 weeks ended 23 January 2022 26 weeks ended 24 January 2021 26 weeks ended 26 January 2020
£000 £000 £000
Net cash flows from operating activities (7,959) (59,823) 93,079
Net cash flow from investing activities (58,852) (19,012) (135,778)
Net cash flow from financing activities 60,391 129,408 47,162
Net change in cash and cash equivalents (6,420) 50,573 4,463
Opening cash and cash equivalents 45,408 174,451 42,950
Closing cash and cash equivalents 38,988 225,024 47,413
Free cash flow (34,509) (77,306) 48,966
Free cash flow per ordinary share (p) (27.2) (64.5) 46.7
Pre-IFRS16 balance sheet:
As at 23 January 2022 As at 25 July 2021
£000 £000
Non-current assets
Property, plant and equipment 1,437,057 1,420,515
Intangible assets 3,849 5,358
Investment property 12,653 10,533
Other non-current assets 10,658 7,434
Deferred tax assets - -
Total non-current assets 1,464,217 1,443,840
Current assets
Inventories 27,007 26,853
Receivables 34,814 34,477
Asset Held for Sale 2,123 -
Cash and cash equivalents 38,988 45,408
Total current assets 102,932 106,738
Total assets 1,567,149 1,550,578
Current liabilities
Borrowings (6,740) (7,610)
Trade and other payables (259,737) (287,758)
Current income tax liabilities (372) (1,454)
Provisions (4,751) (4,725)
Total current liabilities (271,600) (301,547)
Non-current liabilities
Borrowings (956,605) (883,272)
Derivative financial instruments (3,565) (37,643)
Deferred tax liabilities (24,497) (16,546)
Provisions (1,488) (1,488)
Other liabilities (9,738) (9,738)
Total non-current liabilities (995,893) (948,687)
Total liabilities (1,267,493) (1,250,244)
Net assets 299,656 300,344
Shareholders' equity
Share capital 2,575 2,575
Share premium account 143,294 143,294
Capital redemption reserve 2,337 2,337
Other reserve 234,579 234,579
Hedging reserve (4,224) (15,403)
Currency translation reserve (501) 1,851
Retained earnings (78,404) (68,889)
Total shareholders' equity 299,656 300,344
INCOME STATEMENT for the 26 weeks ended 23 January 2022
J D Wetherspoon plc, company number: 1709784
Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 January 23 January 24 January 24 January 25 July 25 July
2022 2022 2021 2021 2021 2021
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
£000 £000 £000 £000 £000 £000
Revenue 1 807,395 807,395 431,072 431,072 772,555 772,555
Other operating income - exceptional (note 4) - 277 - 8,937 - 15,541
Operating costs (805,767) (805,767) (448,694) (448,694) (872,913) (872,913)
Operating costs - exceptional (note 4) - - - (16,473) - (24,482)
Operating profit/(loss) 2 1,628 1,905 (17,622) (25,158) (100,358) (109,299)
Property gains/(losses) 3 1,653 1,653 (232) (232) (123) (123)
Property losses - exceptional (note 4) 3 - (23) - (2,190) - (5,839)
Finance income 6 229 229 377 377 595 595
Finance costs 6 (29,574) (29,574) (35,290) (35,290) (67,280) (67,280)
Finance income/(costs) - exceptional (note 4) 6 - 12,774 - (5,511) - (12,690)
Loss before tax (26,064) (13,036) (52,767) (68,004) (167,166) (194,636)
Income tax credit 7 1,007 1,007 6,397 6,397 20,695 20,695
Income tax credit/(expense) - exceptional (note 4) 7 - 560 - 2,816 - (7,114)
Loss for the period (25,057) (11,469) (46,370) (58,791) (146,471) (181,055)
Loss per ordinary share (p)
- Basic(1) 8 (19.7) (9.0) (38.7) (49.1) (119.2) (147.4)
- Diluted(1) 8 (19.7) (9.0) (38.7) (49.1) (119.2) (147.4)
STATEMENT OF COMPREHENSIVE INCOME for the 26 weeks ended 23 January 2022
Notes Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Items which will be reclassified subsequently to profit or loss:
Interest-rate swaps: gain taken to other comprehensive income 22 22,314 16,717 44,551
Interest-rate swaps: (loss)/gain reclassification to the income statement 22 (2,011) 4,528 11,707
Tax on items taken directly to other comprehensive income 7 (9,124) (4,037) (5,084)
Currency translation differences (1,885) (1,933) (3,510)
Net gain recognised directly in other comprehensive income 9,294 15,275 47,664
Loss for the period (11,469) (58,791) (181,055)
Total comprehensive loss for the period (2,175) (43,516) (133,391)
CASH FLOW STATEMENT for the 26 weeks ended 23 January 2022
J D Wetherspoon plc, company number: 1709784
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
free cash free cash free cash
flow flow flow
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 January 23 January 24 January 24 January 25 July 25 July
2022 2022 2021 2021 2021 2021
£000 £000 £000 £000 £000 £000
Cash flows from operating activities
Cash generated from/(used in) operations 9 33,215 33,215 (28,749) (28,749) 25,208 25,208
Interest received 8 8 105 105 187 187
Interest paid (6,662) (6,662) (29,185) (29,185) (48,428) (48,428)
Corporation tax paid (709) (709) 12,201 12,201 7,673 7,673
Lease interest (9,222) (9,222) (10,843) (10,843) (19,942) (19,942)
Net cash flow from operating activities 16,630 16,630 (56,471) (56,471) (35,302) (35,302)
Cash flows from investing activities
Reinvestment in pubs (18,925) (18,925) (9,602) (9,602) (19,692) (19,692)
Reinvestment in business and IT projects (543) (543) (872) (872) (2,620) (2,620)
Investment in new pubs and pub extensions (22,275) - (7,115) - (21,131) -
Freehold reversions and investment properties (19,248) - (1,423) - (16,858) -
Proceeds of sale of property, plant and equipment 2,139 - - - 2,575 -
Net cash flow from investing activities (58,852) (19,468) (19,012) (10,474) (57,726) (22,312)
Cash flows from financing activities
Purchase of own shares for share-based payments (7,082) (7,082) (6,771) (6,771) (7,684) (7,684)
Loan issue cost 10 - - (238) (238) (434) (434)
Advances/(repayment) under bank loans 10 74,990 - - - (195,000) -
Advances under CLBILS 10 - - 48,333 - 100,033 -
Other loan receivables 10 (3,986) - - - - -
Lease principal payments 23 (24,589) (24,589) (3,352) (3,352) (17,552) (17,552)
Issue of share capital 28 - - 91,523 - 91,523 -
Asset-financing principal payments 10 (3,531) - (3,439) - (6,901) -
Net cash flow from financing activities 35,802 (31,671) 126,056 (10,361) (36,015) (25,670)
Net change in cash and cash equivalents 10 (6,420) 50,573 (129,043)
Opening cash and cash equivalents 18 45,408 174,451 174,451
Closing cash and cash equivalents 18 38,988 225,024 45,408
Free cash flow 8 (34,509) (77,306) (83,284)
Free cash flow per ordinary share 8 (27.2)p (64.5)p (67.8)p
Free cash flow is a measure not required by accounting standards; a definition
is provided in the accounting policies.
