Final Results
Wetherspoon (JD) PLC
8 September 2000
J D Wetherspoon plc announces preliminary results for the year ended
30 July 2000.
Highlights
Turnover up 37% to £369.6m
*Operating profit (pre impact of sale and leaseback rentals)
up 34% to £54.0m
*Statutory operating profit up 28% to £46.3m
*Profit before tax up 38% to £36.1m
*Earnings per share up 30% to 16.8p
Proposed final dividend per share up 10% to 1.76p
101 pubs opened
*Excludes exceptional items from previous years' results.
Commenting on the results, Tim Martin, the chairman of J D
Wetherspoon plc, said:
'I am pleased to report another year of excellent progress for
Wetherspoon. Sales increased by £99.9 million to £369.6 million, a
rise of 37%.
We opened 101 pubs during the year, compared with 84 in the previous
year, bringing the total number to 428. Average sales per pub in the
year increased to approximately £1 million (1999: £904,000), a figure
which has nearly doubled since our flotation in 1992.
Following our strong trading performance, the pipeline of new sites,
our continuing investment in training and people and the dedicated
effort of our pub and head office teams, 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 Press Office 07956 392234
Photographs are available at: www.newscast.co.uk
CHAIRMAN'S STATEMENT
I am pleased to report another year of excellent progress for
Wetherspoon. Sales increased by £99.9 million to £369.6 million, a
rise of 37%. Operating profit, excluding sale and leaseback rentals,
increased by 34% to £54.0 million, and profit before tax rose by 38%
to £36.1 million. Earnings per share rose by 30% to 16.8p.
Capital investment was £155.8 million, and net gearing at the year
end was 60% (1999: 61%). Net interest was covered 4.5 times (1999:
3.6 times) by operating profit. Operating margins before
depreciation, interest, sale and leaseback rentals and tax were
20.3%, compared with 20.8% last year. This small reduction reflects
mainly higher labour and bonus payments, offset by lower fixed
overheads.
Free cash flow after payments of tax, interest, dividends and capital
investment of £14.5 million in existing pubs increased by 23% to
£45.5 million, resulting in a cash flow per share of 22.3p 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 28% to £42.5 million, with an increase in capital investment in
existing pubs to 3.9% of turnover compared with 3.3% of turnover in
the previous period.
Dividends
The Board proposes, subject to shareholders' consent, to pay a final
dividend of 1.76p net, bringing the total dividend for the year to
2.67p, a 10% increase on the previous year. At this level, dividends
will be covered 6.3 times, compared to 5.3 times, before exceptional
items, in 1999. A scrip alternative will again be offered to
shareholders.
Finance
As previously reported, the company renegotiated its UK banking
facilities during the year, resulting in unsecured loan facilities of
£225 million. In addition to the UK facilities, a 10-year unsecured
US note issue was completed in September 1999 which raised net
proceeds of £86.8 million. The company also raised £43.8 million
through an equity placing in February 2000; at the year end,
unutilised facilities and cash balances were £142 million.
Further Progress
We opened 101 pubs during the year, compared with 84 in the previous
year, bringing the total number to 428. Average sales per pub in the
year increased to approximately £1 million (1999: £904,000), a figure
which has nearly doubled since our flotation in 1992.
The new pubs are located in a variety of areas, including major city
centres, residential suburbs and smaller towns. We are encouraged by
sales in these new pubs, and it is notable that regions such as the
northwest of England, where other pub companies have reported
difficulties, have shown strong growth.
As well as continuing our progress in many parts of England, we have
also continued to open pubs with great success in Scotland, in towns
such as Saltcoats and Wishaw, and in South Wales in Port Talbot,
Blackwood and Llanelli. We have also acquired four sites in Northern
Ireland, the first of which opened in Ballymena just after the period
end, where initial sales have been exceptional.
In late July, we purchased 10 Lloyds No.1 pubs from a regional
brewer. These sites are in extremely good city and town centre
locations and are operated on a different basis from Wetherspoon
pubs, including the provision of music. We intend to operate these
pubs separately from the rest of the company, keeping, for the time
being, their original identity and incorporating Wetherspoon's
systems where they would be helpful. Sales since acquisition have
increased by 17%, and we are confident that they will match the
average for Wetherspoon pubs in the near future.
After like-for-like sales growth of 8.6% in 1998/99, like-for-like
sales increased by a further 12.4% in the year under review, with
profits increasing by 13%.
