Final Results
JD WETHERSPOON PLC
10 September 1999
J D WETHERSPOON PLC
J D Wetherspoon plc announces preliminary results for the year ended
1 August 1999
Highlights
Turnover up 43% to £269.7m
*Operating profit (pre impact of sale and leaseback rentals)
up 40% to £40.2m
*Statutory operating profit up 28% to £36.2m
*Profit before tax up 30% to £26.2m
*Earnings per share up 30% to 12.9p
Proposed final dividend per share up 10% to 1.60p
84 new pubs opened
*excluding exceptional items
Commenting on the results, Tim Martin, the Chairman of J D
Wetherspoon plc, said:
'I am pleased to report another year of good progress for
Wetherspoon. We opened 84 pubs during the year bringing the total
number to 327. On Monday 13 September we are introducing a number of
new brands and a national price list for 23 products at all pubs
apart from those in Central London and at airports. For example, we
are offering estate wide, Boddingtons, Carling and Coca Cola all at
standard prices substantially less than our major competitors.
As a result of our recent trading performance, a continuing trend
over many years, I remain confident of our future prospects.'
Enquiries:
Tim Martin Chairman 01923 477777
John Hutson Managing Director 01923 477777
Jim Clarke Finance Director 01923 477777
Eddie Gershon Finance Director 01923 477777
Chairman's statement
I am pleased to report another year of good progress for Wetherspoon.
Sales increased by £81.2million to £269.7 million, a rise of 43%.
Operating profit, before the impact of increased property rentals on
the sale and leaseback of freehold properties, increased by 40% to
£40.2 million and profit before tax rose by 30% £26.2 million.
Earnings per share rose by 30% to 12.9p.
Capital investment was £109.8 million and net gearing at the year end
was 61%. Interest was covered 3.6 times by operating profit.
Operating margins before depreciation, interest, sale and leaseback
rentals and tax were 20.8%, compared to 21.2% last year, as a result
of lower pub operating margins offset by lower head office costs.
Free cashflow after capital investment of £8.8 million in existing
pubs, and payments of tax, interest and dividends increased by 57% to
£37.0 million resulting in cashflow per share of 18.8p before
investment in new pubs and loan repayments.
Economic profit, calculated by adding depreciation to profit before
tax and subtracting capital expenditure on existing pubs, increased
by 51% to £33.2 million, partly as a result of a reduction of capital
investment in existing pubs to 3.3% of turnover compared to 5% of
turnover in the previous period.
Dividends
=========
The Board proposes subject to shareholders' consent, to pay a final
dividend of 1.60p net, bringing the total dividend for the year to
2.43p, a 10% increase on the previous year. At this level, dividends
will be covered 5.3 times compared to 4.5 times in 1998. A scrip
alternative will again be offered to shareholders.
Finance
=======
As indicated in our interim statement, the Company undertook the sale
and leaseback of 54 pubs in the course of the year for a total
consideration of £80 million, including a deferred element and
interest thereon.
The Company has also re-negotiated its banking facilities, resulting
in unsecured loan facilities of £225 million, compared to net
borrowings at the period end of £125m.
We also reported at the half year the sale of 9 pubs to the Ambishus
Pub Company for £4.7 million. These pubs were smaller than average
and no further pub sales are planned for the time being.
Further Progress
================
We opened 84 pubs during the year, compared with 68 in the comparable
period, bringing the total number to 327. As in previous years, in
keeping with the pattern of our existing estate, the new pubs are
located in a variety of areas, including major city centres,
predominantly residential suburban areas and in some smaller towns.
Pubs opened in the last couple of financial years have been slower to
reach maturity, but sales accelerated substantially in the second
half of the year under review, so that in recent months pubs for
every year of opening have on average reached the sales levels
anticipated at their acquisition.
Having a long track record of success in major urban areas, we are
particularly encouraged by success in smaller towns such as Oxted in
Surrey, Tiverton in Devon, Trowbridge in Wiltshire and Heanor in
Derbyshire.
Another feature of the year under review has been the great success
of suburban sites outside London, which are relatively new for the
Company, and are performing particularly well in areas such as
Greater Manchester, Liverpool, Glasgow and Bristol.
Success in suburban areas outside London and smaller towns indicates
considerable potential for future openings.
After a slow start to the year, established pubs performed well with
like-for-like sales increasing by 8.6%, and profits by 10.1%, helped
by a quiet comparative period in the last two months of the previous
financial year. Like-for-like sales were strongest for the most
recent year of openings, although good growth was achieved in every
year without exception.
