REG - Wetherspoon (JD) PLC - Preliminary Results
22/03/2024 07:00
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RNS Number : 8747H Wetherspoon (JD) PLC 22 March 2024
22 March 2024
J D WETHERSPOON PLC
PRELIMINARY RESULTS
(For the 26 weeks ended 28 January 2024)
FINANCIAL HIGHLIGHTS Var %
Before separately disclosed items
Like-for-like sales (vs FY23) +9.9%
Revenue £991.0m (2023: £916.0m) +8.2%
Profit before tax £36.0m (2023: £4.6m) +682.6%
Operating profit £67.7m (2023: £37.4m) +81.0%
Basic earnings per share 20.3p (2023: 1.0p) +1930%
Free cash outflow per share (4.8)p (2023: inflow 132.4p) -103.6%
Half year dividend 0.0p (2023: 0.0p) -
After separately disclosed items(1)
Profit before tax £26.1m (2023: £57.0m) -54.2%
Operating profit £72.0m (2023: £37.4m) +92.5%
Basic earnings per share 15.2p (2023: 29.4p) -48.3%
(1)Separately disclosed items as disclosed in account note 2.
Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc,
said:
"Sales continue to improve. In the last 7 weeks, to 17 March 2024,
like-for-like sales increased by 5.8%.
"The company continues to be concerned about the possibility of further
lockdowns and about the efficacy of the government enquiry into the pandemic,
which will not be concluded for several years.
"In contrast, the World Health Organisation (WHO) reported on its findings in
2022.
"Professor Francois Balloux, director of the UCL Genetics Institute, writing
in The Guardian, and Professor Robert Dingwall, of Trent University, writing
in the Telegraph, provide useful synopses of the WHO report:
(see pages 54-56 of Wetherspoon News
https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/wetherspoon-news-autumn-2022.pdf)
"The conclusion of Professor Balloux, broadly echoed by Professor Dingwall,
based on an analysis by the World Health Organisation of the pandemic, is that
Sweden (which did not lock down), had a Covid-19 fatality rate "of about half
the UK's" and that "the worst performer, by some margin, is Peru, despite
enforcing the harshest, longest lockdown."
"Professor Balloux concludes that "the strength of mitigation measures does
not seem to be a particularly strong indicator of excess deaths."
"The company currently anticipates a reasonable outcome for the financial
year, subject to our future sales performance."
Enquiries:
John
Hutson
Chief Executive Officer 01923 477777
Ben
Whitley
Finance Director 01923 477777
Eddie Gershon
Company spokesman 07956 392234
Photographs are available at: www.newscast.co.uk
Notes to editors
1. J D Wetherspoon owns and operates pubs throughout
the UK. 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. The financial information set out in the
announcement does not constitute the company's statutory accounts for the
periods ended 28 July 2024 or 30 July 2023. The financial information for the
period ended 30 July 2023 is derived from the statutory accounts for that year
which have been delivered to the Registrar of Companies. The auditors have
reported on those accounts: their report was unqualified and did not contain
a statement under section 498(2) or (3) of the Companies Act 2006. Statutory
accounts for 2024 will be delivered to the registrar of companies in due
course. 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 2023 has
been published on the Company's website on 6 October 2023.
5. The current financial year comprises 52 trading
weeks to 28 July 2024.
6. The next trading update will be issued on 8 May
2024.
CHAIRMAN'S STATEMENT
Background
The recovery from the effects of the pandemic continued in the period under
review.
In the first full post-lockdown financial year (FY22), like-for-like (LFL)
sales declined by 4.7% compared to the pre-pandemic FY19.
In the second post-lockdown year (FY23), LFL sales increased by 7.4%, compared
to FY19 - and in the half year under review, LFL sales increased to 15.3%
compared to the same period in FY19.
In the last decade, there has been a reduction in the number of trading
Wetherspoon pubs, which peaked at 955 in December 2015. Some leasehold pubs
have been surrendered to landlords at the end of the lease or by negotiation,
and other pubs have been sold to third parties. At the end of the period under
review, the company traded from 814 pubs.
In spite of a reduction in the overall number of pubs, sales have continued to
increase - total sales are now about one third higher than in 2015, when the
number of pubs peaked, and sales per pub have increased by about 50% since
then.
Since 2010, the company has invested £448m in acquiring the freehold
"reversions" of pubs where it was previously the tenant.
71% of pubs are now freehold, an increase from 41% in 2010.
Our best estimate is that the company has potential for about 1,000 pubs in
the UK.
Examples of recent pub openings include the Captain Flinders near Euston
Station, London; the Stargazer, The O2, Greenwich; The Star Light, Heathrow
Airport and the Scribbling Mill, White Rose Shopping Centre, Leeds.
In addition, there is potential to expand existing successful pubs, by adding
gardens or, for example, by expanding the existing customer area into adjacent
buildings.
Examples of the substantial expansion of existing pubs include the Prince of
Wales, Cardiff; the Sir John Moore, Glasgow; the Standing Order, Derby; the
Five Swans, Newcastle; the Six Chimneys, Wakefield; Wetherspoons, Victoria
Station, London; the Red Lion, Skegness and the Windmill, Stansted Airport.
As previously indicated, the company is also increasing investment in new
staff rooms, changing rooms, glass racks above bars (to cater for increased
usage of brewers' "branded glasses") and air conditioning.
In summary, the company has recovered steadily from the pandemic, with current
sales at record levels, and plans to increase sales in the next decade by
investing in the areas outlined above.
Trading Summary
Total sales for the first half of FY24 were £991.0 million, an increase of
8.2%, compared to the first half of FY23.
Like-for-like sales, compared to FY23, increased by 9.9%. Like-for-like bar
sales increased by 11.6%, food sales by 7.6%, slot/fruit machine sales by
10.5% and hotel rooms by 2.8%.
Like-for-like (LFL) sales were stronger than total sales due to a small number
of pub disposals and lease terminations.
The operating profit, before separately disclosed items, was £67.7 million
(2023: £37.4 million). The operating margin, before separately disclosed
items, was 6.8% (2023: 4.1%).
The profit before tax and separately disclosed items was £36.0 million (2023:
£4.6 million), including property gains of £0.1 million (2023: £0.5
million).
In the period, the company sold five pubs, terminated the lease of five pubs
and sublet three pubs. This gave rise to a cash inflow of £3.8 million.
There was a loss on disposal of £5.9 million, recognised in the income
statement, relating to these pubs.
The company opened two pubs; The Star Light at Heathrow Airport and the
Captain Flinders, close to Euston Station in London.
The first Wetherspoon franchise pub opened at Hull University in January 2022.
The second opened at Newcastle University in September 2023. The third opened
at Haven Primrose Valley Holiday Park, Filey, North Yorkshire in March 2024.
Earnings per share before separately disclosed items, were 20.3p (2023: 1.0p).
Total capital investment was £57.2 million (2023: £47.8 million). £10.5
million was invested in new pubs and pub extensions (2023: £10.7 million),
£34.6 million in existing pubs and IT (2023: £27.1 million) and £12.1
million in freehold reversions of properties where Wetherspoon was the tenant
(2023: £10.0 million).
Separately disclosed items
Overall, there was a pre-tax 'separately disclosed loss' of £9.8 million
(2023: £52.3 million).
There was a £4.1 million depreciation credit in relation to previously
impaired fixed assets. The company had, in previous financial years, continued
to depreciate pubs at the level which applied before the impairments. This
credit corrects the 'over-depreciation'.