BALANCE SHEET as at 23 January 2022
J D Wetherspoon plc, company number: 1709784 Notes Unaudited Unaudited Audited
Restated
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Assets
Non-current assets
Property, plant and equipment 13 1,440,368 1,425,570 1,423,826
Intangible assets 12 3,849 8,956 5,358
Investment property 14 12,653 6,037 10,533
Right-of-use assets 23 448,184 527,614 468,538
Other loan receivable 16 3,224 - -
Deferred tax assets 7 - - -
Lease assets 23 9,681 10,506 9,890
Total non-current assets 1,917,959 1,978,683 1,918,145
Current assets
Lease assets 23 1,638 1,691 1,638
Assets held for sale 17 2,123 - -
Inventories 15 27,007 22,369 26,853
Receivables 16 16,696 27,268 16,427
Current income tax receivables 2,269 - 1,187
Cash and cash equivalents 18 38,988 225,024 45,408
Total current assets 88,721 276,352 91,513
Total assets 2,006,680 2,255,035 2,009,658
Current liabilities
Borrowings 20 (6,740) (7,610) (7,610)
Trade and other payables 19 (244,757) (184,742) (259,791)
Provisions 21 (3,030) (2,797) (3,004)
Lease liabilities 23 (50,797) (72,481) (65,219)
Total current liabilities (305,324) (267,630) (335,624)
Non-current liabilities
Borrowings 20 (956,605) (1,029,343) (883,272)
Derivative financial instruments 22 (3,565) (65,477) (37,643)
Deferred tax liabilities 7 (24,497) (18,693) (16,546)
Lease liabilities 23 (444,836) (508,518) (458,596)
Total non-current liabilities (1,429,503) (1,622,031) (1,396,057)
Total liabilities (1,734,827) (1,889,661) (1,731,681)
Net assets 271,853 365,374 277,977
Shareholders' equity
Share capital 28 2,575 2,575 2,575
Share premium account 143,294 143,294 143,294
Capital redemption reserve 2,337 2,337 2,337
Other reserves 234,579 234,579 234,579
Hedging reserve (4,224) (49,369) (15,403)
Currency translation reserve (501) 5,089 1,851
Retained earnings (106,207) 26,869 (91,256)
Total shareholders' equity 271,853 365,374 277,977
STATEMENT OF CHANGES IN EQUITY
J D Wetherspoon plc, company number: 1709784
Notes Share Share premium Capital Other Hedging Currency Retained Total
capital account redemption Reserves reserve translation earnings
reserve reserve
£000 £000 £000 £000 £000 £000 £000 £000
As at 26 July 2020 as previously reported 2,408 280,975 2,337 - (66,577) 7,089 91,016 317,248
Effect of restatements - (137,681) - 141,002 - - (3,321) -
At 26 July 2020 restated 2,408 143,294 2,337 141,002 (66,577) 7,089 87,695 317,248
Total comprehensive income - - - - 17,208 (2,000) (58,724) (43,516)
Loss for the period - - - - - - (58,791) (58,791)
Interest-rate swaps: cash flow hedges 22 - - - - 16,717 - - 16,717
Interest-rate swaps: amount reclassified to the income statement 22 - - - - 4,528 - - 4,528
Tax on items taken directly to comprehensive income 7 - - - - (4,037) - - (4,037)
Currency translation differences - - - - - (2,000) 67 (1,933)
Issued share capital (net of expenses) 167 - - 93,577 - - (2,222) 91,522
Share-based payment charges - - - - - - 6,420 6,420
Tax on share-based payment - - - - - - 471 471
Purchase of own shares for share-based payments - - - - - - (6,771) (6,771)
At 24 January 2021 2,575 143,294 2,337 234,579 (49,369) 5,089 26,869 365,374
Total comprehensive income - - - - 33,966 (3,238) (120,604) (89,876)
Loss for the period - - - - - - (122,264) (122,264)
Interest-rate swaps: cash flow hedges 22 - - - - 27,834 - - 27,834
Interest-rate swaps: amount reclassified to the income statement 22 - - - - 7,179 - - 7,179
Tax on items taken directly to comprehensive income 7 - - - - (1,047) - - (1,047)
Currency translation differences - - - - - (3,238) 1,660 (1,578)
Share-based payment charges - - - - - - 3,847 3,847
Tax on share-based payment - - - - - - (455) (455)
Purchase of own shares for share-based payments - - - - - - (913) (913)
At 25 July 2021 2,575 143,294 2,337 234,579 (15,403) 1,851 (91,256) 277,977
Total comprehensive income - - - - 11,179 (2,352) (11,003) (2,176)
Loss for the period - - - - - - (11,469) (11,469)
Interest-rate swaps: cash flow hedges 22 - - - - 22,314 - - 22,314
Interest-rate swaps: amount reclassified to the income statement 22 - - - - (2,011) - - (2,011)
Tax on items taken directly to comprehensive income 7 - - - - (9,124) - - (9,124)
Currency translation differences - - - - - (2,352) 466 (1,885)
Share-based payment charges - - - - - - 3,152 3,152
Tax on share-based payment - - - - - - (18) (18)
Purchase of own shares for share-based payments - - - - - - (7,082) (7,082)
At 23 January 2022 2,575 143,294 2,337 234,579 (4,224) (501) (106,207) 271,853
The currency translation reserve contains the accumulated currency gains and
losses on the long-term financing and balance sheet translation of the
overseas branch. The currency translation difference reported in retained
earnings is the retranslation of the opening reserves in the overseas branch
at the current period end's currency exchange rate.
As at 23 January 2022, the company had distributable reserves of £124.7m.
NOTES TO THE FINANCIAL STATEMENTS
1. Revenue
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Bar 480,453 236,701 440,119
Food 292,891 154,304 283,192
Eat out to help out scheme (note 24) - 23,248 23,248
Slot/fruit machines 23,144 12,046 17,059
Hotel 10,424 4,570 8,592
Other 483 203 345
807,395 431,072 772,555
2. Operating profit/(loss) - analysis of costs by nature
This is stated after charging/(crediting): Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Variable concession rental payments 2,196 2,607 2,801
Short term leases 375 102 784
Cancelled principal payments (note 23) (2,250) (7,322) (10,933)
Repairs and maintenance 45,557 25,609 64,020
Net rent receivable (926) (1,076) (1,873)
Share-based payments (note 5) 3,152 6,420 10,267
Depreciation of property, plant and equipment (note 13) 35,690 37,014 73,193
Amortisation of intangible assets (note 12) 1,491 1,694 3,151
Depreciation of investment properties (note 14) 50 12 44
Amortisation of right of use assets (note 23) 22,672 23,042 44,532
Analysis of continuing operations Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Revenue 807,395 431,072 772,555
Cost of sales (784,197) (439,375) (844,574)
Gross profit/(loss) 23,198 (8,303) (72,019)
Administration costs (21,293) (16,855) (37,280)
Operating profit/(loss) after exceptional items 1,905 (25,158) (109,299)
Included in cost of sales is £274.5m (2021: £145.9m) relating to cost of
inventory recognised as expense.
3. Property (gains)/losses
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Non-exceptional property (gains)/losses
Disposal of fixed assets 1,485 1,268 1,548
Additional costs of disposal 435 52 775
Disposal of leases (3,449) (1,088) (2,200)
Other property gains (124) - -
(1,653) 232 123
Exceptional property (gains)/losses
Disposal of fixed assets - - 1,592
Additional costs of disposal 23 57 115
Impairment of property, plant and equipment - - 1,999
Impairment of right of use assets - 2,133 2,133
23 2,190 5,839
Total property (gains)/losses (1,630) 2,422 5,962
Non-exceptional property losses, excluding disposal of lease assets, were
£1,796,000 in the period (2021: £1,320,000).
4. Exceptional Items
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Exceptional operating items
Local government support grants (107) (5,238) (11,123)
Duty drawback (170) (3,699) (4,418)
Exceptional operating income (277) (8,937) (15,541)
Equipment - 2,516 3,753
Stock losses - 2,200 4,158
Staff costs - 11,562 15,692
Other - 195 879
Exceptional operating costs - 16,473 24,482
Total exceptional operating costs (277) 7,536 8,941
Exceptional property losses
Disposal programme
Loss on disposal of pubs 23 57 1,707
Impairment of property plant and equipment - - -
23 57 1,707
Other property losses
Impairment of property, plant and equipment - - 1,999
Impairment of right-of-use asset - 2,133 2,133
- 2,133 4,132
Total exceptional property losses 23 2,190 5,839
Other exceptional items
Exceptional finance costs (12,774) 5,511 12,690
Exceptional tax
Exceptional tax items 189 (2,816) 10,385
Tax effect on exceptional items (749) - (3,271)
(560) (2,816) 7,114
Total exceptional items (13,588) 12,421 34,584
Duty drawback
A credit of £170,000 (July 2021: £4,418,000) for duty drawback was received
for perished stock during the closure periods which arose in the last
financial year.
Local government support grants
The company has recognised £107,000 income of local government support grants
in the UK and the Republic of Ireland relating to the Covid-19 pandemic. These
are recognised on receipt.
Exceptional finance costs
The company has recognised an exceptional net income of £12,774,000,
£13,774,000 of which relates to a reclassification due to hedge accounting.
See note 22 for further detail. The remaining £1,000,000 charge relates to
covenant-waiver fees incurred during the period.
Taxation
The exceptional tax credit of £560,000 comprises a previous year adjustment
to current tax of £2,000 and a deferred tax credit of £562,000. The deferred
tax relates to a fair value movement on interest rate swaps (£373,000) and
the impact of the change in UK tax rate on the deferred tax balances
(£189,000).
5. Employee benefits expenses
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Wages and salaries 302,569 256,022 520,339
Employee support grants (3,145) (97,539) (208,986)
Social security costs 18,990 11,130 23,380
Other pension costs 4,579 4,058 7,877
Share-based payments 3,152 6,420 10,267
Redundancy and restructuring costs (note 4) - 6,179 6,179
326,145 186,270 359,056
Employee support grants disclosed above are amounts claimed by the company
under the coronavirus job retention schemes in the UK and the Republic of
Ireland.
Employee numbers Unaudited Unaudited Audited
2022 2021 2021
Number Number Number
Full-time equivalents
Managerial/administration 4,916 4,613 4,586
Hourly paid staff 19,695 19,659 18,736
24,611 24,272 23,322
2022 2021 2021
Number Number Number
Total employees
Managerial/administration 5,030 4,722 4,703
Hourly paid staff 36,957 34,694 34,322
41,987 39,416 39,025
The totals above relate to the monthly average number of employees during the
year, not the total of employees at the end of the year.
Share-based payments Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
Shares awarded during the year (shares) 839,248 852,261 852,261
Average price of shares awarded (pence) 1,069 957 957
Market value of shares vested during the year (£000) 3,906 4,150 9,169
Total liability of the share-based payments scheme (£000) 12,239 15,047 14,608
The shares awarded as part of the above schemes are based on the cash value of
the bonuses at the date of the awards. These awards vest over three years,
with their cost spread over their three-year life. The share-based payment
charge above represents the annual cost of bonuses awarded over the past three
years. All awards are settled in equity.