The Company has always tried to listen to customers and to colleagues
to obtain ideas to upgrade every area of the business, believing that
small advances in many areas are more productive in the long run than
major changes. In the current year, as a result of suggestions made,
we have, for example, continued to concentrate on upgrading our
information technology systems, improved our range of soft drinks,
reviewed our menu and have worked hard to create individually
designed pubs. We also continue to try to make ourselves a more
attractive company to work for and, following the introduction of a
48 hour week for pub managers, have substantially increased the
'London weighting' for managers in that area.
We have re-negotiated our major beer supply agreements, achieving
marginally lower buying prices, and we will be introducing on Monday
13 September a number of new brands and a national price list for 23
products at all pubs apart from those in Central London and at
airports. For example, we are offering Boddingtons at £1.29 a pint,
Carling at £1.49 a pint and Coca Cola at 90p a pint, substantially
less than prices charged by our major competitors. We believe this is
the first time that a large number of products have been made
available across the country at competitive prices and that this
initiative will be popular with the public.
We have also upgraded our web site (www.jdwetherspoon.co.uk),
previously used for recruitment purposes, but which now provides a
variety of other information, including the location of our pubs, our
own quarterly magazine Wetherspoon News, and financial information
for investors including today's results.
People
======
As a result of great efforts and innovation by many people in the
Company, and also from a considerable number of our suppliers and
advisers, we have continued to make improvements to the business and
I would like to thank them sincerely for their dedicated work.
The Economy
===========
The major economic issue for Britain relates to the Euro. I believe
that participation would be economic folly since the crucial
ingredient of all successful major currencies in the world is a
single government and this ingredient does not exist in the Euro's
case. Many commentators including, for example, the CBI (the
Confederation of British Industry), do not appear to have
acknowledged this central fact. We experienced severe economic
dislocation as a result of the failed attempt to impose the ERM (the
exchange rate mechanism), the Euro's predecessor, on diverse European
economies, and should learn from history.
Prospects
=========
Like-for-like sales in August, helped by poor weather which benefits
high street pubs, increased by 19% and total Company sales increased
by 49%. The encouraging sales growth in recently opened pubs has
also continued, with an excellent start from the 10 pubs opened since
the period end.
We also have 35 sites in the course of development, all of which are
expected to open in the current calendar year, 38 sites with all the
necessary permissions for development and a further 105 sites for
which terms have been agreed. Due to a reduction in competition from
other pub operators for sites, the market is more favourable to
Wetherspoon than in recent years.
Following our strong trading performance, a trend established over
many years, I remain confident of our future prospects.
Tim Martin
Chairman
Profit and loss account
for the year ended 1 August 1999
Before After Before After
Excep- Excep- Excep- Excep- Excep-
Tional Tional Tional Tional Tional
Items Items Items Items Items
1999 (Note 3) 1999 1998 1998
£000 £000 £000 £000 £000
Turnover 269,699 - 269,699 188,515 188,515
-------- ------- ------- ------- -------
Operating profit 36,226 (837) 35,389 28,367 28,367
(2)
Profit on - 22,625 22,625 - 14,968
disposal of
tangible fixed
assets (3)
Net interest (10,012) - (10,012) (8,202) (8,202)
payable (4)
-------- ------- ------- ------- -------
Profit on 26,214 21,788 48,002 20,165 35,133
ordinary
activities before
taxation
Tax on profit on (751) - (751) (726) (726)
ordinary
activities (5)
------- ------- ------- ------ ------
Profit on 25,463 21,788 47,251 19,439 34,407
ordinary
activities after
taxation
Dividends (6) (4,809) - (4,809) (4,321) (4,321)
------- ------- ------ ------ ------
Retained profit 20,654 21,788 42,442 15,118 30,086
for the year
======= ======= ====== ====== ======
Earnings per 12.9p 11.1p 24.0p 9.9p 17.5p
Ordinary share
(7)
Fully diluted 12.8p 11.0p 23.8p 9.8p 17.3p
earnings per
share (7)
All activities relate to continuing operations.