There was also:
- a £0.6 million charge relating to the fair value movement of interest rate
swaps.
- a £1.6 million credit relating to overcharged interest in respect of
IFRS-16 leases.
- a £5.9 million charge, reflecting the loss on disposal referred to above.
- a £9.3 million property impairment charge, in respect of pubs which were
deemed unlikely to generate sufficient cash flows, in the future, to support
their carrying value.
The tax effect on separately disclosed items is a credit of £3.7 million
(2023: debit of £16.8 million).
The net book value of the company's assets in the balance sheet is £1.38
billion, which is approximately seven times the company's EBITDA (pre
IFRS-16), in the last 12 months, of £198 million.
Free cash flow
There was a free cash outflow of £6.1 million in the period (2023: £166.0
million inflow). The main reason for the outflow is that 'trade and other
payables', the amount that the company owed to suppliers and other third
parties, such as HMRC, were £329 million at the end of FY23, reducing to
£281 million at the end of the period under review.
Free cash flow benefitted from proceeds of approximately £14.8 million from a
sale of interest rate swaps (please see the 'Financing' section below).
Free cash flow was calculated after capital payments of £34.6 million for
existing pubs (2023: £27.1 million), £6.6 million for share purchases for
employees (2023: £7.5 million) and payments of tax and interest.
Balance sheet
Debt levels, excluding IFRS-16 lease debt, were £694.2 million at the period
end (30 July 2023: £641.9 million). As indicated in the 'Free cash flow'
section above, there was a reduction in trade and other payables of £48
million between the last year end and the end of the period under review,
which contributed to the increase in borrowings.
On an IFRS-16 basis, which includes notional debt from leases, debt increased
from £1.06 billion to £1.11 billion in the first half of FY24.
Debt levels, excluding IFRS-16 lease debt, have decreased from £804.5 million
to £694.2 million since January 2020, just before the first lockdown. On an
IFRS-16 basis, debt decreased from £1.45 billion to £1.11 billion.
Dividends and return of capital
The board has not recommended the payment of an interim dividend (2023: £0).
During the period, 4,497,959 shares (3.5% of the share capital) were purchased
by the company for cancellation, at a cost of £34.1m, including stamp duty
and fees, representing an average cost per share of 779p.
Financing
The company has total available finance facilities of £963 million.
On 22 August 2023, the company disposed of all interest rate swaps in place,
receiving £14.8 million to do so. At the same time, the company took out a
new interest-rate swap of £200 million from 23 August 2023 through to 6
February 2025 at a rate of 5.665%. On 25 September 2023, the company took out
a further interest-rate swap of £400 million from 6 February 2025 to 6
February 2028 at a rate of 4.225%.
The total cost of the company's debt, in the period under review, including
the banks' margin was 7.03%.
Taxation
The total tax charge for the period was £11.1 million in respect of profits
before separately disclosed items (2023: £3.3 million).
The total tax charge comprises two parts. The first part is the actual current
tax (the 'cash' tax) which this year is £0.1 million (2023: £0.9 million).
The second part is deferred tax (the 'accounting' tax), which is tax payable
in future periods, that must be recognised in the current period for
accounting purposes. The accounting tax charge for the period is £11.1
million (2023: £2.4 million).
Scottish Business Rates
In appendix 1 below, we explain how business rates for Scottish pubs,
theoretically based on property values, have, by a strange process of legal
reasoning, become a de facto sales tax, based on the sales performance of the
occupier. As the famous baseball coach, Yogi Berra said: "In theory there is
no difference between theory and practice - in practice, there is."
VAT equality
Wetherspoon, along with many in the hospitality industry, has been a strong
advocate of tax equality between the off-trade, which consists mainly of
supermarkets, and the on-trade, consisting mainly of pubs, clubs and
restaurants.
Pubs, clubs and restaurants pay 20% VAT in respect of food sales but
supermarkets pay nothing. Supermarkets also pay far less business rates per
pint or meal than pubs.
It does not make economic sense for the tax system to favour mainly
out-of-town supermarkets over mainly high-street pubs. This imbalance is a
major factor in town centre and high street dereliction.
Our more detailed arguments on this point, from our last annual report, can be
found in appendix 2.
How pubs contribute to the economy
Wetherspoon and other pub and restaurant companies have always generated far
more in taxes than are earned in profit.
In the six months ended 28 January 2024, the company generated taxes of
£383.1 million.
The table below shows the £5.8 billion of tax revenue generated by the
company, its staff and customers in the last nine and a half years. Each pub,
on average, generated £6.6 million in tax during that period. The tax
generated by the company, during this period, equates to approximately 28
times the company's profits after tax.
2024 H1 2023 2022 2021 2020 2019 2018 2017 2016 2015 TOTAL
2015 to 2024 H1
£m £m £m £m £m £m £m £m £m £m £m
VAT 193.0 372.3 287.7 93.8 244.3 357.9 332.8 323.4 311.7 294.4 2,811.3
Alcohol duty 80.9 166.1 158.6 70.6 124.2 174.4 175.9 167.2 164.4 161.4 1,443.7
PAYE and NIC 65.8 124.0 141.9 101.5 106.6 121.4 109.2 96.2 95.1 84.8 1,046.5
Business rates 20.2 49.9 50.3 1.5 39.5 57.3 55.6 53.0 50.2 48.7 426.2
Corporation tax 6.6 12.2 1.5 - 21.5 19.9 26.1 20.7 19.9 15.3 143.7
Corporation tax credit (historic capital allowances) - - - - - - - - - -2.0 -2.0
Fruit/slot Machine duty 8.1 15.7 12.8 4.3 9.0 11.6 10.5 10.5 11.0 11.2 104.7
Climate change levies 4.2 11.1 9.7 7.9 10.0 9.6 9.2 9.7 8.7 6.4 86.5
Stamp duty 0.4 0.9 2.7 1.8 4.9 3.7 1.2 5.1 2.6 1.8 25.1
Sugar tax 1.4 3.1 2.9 1.3 2.0 2.9 0.8 - - - 14.4
Fuel duty 1.0 1.9 1.9 1.1 1.7 2.2 2.1 2.1 2.1 2.9 19.0
Apprenticeship levy 1.2 2.5 2.2 1.9 1.2 1.3 1.7 0.6 - - 12.6
Carbon tax - - - - - 1.9 3.0 3.4 3.6 3.7 15.6
Premise licence and TV licences 0.3 0.5 0.5 0.5 1.1 0.8 0.7 0.8 0.8 1.6 7.6
Landfill tax - - - - - - 1.7 2.5 2.2 2.2 8.6
Furlough tax - - -4.4 -213.0 -124.1 - - - - - -341.5
Eat out to help out - - - -23.2 - - - - - - -23.2
Local government grants - - -1.4 -11.1 - - - - - - -12.5
TOTAL TAX 383.1 760.2 666.9 38.9 441.9 764.9 730.5 695.2 672.3 632.4 £5.8bn
TAX PER PUB (£m) 0.47 0.92 0.78 0.05 0.51 0.87 0.83 0.78 0.73 0.66 £6.6m
TAX AS % OF NET SALES 38.7% 39.5% 38.3% 5.0% 35.0% 42.1% 43.1% 41.9% 42.1% 41.8% 38.6%
PROFIT/(LOSS) AFTER TAX 24.9 33.8 -24.9 -146.5 -38.5 79.6 83.6 76.9 56.9 57.5 203.3
Note - this table is prepared on a cash basis. IFRS-16 from FY20 onwards
Corporate governance
Wetherspoon has been a strong critic of the composition of the boards of
UK-quoted companies.