The company operates two share-based compensation plans. In both schemes,
the fair values of the shares granted are determined by reference to the share
price at the date of the award. The shares vest at a £Nil exercise price -
and there are
no market-based conditions to the shares which affect their ability to vest.
6. Finance Income and costs
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Finance costs
Interest payable on bank loans and overdrafts 9,892 11,725 21,903
Amortisation of bank loan issue costs (note 10) 1,002 860 1,746
Interest payable on swaps 5,918 9,115 18,228
Interest payable on asset-financing 256 352 664
Interest payable on private placement 2,889 2,223 4,907
Finance costs, excluding lease interest 19,957 24,275 47,448
Interest payable on leases 9,617 11,015 19,832
Total finance costs 29,574 35,290 67,280
Bank interest receivable (6) (167) (188)
Lease interest receivable (223) (210) (407)
Total finance income (229) (377) (595)
Net finance costs before exceptional items 29,345 34,913 66,685
Exceptional finance costs (note 4) (12,774) 5,511 12,690
Net finance costs after exceptional items 16,571 40,424 79,375
7. Income tax expense
(a) Tax on loss on ordinary activities
The standard rate of corporation tax in the UK is 19.0%. The company's profits
for the accounting period are taxed
at a rate of 19.0% (2021: 19.0%).
Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
£000 £000 £000 £000 £000 £000
Taken through income statement
Current income tax:
Current income tax charge (378) (378) - - (380) (380)
Previous period adjustment - 2 - 2,641 - 1,836
Total current income tax (378) (376) - 2,641 (380) 1,456
Deferred tax:
Origination and reversal of temporary differences (629) (1,380) (6,297) (9,192) (19,158) (21,704)
Prior year deferred tax (credit)/charge - - (100) (2,662) (1,157) (3,718)
Impact of change in UK tax rate - 189 - - - 10,385
Total deferred tax (629) (1,191) (6,397) (11,854) (20,315) (15,037)
Tax charge/(credit) (1,007) (1,567) (6,397) (9,213) (20,695) (13,581)
Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
£000 £000 £000 £000 £000 £000
Taken through equity
Current tax (2) (2) 4 4 6 6
Deferred tax 20 20 (8) (8) (22) (22)
Tax (credit)/charge 18 18 (4) (4) (16) (16)
Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
£000 £000 £000 £000 £000 £000
Taken through comprehensive income
Deferred tax charge on swaps 7,079 7,079 4,037 4,037 6,241 6,241
Impact of change in UK tax rate 2,045 2,045 - - (1,157) (1,157)
Tax charge/(credit) 9,124 9,124 4,037 4,037 5,084 5,084
7. Income tax expense (continued)
(b) Reconciliation of the total tax charge
The taxation charge for the 26 weeks ended 23 January 2022 is based on the
pre-exceptional loss before tax of £26.1m and the estimated effective tax
rate before exceptional items for the 26 weeks ended 23 January 2022 of 3.9%
(2021: 12.4%).
This comprises a pre-exceptional current tax rate of 1.4% (2021: 0.2%) and a
pre-exceptional deferred tax charge of 2.5%
(2021: 12.2% charge).
The UK standard weighted average tax rate for the period is 19.0% (2021:
19.0%). The current tax rate is lower than the UK standard weighted average
tax rate, owing to tax losses in the period.
Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
£000 £000 £000 £000 £000 £000
(Loss) before income tax (26,064) (13,036) (52,767) (68,004) (167,166) (194,636)
Loss multiplied by the UK standard rate of (4,952) (2,477) (10,027) (12,921) (31,762) (36,981)
corporation tax of 19.0% (2021: 19.0%)
Abortive acquisition costs and disposals 373 373 - - - -
Expenditure not allowable 108 98 69 69 1,791 4,680
Fair value movement on SWAP disregarded for tax - (3,217) - - - -
Other allowable deductions (9) (9) (34) (34) (18) (18)
Non-qualifying depreciation 3,294 3,294 2,287 2,287 7,029 7,029
Capital gains - effect or reliefs 464 464 168 168 728 728
Share options and SIPs (297) (297) 181 181 955 955
Deferred tax on balance-sheet-only items (103) (103) - - - -
Effect of different tax rates and unrecognisd losses in oversea companies 115 115 1,059 1,059 1,740 1,524
Rate change adjustment - 190 - - - 10,385
Previous year adjustment - current tax - 2 - 2,640 - 1,836
Previous year adjustment - deferred tax - - (100) (2,662) (1,158) (3,719)
Total tax expense reported in the income statement (1,007) (1,567) (6,397) (9,213) (20,695) (13,581)
7. Income tax expense (continued)
(c) Deferred tax
The deferred tax in the balance sheet is as follows:
The main rate of corporation tax is currently 19% but this will increase to
25% from 1 April 2023. The rate increase has been substantively enacted and
therefore the deferred tax balances have been recognised at the rate they are
expected to reverse.
Deferred tax liabilities
Accelerated tax Other Total
depreciation temporary
differences
£000 £000 £000
At 25 July 2021 50,593 5,536 56,129
Movement during year posted to the income statement 2,944 108 3,052
Impact of tax rate change posted to the income statement 932 34 966
At 23 January 2022 (unaudited) 54,469 5,678 60,147
Deferred tax assets
Share Tax losses Interest-rate Total
based and interest swaps
payments capacity carried
forward
£000 £000 £000 £000
At 25 July 2021 807 29,365 9,412 39,584
Movement during year posted to the income statement (98) 3,927 604 4,433
Movement during year posted to comprehensive income - - (7,079) (7,079)
Movement during year posted to equity (20) - - (20)
Impact of change in tax rate posted to income statement - 777 - 777
Impact of change in tax rate posted to comprehensive income - - (2,045) (2,045)
At 23 January 2022 (unaudited) 689 34,069 892 35,650
The company has recognised deferred tax assets of £35.7m (2021: £39.6m),
which are expected to offset against future profits. This includes a
deferred tax asset of £34.1m (2021: £29.4m) in respect of UK tax losses and
current-year interest restrictions capable of reactivation in future periods.
This is on the basis that it is probable that profits will arise in the
foreseeable future, enabling the assets to be utilised.
Deferred tax assets and liabilities have been offset as follows
2022 2021
£000 £000
Deferred tax liabilities 60,147 56,129
Offset against deferred tax assets (35,650) (30,172)
Offset against deferred tax assets (restated) - (9,412)
Deferred tax liabilities 24,497 16,546
Deferred tax assets 35,650 39,584
Offset against deferred tax liabilities (35,650) (30,172)
Offset against deferred tax liabilities (restated) - (9,412)
Deferred tax asset - -
As at 23 January 2022, the company had a potential deferred tax asset of
£8.8m (2021: £9.1m) relating to capital losses and tax losses in the
Republic of Ireland. A deferred tax asset has not been recognised, as there is
insufficient certainty of recovery.
On 3 March 2021, the chancellor confirmed that the UK rate of corporation tax
will increase to 25% from 1 April 2023. Deferred tax has been calculated at
the rate of taxation for the peiod that the deferred tax items are expected
reverse.
In accordance with IAS 12, the deferred tax asset and liability must be offset
where there is a right of offset, this has been applied in the period and the
prior year balance.
8. Earnings and free cash flow per share
(a) Weighted average number of shares
Earnings per share are based on the weighted average number of shares in
issue of 128,750,155 (2021: 120,565,127), including those held in trust in
respect of employee share schemes. Earnings per share, calculated on this
basis, are usually referred to as 'diluted', since all of the shares in issue
are included.
Accounting standards refer to 'basic earnings' per share - these exclude
those shares held in trust in respect of employee share schemes.
During a period where a company makes a loss, accounting standards require
that 'dilutive' shares (for the company, those
held in trust in respect of employee share schemes) not be included in the
earning per share calculation, because they will reduce the reported loss per
share; consequently, all per-share measures in the current period are based on
the number of shares in issue less shares held in trust of 126,946,018 (2021:
119,827,162).
From financial year 2021, the weighted average number of shares held in
trust for employee share schemes has been adjusted to exclude those shares
which are expected to vest, yet remain in trust.