Statement of total recognised gains and losses
1999 1998
£000 £000
Profit for the 47,251 34,407
financial year after
taxation
Unrealised surplus on 1,938 2,086
revaluation of
properties
------ ------
Total recognised gains 49,189 36,493
relating to the year
====== ======
Note of historical cost profits
1999 1998
£000 £000
Reported profit on ordinary activities 48,002 35,133
before taxation
Realisation of property revaluation (880) 772
(deficits) / gains of previous years
Difference between historical cost 495 494
depreciation charge and the actual
depreciation charge of the year
calculated on the revalued amount
------ ------
Historical cost profit on ordinary 47,617 36,399
activities before taxation
------ ------
Historical cost profit for the year 42,057 31,352
retained after taxation and dividends
====== ======
Cash flow statement
for the year ended 1 August 1999
1999 1998
£000 £000 £000 £000
Net cash inflow from 60,863 60,863 42,984 42,984
operating activities (8)
------ -------- ------- -------
Returns on investments and
servicing of finance
Interest received 782 782 351 351
Interest paid - existing (12,117) (12,117) (7,209) (7,209)
business
Interest paid - new pubs (2,548) (1,849)
-------- -------
Net cash outflow from returns (13,883) (8,707)
on investment and servicing
of finance
-------- -------
Taxation
-------- -------
Advance corporation tax paid (636) (434)
-------- -------
Corporation tax paid 0 (150)
(636) (636) (584) (584)
Capital expenditure
Purchase of tangible fixed (8,804) (8,804) (9,377) (9,377)
assets for existing pubs
Proceeds of sale of tangible 76,526 35,443
fixed assets
Investment in new pubs and (106,390) (100,351)
pub extensions
--------- --------
Net cash outflow from capital (38,668) (74,285)
expenditures
--------- --------
Equity dividends paid (3,037) (3,037) (2,626) (2,626)
--------- --------
Net cash inflow / (outflow)
before financing 4,639 (43,218)
Financing
Issue of ordinary shares 973 939
Advances under secured bank 50,000 48,833
loans
Repayments of secured bank (5,784) (1,000)
loans
------ ------
Net cash inflow from 45,189 48,772
financing (9)
------ ------
Increase in cash (10) 49,828 5,554
====== ======
------ ------
Free cash flow (7) 37,051 23,539
====== ======
Cash flow per Ordinary share 18.8p
(7) 12.0p
Balance sheet
at 1 August 1999
1999 1998
£000 £000
Fixed assets
Tangible assets (11) 370,148 334,695
------- -------
Current assets
Investments 253 286
Stocks 3,845 3,195
Debtors due within one year 11,472 11,385
Debtors due after more than one year 5,588 -
Cash 62,578 12,750
-------- --------
83,736 27,616
Creditors due within one year (12) (67,296) (62,564)
-------- --------
Net current assets / (liabilities) 16,440 (34,948)
------- --------
Total assets less current liabilities 386,588 299,747
Creditors due after one year (13) (180,592) (140,555)
------- -------
Total Net Assets 205,996 159,192
======= =======
Capital and reserves
Called up share capital 3,962 3,931
Share premium account 65,463 62,000
Revaluation reserve 25,166 22,843
Profit and loss account 111,405 70,418
------- -------
Equity shareholders' funds (14) 205,996 159,192
======= =======
Notes
1 These preliminary statements do not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985. They have,
however, been extracted from the statutory accounts for the periods
ending 1 August 1999 and 2 August 1998, on which unqualified reports were
made by the Company's auditors.
The 1998 statutory accounts have been filed with the Registrar of
Companies. The 1999 statutory accounts will be sent to shareholders on 6
October 1999 and will be filed with the Registrar of Companies following
their adoption at the forthcoming Annual General Meeting.
2 Analysis of continuing operations
Before After
Exception Exception- Exceptio-
-al Items al Items nal
1999 Items 1998
£000 £000 1999 £000
£000
Turnover 269,699 - 269,699 188,515
Cost of sales (219,035) - (219,035) (149,317)
--------- ------ --------- -------
Gross profit 50,664 - 50,664 39,198
--------- ------ --------- -------
Administrative (14,438) (837) (15,275) (10,831)
expenses
--------- ------ --------- -------
Operating profit 36,226 (837) 35,389 28,367
========= ====== ======== =======
Cost of sales includes distribution costs and all pub operating costs.
The company reviewed for impairment its capitalised expenditure on
unopened properties. The additional loss arising from this review have
been shown as an exceptional administration expense.
3 Exceptional Items
1999 1998
£000 £000
Charged against operating profit:
Costs relating to abortive property (837) -
acquisitions
Non-operating items: 22,625 14,968
Net profit on disposal of trading
properties, other properties and fixed
asset investments
------- -------
21,788 14,968
======= =======
No tax is attributable to profits arising on property disposals as the
proceeds are used to fund the continuing expansion programme and
therefore attract rollover relief.
4 Net interest payable
1999 1998
£000 £000
Interest payable on bank loans 14,358 10,805
Less:
Interest capitalised (3,282) (2,202)
Interest receivable (1,064) (401)
------- ------
Charge to profit and loss account 10,012 8,202
======= ======
5 Taxation
1999 1998
£000 £000
Corporation tax at 31 % (1998:31% ) 1,050 -
Advance corporation tax (299) 726
------ -----
751 726
====== =====
To date the Company has written off £3.1 million (1998: £4.1 million)
advance corporation tax which will be available to offset against future
mainstream corporation tax liabilities.