Directors of UK PLCs have, on average, relatively little experience of the
companies they govern, due to the "nine-year rule", which limits their tenure,
combined with the fact that most directors are part-time, and have never
worked for the company in question, on a full-time basis.
In addition, those responsible for overseeing governance, among institutional
shareholders, are often responsible for several hundred companies each, making
genuine board engagement impossible, and thereby necessitating a "tick-box"
approach, which is the antithesis of good governance.
The combination of arbitrary rules, the preponderance of part-time directors
and overloaded institutional governance departments means that bureaucracy and
virtue-signalling, rather than innovation and efficacy, dominate most UK PLC
boardrooms.
In appendix 3, further details are provided on this issue from our last
annual report.
Further progress
The company has always tried to improve as many areas of the business as
possible, on a continuing basis.
In the period Wetherspoon awarded £21.2 million in respect of bonuses and
free shares to employees, of which 99.0% was paid to staff below board level
and 89.6% was paid to staff working in our pubs.
Tenure continued to improve. The average length of service of a pub manager is
now 14.6 years, and of a kitchen manager is 10.7 years.
Wetherspoon has been recognised by the Top Employers Institute as a Top
Employer United Kingdom 2024. It is the 19th time that Wetherspoon has been
certified by the Top Employers' Institute.
The company has an extensive training programme for its employees, including
'kitchen of excellence' training, as well as cellar, dispense and coffee
academy training.
Wetherspoon has recently been included in the Financial Times 'FT - Statista
Leaders 2024' report, which highlights Europe's leading companies in diversity
and inclusion.
The company's UK nominated charity is Young Lives vs Cancer (previously CLIC
Sargent). It supports children and young people with cancer. Since our
partnership began in 2002, Wetherspoon has raised over £23 million for the
charity, thanks to the generosity of our customers and employees.
In January 2024, the company was awarded the highest rating by the Sustainable
Restaurant Association - the world's largest accreditation scheme for pubs and
restaurants, see Link to SRA article
(https://www.jdwetherspoon.com/~/media/files/pdf-documents/pages-for-interim-report.pdf?la=en)
.
Wetherspoon came first in the 'Out to Lunch' league table, compiled by the
Soil Association, when last awarded, in 2019 and 2021. Restaurants and pubs
are judged and scored on a range of criteria: family friendliness, healthy
options, food quality, value, sustainability and ingredients' provenance.
Wetherspoon is seeking to extend the appeal of its menu. For example, 36% of
the dishes on the menu that is available in the majority of pubs are
vegetarian, 10% are vegan and 21% are under 500 calories.
Cod and haddock are sourced from fisheries which have been certified to the
MSC's (Marine Stewardship Council) standards for well-managed and sustainable
fisheries.
We are introducing a new chip scuttle to our kitchens, which helps to keep
chips hot, while also reducing the risk of fire, and reducing energy
consumption by around 10%.
We have introduced a food oil monitoring device to improve oil quality checks,
which should reduce oil consumption and improve food quality.
Guinness have a 'Quality Accreditation Programme'. Independent assessors
review 17 aspects of quality. All Wetherspoon pubs have received
accreditation.
Since 2008, Wetherspoon has invited brewers from overseas to feature their
ales in its real-ale festivals. To date, these brewers have contributed 234
ales, from 147 breweries in 29 countries. In addition, the company works with
over 250 UK brewers, mostly small or "micro" brewers.
Since 1999, Wetherspoon has worked with independent real-ale quality assessor
Cask Marque to gauge the quality of ale being served in its pubs. Cask Marque
carries out an 11-point audit covering stock rotation, beer line cleanliness,
equipment maintenance, glasswashing cleanliness and hygiene. A star rating is
awarded from 1 to 5, with a target or 4 to 5 stars for all pubs. Cask Marque
state that 66% of pubs achieve 4 or 5 stars. 99% of Wetherspoon pubs have
achieved 4 or 5 stars.
Sustainability, recycling and the environment
Wherever possible, Wetherspoon separates waste into eight streams: glass;
tins/cans; cooking oil; paper/cardboard; plastic; lightbulbs; food waste and
general waste.
9,911 tonnes of recyclable waste were processed last year at our national
recycling centre. In addition, food waste is sent for 'anaerobic digestion'
and used cooking oil is converted to biodiesel for agricultural use.
Smart meters are installed in the majority of pubs to facilitate energy
consumption reporting.
According to ISTA, a leading company providing energy services, Wetherspoon
has reduced greenhouse gas emissions by 60% over the last 10 years, after
adjusting for sales growth. During that time, the company has also contributed
£107m in climate change levies and carbon taxes.
The company has 'Cleaner Power Certification' from its electricity supplier,
Total Gas & Power Ltd, that states that "the electricity supplied by Total
Gas & Power Ltd for the supply period of 01/10/22 to 30/09/24 will be 100%
generated from renewable schemes as accredited by OFGEM".
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 Profit/(loss) 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 (39) -
2021 23 (146) -
2022 30 (25) -
2023 36 34 106%
2024 H1 21 25 84%
Total 524 616 55%(2)
(1)(IFRS-16 was implemented in the year ending 26 July 2020 (FY20). From this
period all profit numbers in the above table are on a Post IFRS-16 basis.
Prior to this date all profit numbers are on a Pre IFRS-16 basis.
(2) Excludes 2020, 2021 and 2022.
Length of service
The table below provides details of the improved retention levels of pub and
kitchen managers, key areas for any pub company, in the last decade.
Financial year Average pub manager length of service Average kitchen manager length of service
(Years) (Years)
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 13.9 10.4
2023 14.3 10.6
2024 14.6 10.7
Food hygiene ratings
Wetherspoon has always emphasised the importance of hygiene standards.
We now have 744 pubs rated on the Food Standards Agency's website (see table
below). The average score is 4.99, with 99.1% 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 57 pubs have passed.
Financial Year Total pubs scored Average rating Pubs with highest rating %
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 775 4.98 98.6
2023 753 4.99 99.2
2024 744 4.99 98.7
Property litigation
Some years ago, Wetherspoon took successful legal action for fraud against
its own property advisors Van de Berg, who were found, by the court, to have
diverted freehold properties to third parties, leaving Wetherspoon with an
inferior leasehold interest. Following the Van de Berg case, Wetherspoon
instigated further legal actions against a number of individuals and companies
who had freehold properties introduced to them by Van de Berg. Liability was
denied by all. The cases were contested and settled out of court. Details can
be found in appendix 4.
Press corrections
In the febrile atmosphere of the first UK lockdown, a number of harmful
inaccuracies were published in the press. A large number of corrections and
apologies were received, as a result of legal representations by Wetherspoon.
In order to try to set the record straight, a special edition of Wetherspoon
News was published, which includes details of the apologies and corrections.
It 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)
).
Pubwatch
As Wetherspoon has previously highlighted, Pubwatch is a forum which has
improved wider town and city environments, by bringing together pubs, local
authorities and the police, in a concerted way, to encourage good behaviour
and to reduce antisocial activity.
Wetherspoon pubs are members of 541 schemes country wide, with 5 new schemes
and 2 less schemes due to disposals.
The company also helps to fund National Pubwatch, founded in 1997 by just two
licensees and a police office. This is the umbrella organisation which helps
to set up, co-ordinate and support local schemes.