Weighted average number of shares Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
Shares in issue 128,750,155 120,565,127 124,668,915
Shares held in trust (1,804,137) (737,965) (1,841,667)
Shares in issue less shares held in trust 126,946,018 119,827,162 122,827,248
(b) Earnings per share
26 weeks ended 23 January 2022 unaudited Loss Basic EPS Diluted EPS
£000 pence pence
Earnings (loss after tax) (11,469) (9.0) (9.0)
Exclude effect of exceptional items after tax (13,588) (10.7) (10.7)
Earnings before exceptional items (25,057) (19.7) (19.7)
Exclude effect of property gains/(losses) (1,653) (1.3) (1.3)
Underlying earnings before exceptional items (26,710) (21.0) (21.0)
26 weeks ended 23 January 2022 unaudited - pre-IFRS16 Loss Basic EPS Diluted EPS
£000 pence pence
Earnings (loss after tax) (6,660) (5.2) (5.2)
Exclude effect of exceptional items after tax (13,588) (10.7) (10.7)
Earnings before exceptional items (20,248) (15.9) (15.9)
Exclude effect of property gains/(losses) 1,796 1.4 1.4
Underlying earnings before exceptional items (18,452) (14.5) (14.5)
26 weeks ended 24 January 2021 unaudited Loss Basic EPS Diluted EPS
£000 pence pence
Earnings (profit after tax) (58,791) (49.1) (49.1)
Exclude effect of exceptional items after tax 12,421 10.4 10.4
Earnings before exceptional items (46,370) (38.7) (38.7)
Exclude effect of property gains/(losses) 232 0.2 0.2
Underlying earnings before exceptional items (46,138) (38.5) (38.5)
8. Earnings and free cash flow per share (continued)
(c) Free cash flow per share
The calculation of free cash flow per share is based on the net cash
generated by business activities and available for investment in new pub
developments and extensions to current pubs, after funding interest,
corporation tax, lease principal payments, loan issues costs, all other
reinvestment in pubs open at the start of the period and the purchase of own
shares under the employee Share Incentive Plan ('free cash flow'). It is
calculated before taking account of proceeds from property disposals, inflows
and outflows of financing from outside sources and dividend payments and is
based on the weighted average number of shares in issue, including those held
in trust in respect of the employee share scheme.
Free cash Basic free Diluted free
flow cash flow cash flow
per share per share
£000 pence pence
26 weeks ended 23 January 2022 (34,509) (27.2) (27.2)
26 weeks ended 24 January 2021 (77,306) (64.5) (64.5)
52 weeks ended 25 July 2021 (83,284) (67.8) (67.8)
(d) Owners' earnings per share
Owners' earnings measures' those earnings attributable to shareholders from
current activities adjusted for significant non-cash items and one-off items.
Owners' earnings are calculated as pre-IFRS16 profit before tax, exceptional
items, depreciation and
amortisation and property gains and losses less reinvestment in current
properties and cash tax. Cash tax is defined as the current year's current tax
charge. The weighted average number of shares in issue used in this metric is
disclosed above (see note 8a).
26 weeks ended 23 January 2022 unaudited Owners' Basic Diluted
Earnings Owners' EPS Owners' EPS
£000 pence pence
Loss before tax and exceptional items (pre-IFRS 16 income statement) (21,255) (16.7) (16.7)
Exclude depreciation and amortisation 37,231 29.3 29.3
Less reinvestment in current properties (18,925) (14.9) (14.9)
Exclude property gains and losses 1,796 1.4 1.4
Less cash tax (note 7a) 378 0.3 0.3
Owners' earnings (775) (0.6) (0.6)
26 weeks ended 24 January 2021 unaudited Owners' Basic Diluted
Earnings Owners' EPS Owners' EPS
£000 pence pence
Loss before tax and exceptional items (pre-IFRS 16 income statement) (46,172) (38.5) (38.5)
Exclude depreciation and amortisation 38,719 32.3 32.3
Less cash reinvestment in current properties (7,633) (6.4) (6.4)
Exclude property gains and losses 1,320 1.1 1.1
Less cash tax (note 7a) - - -
Owners' earnings (13,766) (11.5) (11.5)
52 weeks ended 25 July 2021 audited Owners' Basic Diluted
Earnings Owners' EPS Owners' EPS
£000 pence pence
Loss before tax and exceptional items (pre-IFRS 16 income statement) (154,676) (125.9) (125.9)
Exclude depreciation and amortisation 76,388 62.2 62.2
Less cash reinvestment in current properties (19,962) (16.3) (16.3)
Exclude property gains and losses 2,323 1.9 1.9
Less cash tax (note 7a) 380 0.3 0.3
Owners' earnings (95,547) (77.8) (77.8)
8. Earnings and free cash flow per share (continued)
Analysis of additions by type Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
Reinvestment in existing pubs 18,925 8,130 19,962
Investment in new pubs and pub extensions 26,645 7,663 24,051
Lease premiums (127) 276 1,800
Freehold reversions and investment properties 19,248 1,359 16,858
64,691 17,428 62,671
Analysis of additions by category Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
Property, plant and equipment (note 13) 62,521 15,194 58,139
Intangible assets (note 12) - 2,234 4
Investment properties (note 14) 2,170 - 4,528
64,691 17,428 62,671
These additions tables have been inserted to reconcile the total fixed asset
additions during the period to the reinvestment in existing pubs metric used
in the owners' earnings calculation.
9. Cash used in/generated from operations
Unaudited Unaudited* Unaudited Audited
26 weeks 26 weeks 26 weeks 52 weeks
ended ended ended ended
23 January 23 January 24 January 25 July
2022 2022 2021 2021
£000 £000 £000 £000
Loss for the period (11,469) (6,660) (58,791) (181,055)
Adjusted for:
Tax (note 7) (1,567) (1,567) (9,213) (13,581)
Share-based charges (note 2) 3,152 3,152 6,420 10,267
Loss on disposal of property, plant and equipment (note 3) 1,485 1,485 1,268 3,140
Disposal of capitalised leases (note 3) (3,449) - (1,088) (2,200)
Net impairment charge (note 3) - - 2,133 4,132
Interest receivable (note 6) (6) (6) (167) (188)
Interest payable (note 6) 18,955 18,955 23,415 45,702
Lease interest receivable (note 6) (223) - (210) (407)
Lease interest payable (note 6) 9,617 - 11,015 19,832
Exceptional Interest (note 6) (12,774) (12,774) 5,511 12,690
Amortisation of bank loan issue costs (note 6) 1,002 1,002 860 1,746
Depreciation of property, plant and equipment (note 13) 35,690 35,690 37,014 73,193
Amortisation of intangible assets (note 12) 1,491 1,491 1,694 3,151
Depreciation on investment properties (note 14) 50 50 12 44
Aborted properties costs 2,283 2,283 17 628
Cancelled prinipal payments (note 23) (2,250) - (7,322) (10,993)
Amortisation of right-of-use assets (note 23) 22,652 - 23,042 44,532
64,640 43,101 35,611 10,633
Change in inventories (154) (154) 726 (3,758)
Change in receivables (269) (337) 4,908 15,748
Change in payables (31,002) (28,021) (69,994) 2,585
Cash flow from operating activities 33,215 14,589 (28,749) 25,208
*This column shows the cash generated from operations as it would have been
reported, before the introduction of IFRS16.
10. Analysis of change in net debt
25 July Cash Other 23 January
2021 flows changes 2022
£000 £000 £000 £000
Borrowings
Cash and cash equivalents 45,408 (6,420) - 38,988
Other loan receivable - due before one year - 762 - 762
Asset-financing obligations - due before one year (7,610) 870 - (6,740)
Current net borrowings 37,798 (4,788) - 33,010
Bank loans - due after one year (776,871) (74,990) (979) (852,842)
Asset-financing obligations - due after one year (8,633) 2,661 - (5,972)
Other loan receivable - due after one year - 3,224 - 3,224
Private placement - due after one year (97,768) - (23) (97,791)
Non-current net borrowings (883,272) (69,105) (1,002) (953,381)
Net debt (845,474) (73,893) (1,002) (920,371)
Derivatives
Interest-rate swaps liability - due after one year (37,643) - 34,078 (3,565)
Total derivatives (37,643) - 34,078 (3,565)
Net debt after derivatives (883,117) (73,893) 33,076 (923,936)
Leases
Lease assets - due before one year 1,638 (656) 656 1,638
Lease assets - due after one year 9,890 - (209) 9,681
Lease obligations - due before one year (65,219) 25,245 (10,823) (50,797)
Lease obligations - due after one year (458,596) - 13,760 (444,836)
Net lease liabilities (512,287) 24,589 3,384 (484,314)
Net debt after derivatives and lease liabilities (1,395,404) (49,304) 36,460 (1,408,250)
The cash movement on the bank loans of £74,990,000 is disclosed in the cash
flow statement as an advance/(repayment) under bank loans.
The cash movement on asset-financing of £3,531,000 is disclosed in the cash
flow statement as asset-financing principal payments.
Lease obligations represent long term payables and lease assets represent long
term receivables, and are therefore both disclosed in the table above.
Non-cash movements
The non-cash movement in bank loans and the private placement relate to the
amortisation of loan issue costs.
The amortisation charge for the year of £1,002,000 is disclosed in note 6.
These are arrangement fees paid in respect of new borrowings and are charged
to the income statement over the expected life of the loans.
The movement in interest-rate swaps relates to the change in the 'mark to
market' valuations for the year for swaps subject to hedge accounting.
The non-cash movement in lease liabilities is analysed in the table
overleaf.