6 Dividends
1999 1998
£000 £000
Interim paid of 0.83p per share (1998: 1,639 1,471
0.75p)
Final proposed of 1.60p per share 3,170 2,850
(1998: 1.45p)
------ ------
4,809 4,321
====== ======
7 Earnings and cash flow per share
The calculation of basic earnings per share is based on profits on
ordinary activities after taxation for the period of £25,463,000 (1998:
£19,439,000) and on 197,270,170 Ordinary shares (1998: 195,888,289),
being the weighted average number of Ordinary shares in issue and ranking
for dividend during the period.
Fully diluted earnings per share has been calculated in accordance with
FRS14 and is after allowing for the dilutive effect of the conversion
into ordinary shares of the weighted average number of options
outstanding during the period. The number of shares used for the fully
diluted calculations is 198,829,600 (1998: 198,722,365).
The calculation of 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 existing pubs, after funding interest on
existing pubs, tax and dividend payments and all other reinvestment in
pubs open at the start of the period ('free cash flow'). It is
calculated before taking into account proceeds from property disposals
and inflows and outflows of financing from outside sources, and is based
on the same number of shares in issue as for the calculation of basic
earnings per share.
8 Net cash inflow from operating activities
1999 1998
£000 £000
Operating profit before exceptional 36,226 28,367
items
Depreciation of tangible fixed assets 15,771 11,236
Change in stocks (650) (980)
Change in debtors 1,102 123
Change in creditors 8,414 4,238
------- -------
60,863 42,984
======= =======
9 Reconciliation of net cash flow to movement in net debt
1999 1998
£000 £000
Increase in cash in the year 49,828 5,554
Cash inflow from increase in debt (44,216) (47,833)
financing
--------- ---------
Movement in net funds/(debt) during 5,612 (42,279)
the period
Net debt at 2 August 1998 (130,916) (88,637)
--------- ---------
Net debt at 1 August 1999 (125,304) (130,916)
========= ========
10 Analysis of net debt
1998 Cash flow 1999
£000 £000 £000
Cash at bank and in hand 12,750 49,828 62,578
Debt due within one year (5,785) (5,034) (10,819)
Debt due after one year (137,881) (39,182) (177,063)
-------- -------- ---------
Net Debt (130,916) 5,612 (125,304)
======== ====== =========
11 Tangible fixed assets
Freehold Short Equip- Expendi- Total
land and leasehold Ment, Ture
buildings land and fixtures On
buildings And Unopened
Fittings Pro-
perties
£000 £000 £000 £000 £000
Cost or valuation
At 3 August 1998 104,999 153,677 61,907 42,674 363,257
Reclassification 15,500 12,876 0 (28,376) 0
Additions 29,314 30,865 18,826 30,837 109,842
Revaluations (203) 2,141 0 0 1,938
Disposals (55,334) (3,013) (1,606) (2,705) (62,658)
-------- -------- ------- ------- --------
At 1 August 1999 94,276 196,546 79,127 42,430 412,379
======== ======== ======= ======= ========
Depreciation
At 3 August 1998 2,147 8,488 17,927 0 28,562
Reclassification (411) 411 0 0 0
Charge for the 1,288 4,321 10,162 0 15,771
year
Disposals (1,231) (240) (631) 0 (2,102)
------- ------- ------ ----- ------
At 1 August 1999 1,793 12,980 27,458 0 42,231
======= ======= ====== ===== ======
Net book value
At 1 August 1999 92,483 183,566 51,669 42,430 370,148
------- ------- ------ ------ -------
At 2 August 1998 102,852 145,189 43,980 42,674 334,695
======= ======= ====== ====== =======
12 Creditors due within one year
1999 1998
£000 £000
Bank loans 10,819 5,785
Trade creditors 30,477 29,775
Corporation tax 966 -
Advance corporation tax - 935
Other tax and social security 5,594 4,295
Other creditors 3,226 1,522
Dividend payable 3,170 2,850
Accruals and deferred income 13,044 17,402
------ ------
67,296 62,564
====== ======
13 Creditors due after one year
1999 1998
£000 £000
Bank loans repayable by instalments 177,063 137,881
Other creditors 3,529 2,674
------- -------
180,592 140,555
======= =======
Bank loans were secured by floating charges over the Company's assets.
14 Capital, reserves and shareholders' funds
At start of year 3,931 62,000 22,843 70,418 159,192 124,663
Re- - 1,070 - (1,070) - -
classification
Allotments 31 2,393 2,424 2,357
Revaluation 1,938 1,938 2,086
Transfer of 880 (880) 0 0
realised deficit
on disposal of
revalued assets
Transfer (495) 495 0 0
Profit for the 47,251 47,251 34,407
year
Dividends (4,809) (4,809) (4,321)
----- ------ ------ ------- ------- -------
At end of year 3,962 65,463 25,166 111,405 205,996 159,192
===== ====== ====== ======= ======= =======