It is our experience that in some towns and cities, where the authorities have
struggled to control antisocial behaviour, the setting up of a Pubwatch has
been instrumental in improving safety and security - of not only licensed
premises, but also the town and city in general, as well as assisting the
police in bringing down crime.
Conversely, we have found, in several towns, including some towns on the
outskirts of London, that the absence of an effective Pubwatch scheme results
in higher incidents of crime, disorder and antisocial behaviour.
In our view, Pubwatch is integral to making towns and cities a safe
environment for everyone.
Current trading and outlook
As indicated above, sales continue to improve. In the last 7 weeks, to 17
March 2024, like-for-like sales increased by 5.8%.
The company continues to be concerned about the possibility of further
lockdowns and about the efficacy of the government enquiry into the pandemic,
which will not be concluded for several years.
In contrast, the World Health Organisation (WHO) reported on its findings in
2022.
Professor Francois Balloux, director of the UCL Genetics Institute, writing in
The Guardian, and Professor Robert Dingwall, of Trent University, writing in
the Telegraph, provide useful synopses of the WHO report:
(see pages 54-56 of Wetherspoon News
https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/wetherspoon-news-autumn-2022.pdf
(https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/wetherspoon-news-autumn-2022.pdf)
)
The conclusion of Professor Balloux, broadly echoed by Professor Dingwall,
based on an analysis by the World Health Organisation of the pandemic, is that
Sweden (which did not lock down), had a Covid-19 fatality rate "of about half
the UK's" and that "the worst performer, by some margin, is Peru, despite
enforcing the harshest, longest lockdown."
Professor Balloux concludes that "the strength of mitigation measures does not
seem to be a particularly strong indicator of excess deaths."
The company currently anticipates a reasonable outcome for the financial year,
subject to our future sales performance.
APPENDIX 1 Extract from Wetherspoon FY23 Annual report, Chairman's Statement
Business rates transmogrified to a sales tax
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 tenant's
trade - has been undermined.
Similar issues are evident in Galashiels, Arbroath, Anniesland - and, indeed,
at 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.
Omni Centre, Edinburgh The Centre, Livingston
Occupier Name Rateable Value (RV) Customer Area (ft²) Rates per square foot Occupier Name Rateable Value (RV) Customer Area (ft²) Rates per square foot
Playfair (JDW) £218,750 2,756 £79.37 The Newyearfield (JDW) £165,750 4,090 £40.53
Unit 9 (vacant) £48,900 1,053 £46.44 Paraffin Lamp £52,200 2,077 £25.13
Unit 7 (vacant) £81,800 2,283 £35.83 Wagamama £67,600 2,096 £32.25
Frankie & Benny's £119,500 2,731 £43.76 Nando's £80,700 2,196 £36.75
Nando's £122,750 2,804 £43.78 Chiquito £68,500 2,221 £30.84
Slug & Lettuce £108,750 3,197 £34.02 Ask Italian £69,600 2,254 £30.88
The Filling Station £147,750 3,375 £43.78 Pizza Express £68,100 2,325 £29.29
Tony Macaroni £125,000 3,427 £36.48 Prezzo £70,600 2,413 £29.26
Unit 6 (vacant) £141,750 3,956 £35.83 Harvester £98,600 3,171 £31.09
Cosmo £200,000 7,395 £27.05 Pizza Hut £111,000 3,796 £29.24
Average (exc JDW) £121,800 3,358 £38.55 Hot Flame £136,500 4,661 £29.29
Average (exc JDW) £82,340 2,721 £30.40
In summary, as a result of the approach taken in Scotland, business rates for
pubs are de facto a sales tax, rather than a property tax, as the above
examples clearly demonstrate.
APPENDIX 2 Extract from Wetherspoon FY23 Annual report, Chairman's Statement:
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.
As a result, in these less affluent areas, there are often fewer pubs, coffee
shops and restaurants, with less employment and increased high-street
dereliction. Tax equality would also be in line with the principle of fairness
- the same taxes should apply to businesses which sell the same products.
APPENDIX 3 Extract from Wetherspoon FY23 Annual report, Chairman's Statement
Corporate Governance
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 2008-10 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 increased the level of 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 regional 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 met a compliance officer from one major
institution who is responsible for around 400 companies - an impossible task.
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.
APPENDIX 4 Extract from Wetherspoon FY23 Annual report, Chairman's Statement:
Property Litigation
In 2013, Wetherspoon agreed an out-of-court settlement of approximately £1.25
million with developer Anthony Lyons, formerly of property leisure agent Davis
Coffer Lyons, relating to claims 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 in respect of properties
in Leytonstone (which currently trades as the Walnut Tree), Newbury (which was
leased to Café Rouge) and Portsmouth (which currently trades as The Isambard
Kingdom Brunel).
Of these three properties, only Portsmouth was pleaded by Wetherspoon in its
case 2008/9 case against Van de Berg. Mr Lyons denied the claim and the
litigation was contested.
In the Van de Berg litigation, Mr Justice Peter Smith ruled that Van de Berg,
but not Mr Lyons (who was not a party to the case), fraudulently diverted the
freehold of Portsmouth from Wetherspoon to Moorstown Properties Limited, a
company owned by Simon Conway, which leased the property to Wetherspoon.
As part of a series of cases, Wetherspoon also agreed out-of-court settlements
with:
1) Paul Ferrari of London estate agent Ferrari Dewe & Co, in respect of
properties referred to as the 'Ferrari Five' by Mr Justice Peter Smith in the
Van de Berg case, and
2) Property investor Jason Harris, formerly of First London and now of First
Urban Group who paid £400,000 to Wetherspoon to settle a claim in which it
was alleged that Harris was an accessory to frauds committed by Van de Berg.
Harris contested the claim and did not admit liability.
Messrs Ferrari and Harris both contested the claims and did not admit
liability.
INCOME STATEMENT for the 26 weeks ended 28 January 2024
J D Wetherspoon plc, company number: 1709784
Notes Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks
ended ended ended ended ended ended
28 January 28 January 28 January 29 January 29 January 29 January
2024 2024 2024 2023 2023 2023
before separately after before separately after
separately disclosed separately separately disclosed separately
disclosed items disclosed disclosed items disclosed
items items items items
£000 £000 £000 £000 £000 £000
Revenue 1 990,954 - 990,954 915,956 - 915,956
Other operating income 2 - 4,356 4,356 - - -
Operating costs (923,272) - (923,272) (878,536) - (878,536)
Operating profit 67,682 4,356 72,038 37,420 - 37,420
Property gains/(losses) 2 88 (15,179) (15,091) 489 (11,665) (11,176)
Finance income 2 1,195 1,567 2,762 247 65,091 65,338
Finance costs 2 (32,931) (636) (33,567) (33,592) (1,037) (34,629)
Profit/(loss) before tax 36,034 (9,892) 26,142 4,564 52,389 56,953
Income tax charge 4 (11,147) 3,653 (7,494) (3,271) (16,767) (20,038)
Profit/(loss) for the period 24,887 (6,239) 18,648 1,293 35,622 36,915
Profit/(loss) per ordinary share (p)
- Basic 5 20.3 5.1 15.2 1.0 28.4 29.4
- Diluted(1) 5 19.6 4.9 14.7 1.1 27.9 29.0
(1)Restated, see note 5.