10. Analysis of change in net debt (continued)
Unaudited
Non-cash movement in net lease liabilities 23 January
2022
£000
Recognition of new leases (note 23) (4,317)
Remeasurements of existing leases liabilities (note 23) (8,504)
Remeasurements of existing leases assets (note 23) 447
Disposal of lease (note 23) 13,508
Cancelled principal payments (note 23) 2,250
Exchange differences (note 23) -
Non-cash movement in net lease liabilities 3,384
The table below calculates a ratio between net debt, being borrowing less cash
and cash equivalents, and earnings before interest, tax, and depreciation
(EBITDA). The numbers in this table are all before the effect of IFRS16.
Unaudited Unaudited Unaudited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Loss before tax (income statement) (21,255) (46,172) (154,676)
Interest 19,951 24,108 47,260
Depreciation 37,215 38,719 76,474
Earnings before interest, tax and depreciation (EBITDA) 35,911 16,655 (30,942)
Net debt / EBITDA 25.63 -60.36 -27.32
11. Dividends paid and proposed
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Paid in the period
2020 final dividend - - -
2021 interim dividend - - -
2021 final dividend - - -
- - -
Dividends in respect of the period
Interim dividend - - -
Final dividend - - -
- - -
Dividend per share (p) - - -
Dividend cover - - -
Dividend cover is calculated as profit after tax and exceptional items over
dividend paid. Dividend cover has not been shown for previous year and current
year, as the company reported a loss in both periods.
12. Intangible assets
Computer Assets Total
software and under
development construction
£000 £000 £000
Cost:
At 24 January 2021 34,266 2,189 36,455
Transfers 804 (804) -
Disposals (2,323) (1,381) (3,704)
At 25 July 2021 32,747 4 32,751
Disposals (21) (4) (25)
At 23 January 2022 32,726 - 32,726
Accumulated amortisation:
At 24 January 2021 (27,499) - (27,499)
Provided during the period (1,457) - (1,457)
Exchange differences (1) - (1)
Disposals 1,564 - 1,564
At 25 July 2021 (27,393) - (27,393)
Provided during the period (1,491) - (1,491)
Disposals 7 - 7
At 23 January 2022 (28,877) - (28,877)
Net book amount at 23 January 2022 3,849 - 3,849
Net book amount at 25 July 2021 5,354 4 5,358
Net book amount at 24 January 2021 6,767 2,189 8,956
The majority of intangible assets relates to computer software and software
development. Examples include the development costs of the SAP accounting and
property-maintenance systems and bespoke J D Wetherspoon apps.
13. Property, plant and equipment
Freehold and Long Leasehold Property Short Leasehold Property Equipment Fixtures and Fittings Assets Under Construction Total
£000 £000 £000 £000 £000
Cost
At 26 July 2020 1,363,106 295,009 684,732 86,624 2,429,471
Additions 4,356 - 3,434 7,404 15,194
Transfers 3,964 901 1,321 (6,186) -
Exchange differences (58) (5) (13) (61) (137)
Disposals - (1,878) (1,262) - (3,140)
Reclassifications 676 (676) - - -
Transfer from investment property 5,768 - - - 5,768
At 24 January 2021 1,377,812 293,351 688,212 87,781 2,447,156
Additions 10,427 132 7,817 24,569 42,945
Transfers 37,059 3,263 7,064 (47,386) -
Exchange differences (1,299) (139) (413) (1,096) (2,947)
Disposals (2,623) (2,507) (2,369) - (7,499)
Reclassifications 7,166 (7,166) - - -
At 25 July 2021 1,428,542 286,934 700,311 63,868 2,479,655
Additions 22,982 2,039 12,993 24,507 62,521
Transfers to investment property - - - (2,170) (2,170)
Transfers 11,193 1,167 1,333 (13,693) -
Exchange differences (930) (47) (163) (380) (1,520)
Transfer to held for sale (2,854) (3,279) (2,123) - (8,256)
Disposals (3,551) (1,132) (978) (959) (6,620)
Reclassifications 8,167 (8,167) - - -
At 23 January 2022 1,463,549 277,515 711,373 71,173 2,523,610
Accumulated depreciation and Impairment
At 26 July 2020 (307,297) (167,009) (512,387) - (986,693)
Provided during the period (9,585) (5,688) (21,741) - (37,014)
Transfers from investment property (290) - - - (290)
Disposals - 1,325 1,086 - 2,411
Reclassification 419 (419) - - -
At 24 January 2021 (316,753) (171,791) (533,042) - (1,021,586)
Provided during the period (10,696) (4,811) (20,672) - (36,179)
Exchange differences 282 23 249 - 554
Impairment loss (1,631) (368) - - (1,999)
Disposals 874 1,080 1,427 - 3,381
Reclassification (4,509) 4,509 - - -
At 25 July 2021 (332,433) (171,358) (552,038) - (1,055,829)
Provided during the period (10,527) (4,969) (20,194) - (35,690)
Exchange differences 49 28 93 - 170
Transfer to held for sale 1,442 2,641 2,050 - 6,133
Disposals 776 618 580 - 1,974
Reclassification (4,751) 4,751 - - -
At 23 January 2022 (345,444) (168,289) (569,509) - (1,083,242)
Net book amount at 23 January 2022 1,118,105 109,226 141,864 71,173 1,440,368
Net book amount at 25 July 2021 1,096,109 115,576 148,273 63,868 1,423,826
Net book amount at 24 January 2021 1,061,059 121,560 155,170 87,781 1,425,570
Net book amount at 26 July 2020 1,055,809 128,000 172,345 86,624 1,442,778
13. Property, plant and equipment (continued)
Impairment of property, plant and equipment
In assessing whether a pub has been impaired, the book value of the pub is
compared with its anticipated future cash flows and fair value. Assumptions
are used about sales, costs and profit, using a pre-tax discount rate for
future years of 8.7% (2021: 7%).
If the value, based on the higher of future anticipated cash flows and fair
value, is lower than the book value, the difference is written off as
property impairment.
As a result of this exercise, £Nil impairment losses (2021: £Nil) was
charged to property losses in the income statement.
14. Investment property
The company owns four (2021: two) freehold properties with existing tenants -
and these assets have been classified
as investment properties. During the year, a property which was originally
recognised as part of property, plant and equipment under the catergory
'Assets under Construction' has been transferred to investment property.
£000
Cost:
At 26 July 2020 11,842
Transfer to property, plant and equipment (5,768)
At 24 January 2021 6,074
Additions 4,528
At 25 July 2021 10,602
Transfer from property plant and equipment 2,170
At 23 January 2022 12,772
Accumulated amortisation:
At 26 July 2020 (315)
Provided during the period (12)
Transfer to property, plant and equipment 290
At 24 January 2021 (37)
Provided during the period (32)
At 25 July 2021 (69)
Provided during the period (50)
At 23 January 2022 (119)
Net book amount at 23 January 2022 12,653
Net book amount at 25 July 2021 10,533
Net book amount at 24 January 2021 6,037
Net book amount at 26 July 2020 11,527
Rental income received in the period from investment properties was £333,000
(2021: £161,250).
Operating costs, excluding depreciation, incurred in relation to these
properties amounted to £9,000 (2021: £2,000).
In the opinion of the directors, the fair value of the investment properties
is approximately equal to its book value.
15. Inventories
Bar, food and non-consumables stock held at pubs and national distribution
centre.
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Goods for resale at cost 27,007 22,369 26,853
16. Receivables
This category relates to situations in which third parties owe the company
money. Examples include rebates from suppliers
and overpayments of certain taxes.
Prepayments relate to payments which have been made in respect of
liabilities after the period's end.
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Current (due within one year)
Other loan receivables 762 - -
Other receivables 3,075 1,015 2,004
Accrued income 1,053 440 1,499
Prepayment 11,806 25,813 12,924
Total current receivables 16,696 27,268 16,427
Non-current (due after one year)
Other loan receivables 3,224 - -
Total other non-current assets 3,224 - -
Accrued income relates to discounts which are calculated based on certain
products delivered at an agreed rate per item.
Included in prepayments is £1,102,000 (2021: £16,500,000) in relation to
government grants receivable under the coronavirus job retention scheme.
Credit risk Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Due from suppliers - not due 2,786 883 1,040
Due from suppliers - overdue 289 132 964
3,075 1,015 2,004
Credit risk is the risk that a counterparty does not settle its financial
obligation with the company. At the period's end, the company has assessed the
credit risk on amounts due from suppliers, based on historic experience,
meaning that the expected lifetime credit loss was immaterial. Cash and cash
equivalents are also subject to the impairment requirements of IFRS9 - the
identified impairment loss was immaterial.
17. Assets held for sale
These relate to situations in which the company had exchanged contracts to
sell a property, but the transaction is not yet complete. As at 23 January
2022, three sites were classified as held for sale (2021:Nil).
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Property, plant and equipment 2,123 - -
18. Cash and cash equivalents
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Cash and cash equivalents 38,988 225,024 45,408
Cash at bank earns interest at floating rates, based on daily bank deposit
rates.
19. Trade and other payables
This category relates to money owed by the company to third parties.
Accruals refer to allowances made by the company for future anticipated
payments to suppliers and other creditors.
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Trade payables 86,652 67,406 111,918
Other payables 20,151 16,835 27,759
Other tax and social security 59,035 48,502 44,237
Accruals 78,082 50,724 74,787
Deferred Income 837 1,275 1,090
244,757 184,742 259,791
20. Borrowings
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Current (due within one year)
Other
Lease liabilities 50,797 72,481 65,219
Asset-financing obligations 6,740 7,610 7,610
Total current borrowings 57,537 80,091 72,829
Non-current (due after one year)
Bank loans
Variable-rate facility 755,000 875,000 680,000
CLBILS 100,033 48,333 100,033
Unamortised bank loan issue costs (2,191) (3,829) (3,162)
852,842 919,504 776,871
Private placement
Fixed-rate facility 98,000 98,000 98,000
Unamortised private placement issue costs (209) (255) (232)
97,791 97,745 97,768
Other
Lease liabilities 444,836 508,518 458,596
Asset-financing 5,972 12,094 8,633
Total non-current borrowings 1,401,441 1,537,861 1,341,868
Total borrowings 1,458,978 1,617,952 1,414,697
21. Provisions
Legal claims Total
£000 £000
At 25 July 2021 3,004 3,004
Charged to the income statement:
- Additional charges 1,084 1,084
- Unused amounts reversed (876) (876)
- Used during year (182) (182)
At 23 January 2022 3,030 3,030
23 January 25 July
2022 2021
£000 £000
Current 3,030 3,004
Non-current - -
Total provisions 3,030 3,004
Legal claims
The amounts represent a provision for ongoing legal claims brought against the
company in the normal course of business by customers and employees. Owing to
the nature of the business, the company expects to have a continuous provision
for outstanding employee and public liability claims. All claim provisions are
considered current and are therefore not discounted.
22. Financial instruments
The table below analyses the company's financial liabilities in relevant
maturity groupings, based on the remaining period at the balance sheet date to
the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Maturity profile of financial liabilities
Within More than
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
£000 £000 £000 £000 £000 £000 £000
At 23 January 2022 (unaudited)
Bank loans 25,247 25,247 44,644 856,221 - - 951,359
Bank loans - CLBILS 2,107 1,164 100,033 - - - 103,304
Private placement 3,655 3,655 3,655 3,655 3,655 98,000 116,275
Trade and other payables 184,885 - - - - - 184,885
Derivatives 8,933 6,165 3,143 3,203 3,361 8,295 33,100
Lease liabilities 50,797 49,096 48,348 45,423 44,242 409,524 647,430
Asset-financing obligations 6,788 4,324 2,323 - - - 13,435
Within More than
1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total
£000 £000 £000 £000 £000 £000 £000
At 25 July 2021
Bank loans 21,798 21,798 11,857 41,549 855,000 - 952,002
Bank loans - CLBILS 2,005 2,005 100,138 - - - 104,148
Private placement 3,655 3,655 3,655 3,655 3,655 99,828 118,103
Trade and other payables 214,464 - - - - - 214,464
Derivatives 12,054 11,969 5,342 5,293 5,207 5,231 45,096
Lease liabilities 65,219 49,587 49,508 47,872 45,290 427,520 684,996
Asset-financing obligations 7,610 5,145 4,323 - - - 17,078
The company has agreed a one-year extension for £855m of its existing banking
agreement. The original loan, agreed in February 2019, was for five years with
two one-year extension options, the first of which has been exercised. The
second extension option was originally meant to be reviewed in January 2022
but this has been deferred until June 2022 at the request of the bank.
At the balance sheet date, the company had loan facilities of £1,083m
(2021: £1,041m) as detailed below:
n Secured revolving-loan facility of £875m
o £20m matures February 2024
o £855m matures February 2025
o 14 participating lenders
n Sale of senior secured notes £98m
o Matures August 2026
o The purchase of loan notes split among 5 participants.
n CLBILS secured loan of £100m
o Matures August 2023
o Four participating lenders
n Overdraft facility of £10m
These facilities have been entered into to meet the short and long term
liquidity needs of the business. The objective is to ensure that the company
has sufficient financial resources to meet working capital requirements as
well as funds for reinvestment and development. The company manages liquidity
risk through its revolving-loan facility as well as other longer term
facilities to avoid reliance on short term borrowings. The company's
borrowings are dependent on the meeting of financial covenants, which if
breached, could result in funding being withdrawn. The company has agreed
covenant waivers with its lenders as outlined in the going concern section of
the 2021 annual report within the accounting policies (page 51) and have
ensured liquidity through share placings in the current and prior year.
22. Financial instruments (continued)
The company has hedged its interest-rate liabilities to its banks by swapping
the floating-rate debt into fixed-rate debt which
has fixed £770m of these borrowings at rates of between 0.61 and 3.84%. The
effective weighted average interest rate of the swap agreements used during
the year is 1.61% (2021: 2.42%), fixed for a weighted average period of 6.9
years (2021: 3.6 years). In addition, the company has entered into
forward-starting interest-rate swaps as detailed in the table below.
Weighted average by swap period:
From To Total swap value £m Weighted average interest %
30/07/2021 30/07/2023 770 1.61
31/07/2023 30/07/2026 770 1.10
31/07/2026 30/06/2028 770 1.33
01/07/2028 29/03/2029 770 1.32
31/03/2029 30/11/2031 770 1.02
At the balance sheet date, £755m (2021: £875m) was drawn down under the
£875m secured-term revolving-loan facility. The amounts drawn under this
agreement can be varied, depending on the requirements of the business.
Capital risk management
The company's capital structure comprises shareholders' equity and loans. The
objective of capital management is to ensure that the company is able to
continue as a going concern and provide shareholders with returns on their
investment, while managing risk.
The company does not have a specific measure for managing capital structure;
instead, the company plans its capital requirements and manages its loans,
dividends and share buybacks accordingly. In a normal trading year, the
company measures loans using a ratio of net debt to EBITDA which was 3.36
times in 2019. With covenant waivers agreed, management's primary metric is
liquidity.
Financial risks associated with financial instruments, including credit risk
and liquidy risk, are discussed in the 2021 annual report in the section 2,
page 61.
Fair value of financial assets and liabilities
IFRS13 requires disclosure of fair value measurements by level, using the
following fair value measurement hierarchy:
n Quoted prices in active markets for identical assets or liabilities (level
1)
n Inputs other than quoted prices included in level 1 which are observable for
the asset or liability,
either directly or indirectly (level 2)
n Inputs for the asset or liability which are not based on observable market
data (level 3)
Interest-rate risks of financial liabilities
An analysis of the interest-rate profile of financial liabilities, after
taking account of all interest-rate swaps,
is set out in the following table. This table excludes lease liabilities.
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Analysis of interest-rate profile of financial liabilities
Floating rate due after one year (2,191) 101,171 (3,162)
Fixed rate due after one year 855,033 818,333 780,033
852,842 919,504 776,871
Asset-financing obligations
Fixed rate due in one year 6,740 7,610 7,610
Fixed-rate due after one year 5,972 12,094 8,633
12,712 19,704 16,243
Private placement
Fixed rate due after one year 97,791 97,745 97,768
97,791 97,745 97,768
963,345 1,036,953 890,882
The floating-rate borrowings are interest-bearing borrowings at rates based on
LIBOR, fixed for periods of up to one month.
The fixed-rate loan is the element of the company's borrowings which has been
fixed with interest-rate swaps.
22. Financial instruments (continued)
Fair values
In some cases, payments which are due to be made in the future by the company
or due to be received by the company
have to be given a fair value. The table below highlights any differences
between book value and fair value of financial instruments.
Unaudited Unaudited Unaudited Unaudited Audited Audited
23 January 23 January 24 January 24 January 25 July 25 July
2022 2022 2021 2021 2021 2021
Book value Fair value Book value Fair value Book value Fair value
£000 £000 £000 £000 £000 £000
Financial assets at amortised cost
Cash and cash equivalents 38,988 38,988 225,024 225,024 45,408 45,408
Receivables 3,075 3,075 1,015 1,015 2,004 2,004
Lease assets 11,319 11,432 12,197 12,185 11,528 11,643
53,382 53,495 238,236 238,224 58,940 59,055
Financial liabilities at amortised cost
Trade and other payables (184,885) (184,885) (136,240) (136,240) (214,464) (214,464)
Asset-financing obligations (12,712) (12,839) (19,704) (19,712) (16,243) (16,406)
Lease obligations (495,633) (500,589) (580,999) (593,892) (523,815) (529,053)
Private placement (97,791) (98,768) (97,745) (99,358) (97,768) (98,746)
Borrowings (852,852) (861,380) (919,504) (928,699) (776,871) (784,639)
(1,643,873) (1,658,461) (1,754,192) (1,777,901) (1,629,161) (1,643,308)
Derivatives - cash flow hedges
Non-current derivative financial liability (3,565) (3,565) (65,477) (65,477) (37,643) (37,643)
(3,565) (3,565) (65,477) (65,477) (37,643) (37,643)
The fair value of derivatives has been calculated by discounting all future
cash flows by the market yield curve at the balance sheet date. The fair value
of borrowings has been calculated by discounting the expected future cash
flows at the year end's prevailing interest rates.