STATEMENT OF COMPREHENSIVE INCOME for the 26 weeks ended 28 January 2024
Unaudited Unaudited Audited
Notes 26 weeks 26 weeks 52 weeks
ended ended ended
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Items which will be reclassified subsequently to profit or loss:
Interest-rate swaps: gain taken to other comprehensive income 10 38 37,529 37,529
Interest-rate swaps: loss reclassification to the income statement 10 (5,601) (1,913) (13,310)
Tax on items taken directly to other comprehensive income - (8,904) (6,055)
Currency translation differences (1,388) 3,211 1,633
Net (loss)/gain recognised directly in other comprehensive income (6,951) 29,923 19,797
Profit for the period 18,648 36,915 59,587
Total comprehensive profit for the period 11,697 66,838 79,384
CASH FLOW STATEMENT for the 26 weeks ended 28 January 2024
( )
J D Wetherspoon plc, company number: 1709784
Unaudited Unaudited Unaudited Unaudited Audited Audited
free cash free cash free cash
flow(1) flow(1) Flow(1)
26 weeks 26 weeks 26 weeks 26 weeks 53 weeks 53 weeks
ended ended ended ended ended ended
Notes 28 January 28 January 29 January 29 January 30 July 30 July
2024 2024 2023 2023 2023 2023
£000 £000 £000 £000 £000 £000
Cash flows from operating activities
Cash generated from operations 6 78,719 78,719 84,187 84,187 270,686 270,686
Interest received 1,053 1,053 71 71 1,011 1,011
Interest paid (26,770) (26,770) (21,245) (21,245) (50,545) (50,545)
Cash proceeds on termination of interest-rate swaps 14,783 14,783 169,413 169,413 169,413 169,413
Corporation tax paid (6,600) (6,600) (8,730) (8,730) (12,200) (12,200)
Lease interest (7,321) (7,321) (8,172) (8,172) (15,954) (15,954)
Net cash flow from operating activities 53,864 53,864 215,524 215,524 362,411 362,411
Cash flows from investing activities
Reinvestment in pubs (33,612) (33,612) (24,333) (24,333) (41,646) (41,646)
Reinvestment in business and IT projects (975) (975) (2,804) (2,804) (5,315) (5,315)
Investment in new pubs and pub extensions (10,510) - (10,669) - (20,361) -
Freehold reversions and investment properties (12,122) - (9,994) - (11,202) -
Proceeds of sale of property, plant and equipment 10,688 - 3,327 - 11,349 -
Net cash flow from investing activities (46,531) (34,587) (44,473) (27,137) (67,175) (46,961)
Cash flows from financing activities
Purchase of own shares for cancellation (34,081) - - - - -
Purchase of own shares for share-based payments (6,630) (6,630) (7,454) (7,454) (12,332) (12,332)
Advances/(repayments) under bank loans 15,000 - (140,033) - (200,033) -
Other loan receivables 370 - 393 - 889 -
Lease principal payments (18,729) (18,729) (14,904) (14,904) (32,023) (32,023)
Asset-financing principal payments (2,107) - (2,855) - (4,911) -
Net cash flow from financing activities (46,177) (25,359) (164,853) (22,358) (248,410) (44,355)
Net change in cash and cash equivalents (38,844) 6,198 46,826
Opening cash and cash equivalents 87,173 40,347 40,347
Closing cash and cash equivalents 48,329 46,545 87,173
Free cash flow(1) (6,082) 166,029 271,095
( )
(1) Free cash flow is a measure not required by accounting standards; a
definition is provided in the accounting policies within the 2023 Annual
Report.
BALANCE SHEET as at 28 January 2024
J D Wetherspoon plc, company number: 1709784 Notes Unaudited Unaudited Audited
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Assets
Non-current assets
Property, plant and equipment 1,374,806 1,417,559 1,377,816
Intangible assets 6,489 5,670 6,505
Investment property 18,652 23,276 18,740
Right-of-use assets 11 364,072 400,739 387,353
Other loan receivable 1,523 2,749 1,986
Derivative financial instruments 10 - 326 11,944
Lease assets 11 9,771 8,662 8,450
Total non-current assets 1,775,313 1,858,981 1,812,794
Current assets
Lease assets 11 1,617 2,001 1,361
Assets held for sale 8 1,750 1,533 400
Inventories 29,374 32,483 34,558
Receivables 27,543 14,650 27,267
Current income tax receivables 6,301 4,049 8,351
Cash and cash equivalents 48,329 46,545 87,173
Total current assets 114,914 101,261 159,110
Total assets 1,890,227 1,960,242 1,971,904
Current liabilities
Borrowings 9 (2,093) (4,324) (4,200)
Derivative financial instruments 10 - (66) (78)
Trade and other payables (281,294) (258,733) (329,098)
Provisions (2,817) (2,877) (2,395)
Lease liabilities 11 (48,413) (47,409) (51,486)
Total current liabilities (334,617) (313,409) (387,257)
Non-current liabilities
Borrowings 9 (742,879) (789,296) (727,643)
Derivative financial instruments 10 (9,116) (9,631) -
Deferred tax liabilities (64,359) (56,984) (65,752)
Lease liabilities 11 (369,938) (406,529) (391,794)
Total non-current liabilities (1,186,292) (1,262,440) (1,185,189)
Total liabilities (1,520,909) (1,575,849) (1,572,446)
Net assets 369,318 384,393 399,458
Shareholders' equity
Share capital 2,485 2,575 2,575
Share premium account 143,170 143,294 143,170
Capital redemption reserve 2,337 2,337 2,337
Other reserves 234,669 234,579 234,579
Hedging reserve 26,218 40,329 31,781
Currency translation reserve 578 4,529 2,148
Retained earnings (40,139) (43,250) (17,132)
Total shareholders' equity 369,318 384,393 399,458
( )
STATEMENT OF CHANGES IN EQUITY
Share Capital Currency
Share premium redemption Other Hedging translation Retained
Notes capital account reserve Reserves reserve reserve earnings Total
£000 £000 £000 £000 £000 £000 £000 £000
As at 29 January 2023 2,575 143,294 2,337 234,579 40,329 4,529 (43,250) 384,393
Total comprehensive income - - - - (8,548) (2,381) 23,476 12,547
Profit for the period - - - - - - 22,673 22,673
Interest-rate swaps: amount reclassified to the income statement 10 - - - - (11,397) - - (11,397)
Tax on items taken directly to comprehensive income 10 - - - - 2,849 - - 2,849
Currency translation differences - - - - - (2,381) 803 (1,578)
Share capital expenses - (124) - - - - - (124)
Share-based payment charges - - - - - - 7,420 7,420
Tax on share-based payment 4 - - - - - - 100 100
Purchase of own shares for share-based payments - - - - - - (4,878) (4,878)
As at 30 July 2023 2,575 143,170 2,337 234,579 31,781 2,148 (17,132) 399,458
Total comprehensive income - - - - (5,563) (1,570) 18,830 11,697
Profit for the period - - - - - 18,648 18,648
Interest-rate swaps: cash flow hedges 10 - - - - 38 - - 38
Interest-rate swaps: amount reclassified to the income statement 10 - - - - (5,601) - - (5,601)
Currency translation differences - - - - - (1,570) 182 (1,388)
Purchase of own shares and cancelled (90) - - 90 - - (39,458) (39,458)
Share-based payment charges - - - - - - 4,013 4,013
Tax on share-based payment 4 - - - - - - 238 238
Purchase of own shares for share-based payments - - - - - - (6,630) (6,630)
As at 28 January 2024 2,485 143,170 2,337 234,669 26,218 578 (40,139) 369,318
The share premium account represents those proceeds received in excess of the
nominal value of new shares issued. £124,000 was recognised in the 2023 in
relation to the issue of shares in previous periods.