Obligations under asset-financing
The minimum lease payments under asset-financing fall due as follows:
Unaudited Unaudited Audited
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Within one year 6,740 7,610 7,610
In the second to fifth year, inclusive 6,485 13,244 9,468
13,225 20,854 17,078
Less future finance charges (513) (1,150) (835)
Present value of lease obligations 12,712 19,704 16,243
Less amount due for settlement within one year (6,740) (7,610) (7,610)
Amount due for settlement during the second to fifth year, inclusive 5,972 12,094 8,633
All asset-financing obligations are in respect of various equipment used in
the business. No escalation clauses are included
in the agreements.
22. Financial instruments (continued)
Interest-rate swaps
At 23 January 2022, the company had fixed-rate swaps designated as hedges of
floating-rate borrowings.
The floating-rate borrowings are interest-bearing borrowings at rates based on
LIBOR, fixed for periods of up to one month.
Loss/(Gain) on Deferred Total Hedging
interest-rate tax Reserve
swaps
£000 £000 £000
As at 24 January 2021 65,477 (11,580) 53,897
Change in fair value posted to comprehensive income (27,834) - (27,834)
Hedge ineffectiveness posted to income statement (11,707) - (11,707)
Deferred tax posted to comprehensive income - 1,047 1,047
As at 25 July 2021 25,936 (10,533) 15,403
Change in fair value posted to comprehensive income (22,314) - (22,314)
Fair value reclassfied from reserve to income statement 2,011 - 2,011
Deferred tax posted to comprehensive income - 9,124 9,124
As at 23 January 2022 5,633 (1,409) 4,224
Interest-rate hedges
The company's interest-rate swap agreements are in place as protection against
future changes in borrowing costs.
Under these agreements, the company pays a fixed interest charge and receives
variable interest income which matches
the variable interest payments made on the company's borrowings.
There is an economic relationship between the company's revolving-loan
facility, the hedged item and the company's interest-rate swaps, the hedging
instruments, where the company pays a floating interest charge on the loan and
receives a floating
interest-rate credit on the interest-rate swap. The interest-rate swap
agreement allows the company to receive a floating interest-rate credit and
requires the company to pay an agreed fixed interest charge.
The company adopts hedge accounting, meaning that the effective portion of
changes in the fair value of derivatives is recognised in comprehensive
income, with any gain or loss relating to an ineffective portion accounted for
in the income statement.
The company has established a hedging ratio of 1:1 between the interest-rate
swaps and the company's floating-rate borrowings, meaning that floating
interest rates paid should be identical to those amounts received for a given
amount
of borrowings.
These hedges could be ineffective if the:
n period over which the borrowings were drawn were changed. This could result
in the borrowings
being made at a different floating rate than the interest-rate swap.
n gross amount of borrowings were less than the value swapped.
n impact of LIBOR reform were to cause a mismatch between the interest rate of
the swaps and
that of the company's debt.
The company tests hedge effectiveness prospectively using the hypothetical
derivative method and compares the changes
in the fair value of the hedging instrument with those in the fair value of
the hedged item attributable to the hedged risk. For interest rate swaps which
were designated as part of a hedging relationship a gain of £22,314,000
(2021: £16,717,000) has been recognised in the hedging reserve in respect of
the effective portion of the fair value movement. A change in fair value of
£13,774,000 (2021: £4,528,000) has been recognised in the income statement
as exceptional finance income (note 4). This recognises hedge ineffectiveness
and the associated reclassification of hedges based on the forecast future
borrowings for the life of the hedges. It has been considered highly
probable that floating-rate utilised core debt will be less than the total
value of interest rate swaps in place, over the remaining life of the swaps,
giving rise to over-hedging. A number of designated hedge relationships have
become fully ineffective and therefore have been discontinued and recognised
in the income statement. There are no amounts recognised in the hedge
reserves for discontinued hedge relationships.
Interest-rate sensitivity
During the 26 weeks ended 23 January 2022, if the interest rates on
UK-denominated borrowings had been 1% higher, with all other variables
constant, pre-tax loss for the year would have been reduced by £5,000 and
equity increased by £67,660,000. The movement in equity arises from a change
in the 'mark to market' valuation of the interest-rate swaps into which the
company has entered, calculated by a 1% shift of the market yield curve. The
company considers that a 1% movement in interest rates represents a reasonable
sensitivity to potential changes. However, this analysis is for illustrative
purposes only.
23. Leases
About 32% of the company's pubs are leasehold. New leases are normally for 30
years, with a break clause after 15 years. Most leases have upwards-only rent
reviews, based on open-market rental at the time of review, but most new pub
leases
have an uplift in rent which is fixed at the start of the lease.
(a) Right-of-use assets
The table below shows the movements in the company's right-of-use assets.
During the period, 15 leases were remeasured as a result of changes in the
agreed payments under the lease contracts and changes in the lease terms. In
additions, three new lease contracts were agreed on.
Disposals and derecognised leases in the period represent the purchasing of 10
formerly leasehold properties, the disposal of four leases altogether.
£000
Cost
As at 25 July 2021 558,897
Additions 4,317
Remeasurement 8,758
Exchange differences 1
Disposals and derecognised leases (14,356)
At 23 January 2022 (unaudited) 557,617
Accumulated depreciation and impairment:
As at 25 July 2021 (90,359)
Provided during the period (22,672)
Disposals and derecognised leases 1,691
Remeasurment 1,907
At 23 January 2022 (unaudited) (109,433)
Net book amount at 23 January 2022 (unaudited) 448,184
Net book amount at 25 July 2021 468,538
23. Leases (continued)
(b) Lease maturity profile
The tables below analyse the company's lease liabilities and assets in
relevant maturity groupings, based on the remaining period at the balance
sheet date to the end of the lease. The amounts disclosed in the table are the
contractual undiscounted cash flows. The impact of discounting reconciles
these amounts to the values disclosed in the balance sheet.
Lease liabilities
Unaudited Audited
2022 2021
£000 £000
Within one year 50,797 65,219
Between one and two years 49,096 49,587
Between two and three years 48,348 49,508
Between three and four years 45,423 47,872
Between four and five years 44,242 45,290
After five years 409,524 427,520
Lease commitments payable 647,430 684,996
Discounting lease liability (151,797) (161,181)
Lease liability 495,633 523,815
Lease assets Unaudited Audited
2022 2021
£000 £000
Within one year 1,638 1,638
Between one and two years 1,398 1,586
Between two and three years 1,150 1,130
Between three and four years 1,106 1,084
Between four and five years 1,112 1,070
After five years 7,066 7,255
13,470 13,763
Discounting lease asset (2,151) (2,235)
Lease asset 11,319 11,528
The comparative numbers disclosed above are those included in the 2021 annual
report.
23. Leases (continued)
(c) Lease liability
The tables below show the movements in the period of the lease liability and
the lease asset.
Lease liability Unaudited Audited
23 January 25 July
2022 2021
£000 £000
Lease liability as at commencement of period 523,815 573,146
Additions 4,317 12,162
Remeasurements of leases 8,504 (15,602)
Disposals (13,508) (15,790)
Cancelled principal payments (due to expedient) (2,250) (10,993)
Exchange differences - (233)
Lease liabilities before payments 520,878 542,690
Interest payable in period:
Interest expense within period (discounting element) 9,954 19,872
Cancelled interest expense (due to expedient) (412) (2,918)
9,542 16,954
Total cash outflow for leases in period:
Lease payment commitments for period (24,463) (53,602)
Cancelled payment commitments (due to expedient) 2,662 13,911
Deferred payment commitments (12,986) 3,862
(34,787) (35,829)
Net principal payments at 23 January 2022 (25,245) (18,875)
At 23 January 2022 495,633 523,815
The company has applied the practical expedient during the financial period,
which is an amendment to IFRS16 - an amendment which allows reductions in rent
payments due on or before June 2022 to be credited to the income statement,
rather than requiring the remeasurement of the lease and spreading of rent
reduction received in this period over the term of the lease.
This practical expedient was extended in March 2021 for a further 12 months to
June 2022. This 2021 amendment is effective for annual reporting periods
beginning on or after 1 April 2021 and has been applied to all rent
concessions which meet the conditions of the expedient.
The application of this amendment results in principal payments of £2,250,000
being credited to the income statement and a reduction in associated interest
charges of £412,000, resulting in a total credit to the income statement of
£2,662,000 which is disclosed in cash generated from operations, note 9.
Future rental payments, up to the end of the lease, are capitalised, including
any agreed increases.
Future rent payments could change as a result of open-market rent reviews or
options being exercised to terminate a lease early. Any changes in the minimum
unavoidable lease payments will be included as a remeasurement of the lease
liability.
Leases with lease terms of under one year are not capitalised.
23. Leases (continued)
Lease assets Unaudited Audited
2022 2021
£000 £000
Recognition of Asset liability 11,528 12,851
Remeasurements of leases 447 -
Lease assets before payments at 23 January 2022 11,975 12,851
Interest due in period 228 413
Total cash Inflow for leases in period (884) (1,736)
Net principal payments at 23 January 2022 (656) (1,323)
At 23 January 2022 11,319 11,528
Rent cash flow Analysis 2022
£000
Cash outflows relating to capitalised leases 34,787
Expense relating to short term leases 375
Expense relating to variable element of concessions 2,196
Total rent cash outflows for period 37,358
Cash inflows relating to capitalised leases (884)
Income relating to lessor sites (757)
Total rent cash Inflows for period (1,641)
The company has sublet several of its leases which have been capitalised
above, with lease assets being the capitalised
future rent receivables from sublet sites. The company monitors the receipts
of rental charges on sublet sites and where any amounts remain unpaid, take
the appropriate steps. It is the company's view that there are no significant
credit losses on
the sublease assets.
Where needed, deferral terms were agreed on with lessees in relation to the
coronavirus pandemic. The assessment is that there is no material expected
credit loss.
The interest payable and receivable shown in the tables above is the interest
element of the payments made and received in the period. These amounts differ
from the lease interest charged/credited to the income statement in the period
- see note 6. The amounts charged/credited to the income statement in the
period will also include amounts due, yet not paid, in the period. The
incremental borrowing rate applied to lease liabilities and assets was
1.9-3.6%, depending on the lease's length.
24. Government support
23 January 24 January 25 July
2022 2021 2021
£000 £000 £000
Eat out to help out (note 1) - (23,248) (23,248)
Local government grants (note 4) (107) (5,238) (11,123)
Employee support grants (note 5) (3,145) (97,539) (208,986)
(3,252) (126,025) (243,357)
The government support in the table above should be viewed in context of the
contribution to the economy as on page 6. In the five years before the
pandemic the company paid 42.1% of its sales as taxes.
Local government grants
From the 9 September 2020, the UK Government made available several grants to
support those businesses which had been adversely affected by the pandemic.
Applications were made to the respective local authorities in line with the
eligibility criteria for each scheme. The Irish Government introduced a
similar grant called "COVID Restrictions Support Scheme", for which the
company applied for centrally. Government grants were recognised at the point
at which funds were receipted. In the year, £0.1m was receipted: with the
majority of this balance in relation to the Republic or Ireland. The grants
were treated as exceptional income.
Employee support grants
The coronavirus job retention scheme, (CJRS) and equivalent Republic of
Ireland schemes, were introduced at the beginning of the pandemic to support
companies in retaining employees, in the form of grants to cover a proportion
of the wages and salaries of furloughed staff. The claims have been made
weekly since April 2020 for weekly paid employees and monthly for salaried
employees. No CJRS claims have been made though since 16 August 2021. These
are accounted for as a credit to wages and salaries within employee costs.
The company was also eligible for a business rates holiday, which represented
a saving of £4.6m (July 2021: £56m) in the period.
The 5% VAT rate on food, non-alcoholic drinks and hotel room sales, introduced
in July 2020, was passed on to customers in the form of lower selling prices.
This temporary reduced rate ended on 30 September 2021, with a new reduced
rate of 12.5% introduced thereafter, which will end on 31 March 2022.
The company has entered into an agreed repayment schedule with HMRC for
outstanding liabilities. At the end of the half-year period the outstanding
amount was £2.7m (2021: £25.7m), which will be repaid in full by the end of
January 2022.
25. Capital commitments
At 23 January 2022, the company had £12.8m (July 2021: £10.0m) of capital
commitments, relating to the purchase of seven
(July 2021: eight) sites, for which no provision had been made in respect of
property, plant and equipment.
The company had some other sites in the property pipeline; however, any
legal commitment is contingent on planning and licensing. Therefore, there are
no commitments at the balance sheet date.
26. Contingent asset
IAS 37 requires disclosure when it is probable (more than 50% likelihood) that
an inflow of benefits will occur. A claim has been submitted to HMRC in
relation to the historic VAT treatment of gaming machines. The company is
stood behind the lead case of Rank Group PLC and 2016 G1 Limited v HMRC, and
will then apply the relevant judgment. The decision of the First-Tier tribunal
was released on 30 June 2021 and was found in favour of the taxpayers, and
HMRC has subsequently confirmed that it will not appeal against the decision.
The timing and amount of the receipt are to be determined, although
management's best estimate is an approximate £27m cash inflow.
27. Related-party disclosures
J D Wetherspoon is the owner of the share capital of the following companies:
Country of incorporation Ownership Status
Company name
J D Wetherspoon (Scot) Limited Scotland Wholly owned Dormant
J D Wetherspoon Property Holdings Limited England Wholly owned Dormant
Moon and Spoon Limited England Wholly owned Dormant
Moon and Stars Limited England Wholly owned Dormant
Moon on the Hill Limited England Wholly owned Dormant
Moorsom & Co Limited England Wholly owned Dormant
Sylvan Moon Limited England Wholly owned Dormant
Checkline House (Head Lease) Limited Wales Wholly owned Dormant
All of these companies are dormant and contain no assets or liabilities and
are, therefore, immaterial. As a result, consolidated accounts have not been
produced. The company has an overseas branch in the Republic of Ireland.
The registered office of all of the above companies is the same as that for
J D Wetherspoon plc, as disclosed on the final page of these accounts.
28. Share capital
Number of Share
shares capital
000s £000
Balance at 26 July 2020 (audited) 120,380 2,408
Issue of shares 8,370 167
Balance at 24 January 2021 (unaudited) 128,750 2,575
Balance at 25 July 2021 (audited) 128,750 2,575
Balance at 23 January 2022 (unaudited) 128,750 2,575
The total authorised number of 2p ordinary shares is 500,000,000 (2021:
500,000,000). All issued shares are fully paid.
While the memorandum and articles of association allow for preferred,
deferred or special rights to attach to ordinary shares, no shares carried
such rights at the balance sheet date.
29. General Information
J D Wetherspoon plc is a public listed company, incorporated and domiciled in
England and Wales.
Its registered office address is: Wetherspoon House, Central Park, Reeds
Crescent, Watford, WD24 4QL.
The company is listed on the London Stock Exchange.
This condensed half-yearly financial information was approved for issue by
the board on 17 March 2022.
This interim report does not comprise statutory accounts within the meaning of
sections 434 and 435 of the Companies Act 2006. Statutory accounts for the
year ended 25 July 2021 were approved by the board of directors on 1 October
2021 and delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, contained an emphasis-of-matter paragraph,
highlighting material uncertainty relating to going concern and did not
contain any statement under sections 498-502 of the Companies Act 2006.
There are no changes to the principal risks and uncertainties as set out in
the financial statements for the 52 weeks ended
25 July 2021 which may affect the company's performance in the next 26 weeks.
The most significant risks and uncertainties relate to widespread pub
closures, the taxation on, and regulation of, the sale of alcohol, cost
increases and UK disposable consumer incomes. For a detailed discussion of the
risks and uncertainties facing the company, refer to pages 60-61 of the annual
report for 2021.
30. Basis of preparation
This condensed half-yearly financial information of J D Wetherspoon plc (the
'Company'), which is abridged and unaudited, has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Services Authority
and with International Accounting Standards (IAS) 34, Interim Financial
Reporting, in conformity with the requirements of the Companies Act 2006. This
interim report should be read in conjunction with the annual financial
statements for the 52 weeks ended
25 July 2021 which were prepared in accordance with the International
Accounting Standards in conformity with the requirements of the Companies Act
2006.
The directors have made enquiries into the adequacy of the Company's financial
resources, through a review of the Company's budget and medium-term financial
plan, including capital expenditure plans and cash flow forecasts.
The Company has modelled a range of scenarios, with the base forecast being
one in which, over the next 12 months, sales broadly recover to pre Covid
levels. More cautious scenarios have been analysed, including ones with
significantly reduced revenue.
The directors are satisfied that the Company has sufficient liquidity in each
of the aforementioned scenarios. The length of the liquidity period, in
relation to each outcome, depends on the actions which the Company chooses to
take (eg the extent to which cash expenditure is reduced).
The Company has agreed with its lenders to replace existing financial covenant
tests with a minimum liquidity covenant for the period up to and including
July 2022. There is material uncertainty, which may cast significant doubt
over the Company's ability to continue as a going concern, beyond this date,
as to whether financial covenant tests will be satisfied or whether further
waivers will be agreed by lenders. The Company will remain in regular dialogue
with its lenders throughout the period.
In addition, the directors have noted the range of possible additional
liquidity options available to the Company, should they be required.
As a result, the directors have satisfied themselves that the Company will
continue in operational existence for the foreseeable future. For this reason,
the Company continues to adopt the going-concern basis in preparing its
financial statements.
The financial information for the 52 weeks ended 25 July 2021 is extracted
from the statutory accounts of the Company
for that year.
The interim results for the 26 weeks ended 23 January 2022 and the
comparatives for 24 January 2021 are unaudited,
yet have been reviewed by the independent auditor.
31. Accounting policies
The accounting policies adopted in the preparation of the interim report are
consistent with those applied in the preparation of the Company's annual
report for the year ended 25 July 2021, with the same methods of computation
and presentation used.
Income tax
Taxes on income in the interim periods are accrued using the tax rate which
would be applicable to expected total
annual earnings.
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