The capital redemption reserve represents the nominal amount of share capital
repurchased and cancelled in previous periods.
Other reserves contain net proceeds received for share placements which took
place in previous periods. The other reserve is determined to be distributable
for the purposes of the Companies Act 2006.
During the year, 4,497,959 shares were repurchased by the company and
cancelled, representing approximately 3.5% of the issued share capital, at a
cost of £34.1 million, including stamp duty and fees, representing an average
cost per share of 779p. As at 28 January 2024, the company had committed to,
but not yet purchased 630,000 shares.
See note 10 for details on the hedging reserve.
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 28 January 2024, the company had distributable reserves of £221.3
million (2023: £251.4 million).
NOTES TO THE FINANCIAL STATEMENTS
1. Revenue
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Bar 570,810 521,088 1,093,368
Food 374,714 351,741 742,067
Slot/fruit machines 32,232 30,269 62,579
Hotel 12,131 11,863 24,939
Other 1,067 995 2,091
990,954 915,956 1,925,044
2. Separately disclosed items
( )
Unaudited Unaudited
26 weeks 26 weeks
ended ended
28 January 29 January
2024 2023
£000 £000
Operating items
Other 203 -
Government grants 14 -
Depreciation overcharge on impaired assets 4,139 -
Operating income 4,356 -
Total operating profit 4,356 -
Property losses
Loss on disposal of pubs (5,913) (3,052)
(5,913) (3,052)
Other property (gains)/losses
Impairment of assets under construction (4,583) -
Reversal of intangible assets impairment - 74
Impairment of property, plant and equipment (5,848) (7,311)
Reversal of property, plant and equipment impairment 358 -
Impairment of right-of-use assets - (1,376)
Reversal of right-of-use assets impairment 807 -
(9,266) (8,613)
Total property losses (15,179) (11,665)
Other items
Finance costs (636) (1,037)
Finance income 1,567 65,091
931 64,054
Taxation
Current income tax charge - (5,847)
Tax effect on separately disclosed items 3,653 (10,920)
3,653 (16,767)
Total separately disclosed items (6,239) 35,622
( )
( )
( )
2. Separately disclosed items (continued)
Other operating income
Other income of £1,402,000 has been recognised in the period relating to a
settlement agreement (2023: nil). This is offset by costs of £517,000 (2023:
nil) due to an ongoing contractual dispute with a large supplier, as outlined
in note 14 and costs of £682,000 (2023: nil) in relation to a historic
employment tax issue.
Included within other operating income is a reversal of overcharged
depreciation in relation to previously impaired fixed assets and right-of-use
assets, totalling £4,139,000. The overcharge of depreciation occurred between
the periods ended 26 July 2020 through to 30 July 2023, and was not material
in any one period to any line item. As such, the overcharge has been reversed
in the current year.
Local government support grants
The company has recognised £14,000 (2023: £nil) of local government support
grants in the UK and the Republic of Ireland, associated with the COVID-19
pandemic.
Property losses
Costs classified under the 'loss on disposal of pubs' relate to sites sold or
surrendered during the year.
Other property (gains)/losses
Property impairment relates to pubs which are deemed unlikely to generate
sufficient cash flows in the future to support their carrying value. In the
year, a total impairment charge of £9,266,000 (2023: £8,613,000) was
incurred in respect of the impairment of assets as required under IAS 36.
Included within this charge were impairment reversals of £1,165,000
recognised in the year (2023: £74,000).
Separately disclosed finance costs and income
The separately disclosed finance costs in the prior period of £1,037,000
relate to covenant-waiver fees. The separately disclosed finance costs in the
current year of £636,000 (2023: income of £65,091,000) relate to
interest-rate swaps.
A charge of £6,237,000 (2023: income of £49,887,000) relates to the fair
value movement on interest-rate swaps. Income of £176,000 (2023: income of
£1,913,000) relates to the amortisation of the hedge reserve to the P&L
relating to discontinued hedges and, £5,425,000 (2023: income of
£13,291,000) relates to hedge ineffectiveness reclassified from the reserve
to the P&L in relation to terminated swaps.
Included within separately disclosed finance income during the 26 weeks ended
28 January 2024 is the reversal of overcharged interest relating to IFRS-16
leases, of £1,567,000.
Taxation
The tax effect on separately disclosed items is a credit of £3,653,000 (2023:
income of £16,767,000).
3. Employee benefits expenses
Unaudited Unaudited
26 weeks 26 weeks
ended ended
28 January 29 January
2024 2023
£000 £000
Wages and salaries 345,684 321,363
Employee support grants (289) (768)
Social security costs 21,506 20,174
Other pension costs 5,682 5,165
Share-based payments 4,013 4,053
376,596 349,987
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.
Unaudited Unaudited
2024 2023
Number Number
Full-time equivalents
Head office 382 354
Pub managerial 4,490 4,563
Pub hourly paid staff 19,593 19,295
24,465 24,212
2024 2023
Number Number
Total employees
Head office 382 362
Pub managerial 4,744 5,069
Pub hourly paid staff 36,628 36,629
41,754 42,060
The totals above relate to the monthly average number of employees during the
period, not the total of employees at the end of the period.
Share-based payments Unaudited Unaudited
26 weeks 26 weeks
ended ended
28 January 29 January
2024 2023
Shares awarded during the year (shares) 1,548,446 1,971,414
Average price of shares awarded (pence) 658 477
Market value of shares vested during the year (£000) 4,835 1,445
Share awards not yet vested (£000) 15,116 9,484
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.
4. Income tax expense
The taxation charge for the 26 weeks ended 28 January 2024 is based on the
pre-separately disclosed items profit before tax of £36.0 million and the
estimated effective tax rate before separately disclosed items for the 26
weeks ended 28 January 2024 of 33.0% (July 2023: 20.5%). This comprises a
pre-separately disclosed current tax rate of 0.3% (July 2023: 0%) and a
pre-separately disclosed deferred tax charge of 32.7% (July 2023: 20.5%
charge).
The UK standard weighted average tax rate for the period is 25% (2023: 21%).
The current tax rate is lower than the UK standard weighted average tax rate
owing to tax losses in the period.
The exceptional current tax charge relates entirely to the tax on profit
crystallised when terminating interest rate SWAP contracts in the previous
period. For tax purposes the profits are spread over the remaining life of
the underlying hedged item which results in the high exceptional ETR in the
current period. A deferred tax liability is recognised in respect of this
item.
Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended Ended
28 January 2024 28 January 2024 29 January 2023 29 January 2023 30 July 2023 30 July 2023
before after before after before after
separately separately separately separately separately separately
disclosed disclosed disclosed Disclosed disclosed disclosed
items items items Items Items Items
£000 £000 £000 £000 £000 £000
Taken through income statement
Current income tax:
Current income tax charge 75 8,895 866 6,625 - 5,552
Previous period adjustment - (245) - 88 - 293
Total current income tax 75 8,650 866 6,713 - 5,845
Deferred tax:
Origination and reversal of temporary differences 11,072 (1,156) 2,405 15,771 13,602 29,947
Prior year deferred tax credit - - - (36) (4,868) (4,868)
Impact of change in UK tax rate - - - (2,410) - -
Total deferred tax 11,072 (1,156) 2,405 13,325 8,734 25,079
Tax charge 11,147 7,494 3,271 20,038 8,734 30,924
Taken through equity
Current tax (52) (52) - - - -
Deferred tax (186) (186) - - (100) (100)
Tax credit (238) (238) - - (100) (100)
Taken through comprehensive income
Deferred tax charge on swaps - - 7,479 7,479 - 6,055
Impact of change in UK tax rate - - 1,425 1,425 - -
Tax (credit)/charge - - 8,904 8,904 - 6,055
5. Basic earnings/(loss) per share
Weighted average number of shares
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
after tax for the period by the weighted average number of ordinary shares in
issue during the financial year of 127,671,463 (2023: 128,750,155) less the
weighted average number of shares held in trust during the financial year of
4,618,943 (2023: 3,296,278). Shares held in trust are shares purchased by the
company to satisfy employee share schemes that have not yet vested.
Diluted earnings/(loss) per share is calculated by dividing the profit/(loss)
after tax for the period by the weighted average number of ordinary shares in
issue during the financial year adjusted for both shares held in trust and the
effects of potentially dilutive shares. For the company, the dilutive shares
are those that relate to employee share schemes that have not been purchased
in advance and have not yet vested. In the event of making a loss during the
year, the diluted loss per share is capped at the basic earnings per share as
the impact of dilution cannot result in a reduction in the loss per share.
Unaudited Unaudited Audited
Weighted average number of shares 26 weeks 26 weeks 52 weeks
ended ended ended
28 January 29 January 30 July
2024 2023 2023
Restated(1)
Shares in issue 127,671,463 128,750,155 128,750,155
Shares held in trust (4,618,943) (3,337,132) (3,296,278)
Shares in issue - Basic 123,052,520 125,413,023 125,453,877
Dilutive shares(1) 3,466,567 2,046,258 2,810,231
Shares in issue - Diluted 126,519,087 127,459,281 128,264,108
(1) Impact of dilutive shares from FY 2023 has been restated.
Earnings / (loss) per share
26 weeks ended 28 January 2024 unaudited Profit/(loss) Basic EPS Diluted EPS
£000 pence pence
Earnings (profit after tax) 18,648 15.2 14.7
Exclude effect of separately disclosed items after tax 6,239 5.1 4.9
Earnings before separately disclosed items 24,887 20.3 19.6
Exclude effect of property gains/(losses) (88) (0.1) (0.1)
Underlying earnings before separately disclosed 24,799 20.2 19.5
26 weeks ended 29 January 2023 unaudited Profit/(loss) Basic EPS Diluted EPS
£000 pence Pence(1)
Earnings (profit after tax) 36,915 29.4 29.0
Exclude effect of exceptional items after tax (35,622) (28.4) (27.9)
Earnings before separately disclosed items 1,293 1.0 1.1
Exclude effect of property gains/(losses) (489) (0.4) (0.4)
Underlying earnings before separately disclosed 804 0.6 0.7
(1) Impact of dilutive shares from FY 2023 has been restated.
6. Cash used in/generated from operations
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Profit for the period 18,648 36,915 59,587
Adjusted for:
Tax (note 4) 7,494 20,038 30,924
Share-based charges 4,013 3,125 10,545
Loss on disposal of property, plant and equipment 5,964 3,738 10,871
Gain on remeasurement of capitalised leases (1,568) (489) (2,273)
Gain on disposal of capitalised leases - (686) -
Net impairment charge (note 2) 9,266 8,613 38,287
Interest payable & receivable 25,718 24,411 49,223
Lease interest 5,782 7,966 22,456
Separately disclosed depreciation overcharge on impaired assets (4,139) - -
Separately disclosed Interest (note 2) 636 (64,054) (96,686)
Amortisation of bank loan and private placement issue costs 236 968 1,246
Depreciation and amortisation 53,814 54,847 109,741
Aborted properties costs 397 688 1,719
Foreign exchange movements (1,388) (3,214) 1,633
Lease premiums (51) - -
124,822 92,866 237,273
Change in inventories 5,184 (6,081) (8,157)
Change in receivables (312) 14,143 2,133
Change in payables (50,975) (16,741) 39,437
Cash flow from operating activities 78,719 84,187 270,686
7. Analysis of change in net debt
Unaudited Audited Unaudited
29 January Cash Other 30 July Cash Other 28 January
2023 flows changes 2023 flows changes 2024
£000 £000 £000 £000 £000 £000 £000
Borrowings
Cash and cash equivalents 46,545 40,628 - 87,173 (38,844) - 48,329
Other loan receivable - before one year 402 401 - 803 (6) - 797
Asset-financing obligations - before one year (4,324) 76 48 (4,200) 2,107 - (2,093)
Current net borrowings 42,623 41,105 48 83,776 (36,743) - 47,033
Bank loans - due after one year (689,528) 60,000 (256) (629,784) (15,000) (212) (644,996)
Asset-financing obligations - after one year (1,931) 1,976 (45) - - - -
Other loan receivable - after one year 2,739 (753) - 1,986 (379) - 1,607
Private placement - after one year (97,837) - (23) (97,860) - (23) (97,883)
Non-current net borrowings (786,557) 61,223 (324) (725,658) (15,379) (235) (741,272)
Net debt (743,934) 102,328 (276) (641,882) (52,122) (235) (694,239)
Derivatives
Interest-rate swaps asset - after one year 326 (169,413) 181,031 11,944 - (11,944) -
Interest-rate swaps liability - within one year (66) - (12) (78) - 78 -
Interest-rate swaps liability - after one year (9,631) - 9,631 - - (9,116) (9,116)
Total derivatives (9,371) (169,413) 190,650 11,866 - (20,982) (9,116)
Net debt after derivatives (753,305) (67,085) 190,374 (630,016) (52,122) (21,217) (703,355)
Leases
Lease assets - before one year 1,213 (851) 999 1,361 (427) 683 1,617
Lease assets - after one year 9,448 - (998) 8,450 - 1,321 9,771
Lease obligations - before one year (47,409) 17,196 (21,273) (51,486) 19,156 (16,083) (48,413)
Lease obligations - after one year (406,529) - 14,735 (391,794) - 21,856 (369,938)
Net lease liabilities (443,277) 16,345 (6,537) (433,469) 18,729 7,777 (406,963)
Net debt after derivatives and lease liabilities (1,196,582) (50,740) 183,837 (1,063,485) (33,393) (13,440) (1,110,318)
Lease obligations represent long-term payables, while lease assets represent
long-term receivables - both are, therefore, disclosed in the table above.
The non-cash movement in bank loans and the private placement relate to the
amortisation of loan issue costs. 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.
8. 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 28 January
2024, one site was classified as held for sale (2023: one site)
Unaudited Unaudited Audited
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Property, plant and equipment 1,750 1,533 400
9. Borrowings
Unaudited Unaudited Audited
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Current (due within one year)
Other
Lease liabilities 48,413 47,409 51,486
Asset-financing obligations 2,093 4,324 4,200
Total current borrowings (including lease liabilities) 50,506 51,733 55,686
Non-current (due after one year)
Bank loans
Variable-rate facility 645,000 690,000 630,000
Unamortised bank loan issue costs (4) (472) (217)
644,996 689,528 629,783
Private placement
Fixed-rate facility 98,000 98,000 98,000
Unamortised private placement issue costs (117) (163) (140)
97,883 97,837 97,860
Other
Lease liabilities 369,938 406,529 391,794
Asset-financing - 1,931 -
369,938 408,460 391,794
Total non-current borrowings (including lease liabilities) 1,112,817 1,195,825 1,119,437
Total borrowings (including lease liabilities) 1,163,323 1,247,558 1,175,123
Lease liabilities
The carrying amounts of lease liabilities and the movements during the period
are outlined in note 11.
Asset-financing obligations
Asset-financing obligations relate to asset finance leases of equipment in
pubs.
Variable-rate facility
The secured revolving credit facility is £875 million. As at 28 January 2024,
£645 million was drawn down (30 July 2023: £630 million). There are 14
participating lenders. £20 million matured in February 2024 while £855
million matures in February 2025. The company has hedged its interest-rate
liabilities to its banks by swapping the floating-rate debt into fixed-rate
debt, see note 10.
Unamortised bank loan issue costs
Unamortised bank loan issue costs primarily relate to refinancing, securing
and extending the variable-rate facility.
Private placement
The fixed-rate facility relates to senior secured notes of £98 million. The
notes mature in 2026.
The company has an overdraft facility of £10 million, which is undrawn as at
28 January 2024.
10. Financial instruments
The below table outlines the movements in fair value among the hedging
reserve, comprehensive income and the income statement during the year.
Unaudited Audited
28 January 30 July
2024 2023
Interest-rate swaps £000 £000
Carrying value of derivative financial instruments - Liability (9,116) (78)
Carrying value of derivative financial instruments - Asset - 11,944
Change in fair value of continuing derivatives (21,048) 1,147
Change in fair value of discontinued derivatives 65 (48,617)
Hedge (gain)/loss recognised in comprehensive income in respect of continuing (38) (50,819)
hedges
Hedge (gain)/loss recognised in P&L in respect of hedges held at fair 21,020 (71,124)
value through the profit or loss
Transaction proceeds received in respect of terminated hedges (net of 14,783 169,413
termination fees)
Hedge ineffectiveness - (13,290)
Amortisation to P&L of cash flow hedge reserve relating to discontinued (5,601) (13,310)
hedge relationship
Hedging reserve balance in respect of continuing hedges - 346
Hedging reserve balance in respect of discontinued hedges (26,218) (32,127)
Unaudited Audited
28 January 31 July
2024 2022
Hedging reserve £000 £000
Opening (31,781) (13,617)
Hedging (gains)/losses recognised in comprehensive income (38) (50,819)
Hedge ineffectiveness reclassified from the reserves to the P&L in respect - 13,290
of terminated swaps
Amortisation to P&L of cash flow hedge reserve relating to discontinued 5,601 13,310
hedge relationships
Deferred tax posted to comprehensive income - 6,055
Closing (26,218) (31,781)
At the beginning of the reporting period, the company had four designated
hedge relationships, each of which held several interest-rate swaps. Hedge
relationships refer to interest-rate swaps entered into at the same time.
Hedge accounting was applied to two of these hedge relationships. The
following changes have taken place during the 26 weeks ended 28 January 2024:
· On 31 July 2023, the two hedge relationships whereby hedge
accounting applied matured (hedge relationships one and four).
· On 22 August 2023, the company terminated the remaining two of
its interest-rate swaps (hedge relationships nine and ten. On termination, the
company received a cash inflow of £14,783,000, being proceeds less
termination fees. Hedge accounting did not apply to either interest-rate swap
and therefore their fair value was realised in the P&L.
· On 23 August 2023, a new interest-rate swap was entered into
(hedge relationship eleven), with a total nominal value of £200 million. On
25 September 2023, a further interest-rate swap was entered into (hedge
relationship twelve), with a nominal value of £400m. Management elected not
to apply hedge accounting to the hedge relationships from inception, as they
did not meet the company's risk strategy.
The liability of £9.1 million (30 July 2023: £0.078 million) is made up of
the two remaining active interest-rate swaps (eleven and twelve) whereby hedge
accounting does not apply. The hedge reserve of £26.2 million is made up of
fair value relating to hedges which have been previously been
derecognised/discontinued (30 July 2023: £0.3m of fair value relating to
continuing hedges and £32.1 million relating to those which have been
derecognised/discontinued).
11. Leases
The following amounts, relating to lease cash flows, were debited/credited to
the income statement during the period.
Rent cash flow analysis Unaudited Unaudited Audited
weeks weeks weeks
ended ended ended
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Cash outflows relating to capitalised leases 26,352 24,081 49,994
Expense relating to short term leases (935) 194 504
Expense relating to variable element of concessions 7,401 7,665 16,980
Total rent cash outflows for period 32,818 31,940 67,478
Cash inflows relating to capitalised leases (567) (1,005) (2,017)
Income relating to lessor sites (1,259) (1,188) (2,506)
Total rent cash Inflows for period (1,826) (2,193) (4,523)
The balance sheet shows the following amounts relating to leases. These have
been reconciled in sections (a) to (d) below:
Amounts Recognised in the balance sheets Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
28 January 29 January 30 July
2024 2023 2023
£000 £000 £000
Right-of-use asset(1)
Current - - -
Non-current 364,072 400,739 387,353
Lease Assets(2)
Current 1,617 2,001 1,361
Non-current 9,771 8,662 8,450
Total Assets 375,460 411,402 397,164
Lease Liabilities
Current (48,413) (47,409) (51,486)
Non-current (369,938) (406,529) (391,794)
Total Liabilities (418,351) (453,938) (443,280)
(1)Right-of-use assets and lease liabilities relate to leasehold properties
occupied by J D Wetherspoon.
(2)Lease assets relate to leasehold properties sublet by J D Wetherspoon.
12. Going Concern
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.
In line with accounting standards, the going concern assessment period is the
12-months from the date of approval of this report (approximately the end of
quarter 3 of FY25).
The Company has modelled a 'base case' forecast in which recent momentum of
sales and profit is sustained. The Company has anticipated within this
forecast continued high levels of inflation, particularly on wages, utility
costs and repairs. The base case scenario indicates that the Company will have
sufficient resources to continue to settle its liabilities as they fall due
and operate comfortably within its leverage covenants for the going concern
assessment period.
A more cautious but plausible scenario has been analysed, in which lower sales
growth is realised. The Company has reviewed, and is satisfied with, the
mitigating actions that it could take if such an outcome were to occur. Such
actions could include reducing discretionary expenditure and/or implementing
price increases. Under this scenario, the Company would still have sufficient
resources to settle liabilities as they fall due and headroom within its
covenants throughout the going concern review period.
The Company has also performed a 'reverse stress case' which shows that the
Company could withstand a 9% reduction in sales from those assessed in the
'base case' throughout the going concern period, as well as similar cost
assumptions to the 'base case' scenario, before the covenant levels would be
exceeded towards the end of the period. The directors consider this scenario
to be remote as, other than when the business was closed during the pandemic,
it has never seen such sales declines. Furthermore, the Company has concluded
it could take additional mitigating actions, in such a scenario, to prevent a
covenant breach.
The Company's secured Revolving Credit Facility totalling £855 million
matures in February 2025. As part of the ongoing refinancing process, the
feedback we have received from existing and potential new lenders to date,
provides the Directors with appropriate assurance that the prospect of not
being able to refinance is remote and as such no material uncertainty exists.
After due consideration of the matters set out above, 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.
13. Contingent liability
The company is in an ongoing contractual dispute with a large supplier. The
outcome of the dispute is yet to be determined and
may be resolved by a legal process. Disclosing any further information at this
stage about the ongoing contractual dispute, its financial effect (if any) and
uncertainties relating to the amount or timing of any outflow might be
prejudicial to the company's position.
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