We continue to upgrade every area of the business. For example, we
have made strenuous efforts in the area of information technology, by
improving our Web site and by making available more new management
information to pub and area managers, so that the Wetherspoon
Information System (WIS) is, I believe, the best in the pub business.
In the area of training, Wetherspoon's pub managers received 337
advanced training qualifications out of a total of 1,455 awarded by
the British Institute of Innkeeping to the entire industry,
reflecting our hard work in this area.
We have also continued to improve our marketing of many products.
Traditional ales, for example, which have seen a decline in the
market overall, have shown strong growth in Wetherspoon. We now
distribute ales nationally from regional brewers, including Spitfire
from Shepherd Neame and Abbott Ale from Greene King, as well as
promoting the renowned beers of smaller brewers, such as Summer
Lightning from Hop Back, Landlord from Timothy Taylor and Butcombe
Bitter, in various regions of the country.
A group of brewers have introduced an excellent quality-control
system for traditional ales, involving regular inspections of pubs
which, if they pass a number of quality-control tests, are awarded
the 'Cask Marque'. I am pleased to say that 350 Wetherspoon pubs have
received Cask Marque awards, a percentage which I believe to be the
highest in the industry.
We have continued to work with our suppliers and, in return for
greater volume growth for them, have renegotiated many of our buying
prices, so that the company continues to become more competitive.
We have introduced a number of new products, including steaks at very
reasonable prices throughout our estate, curries for our extremely
successful Curry Club and cappuccino and other coffees nationwide. An
initiative to increase sales of wine by the bottle, traditionally
sold by the glass in pubs, has worked extremely well and we are now
selling over 20,000 bottles per week in this way.
Other initiatives in our marketing campaign starting today include
the introduction to our national price list of Kozel, a Czech beer,
at £1.59 for a 500ml bottle. This product is available only at
Wetherspoon pubs and won a gold medal in 1999 at the World Beer
Championships held in Chicago, USA. We are also introducing 33cl
bottles of Stella Artois at £1.29 and Wadworths 6X at £1.49
nationwide (excluding our central London and airport sites) and are
continuing to improve our spirit offer in this growing market by
increasing the focus on premium spirits such as Jack Daniel's,
Johnnie Walker Black Label and Courvoisier.
Every Wetherspoon pub receives an average of 6 quality-control visits
per month from head office staff and 'mystery visitors'. Bonuses are
awarded, based on the results of these calls and on the profitability
of the pubs. Bonuses paid out to pubs in the year totalled £8.5
million (1999: £5.1 million).
The Economy
A number of politicians and businessmen advocate Britain joining the
Euro. I personally believe that this is an extremely unwise idea,
since each of the existing major currencies in the World is the
product of a single government which does not exist in Europe. An
attempt to link currencies and interest rates together caused
economic chaos in the early 1990s when the exchange rate mechanism
failed. It is important for our economic future to learn lessons from
that debacle.
The government has recently highlighted the enormous number of
regulations affecting the licensed trade. However, the number of
regulations affecting all businesses continues to increase as a
result of both British and European legislation, and this trend will
undoubtedly make the economy less competitive over time.
People
The great success of the business in the last year results from the
efforts and dedication of the people who work for it, as well as our
suppliers and advisers, and I would like to thank them very much.
Prospects
Like-for-like sales in August, helped by excellent weather, increased
by 5% (following growth of 19% in August 1999) and total company
sales increased by 32%. The encouraging sales growth in recently
opened pubs has also continued, with a promising start from the 10
pubs opened since the period end.
We also have 30 sites in the course of construction, 32 with the
necessary permissions for development and a further 101 on which
terms have been agreed. With the reduction in competition from our
major competitors for new sites, the property market continues to
offer good opportunities to Wetherspoon.
Following our strong trading performance, the pipeline of new sites
and our continuing investment in training and people, I remain
confident of our future prospects.
Tim Martin
Chairman
8 September 2000
Profit and loss account
for the year ended 30 July 2000
Notes Before After
Exceptional Exceptional
Items Items
2000 1999 1999
£000 £000 £000
Turnover 369,628 269,699 269,699
Operating profit 2 46,278 36,226 35,389
Profit on disposal of -
tangible fixed assets 3 - 22,625
Net interest payable 4 (10,226) (10,012) (10,012)
Profit on ordinary
activities before
taxation 36,052 26,214 48,002
Tax on profit on
ordinary activities 5 (1,785) (751) (751)
Profit on ordinary
activities after taxation 34,267 25,463 47,251
Dividends 6 (5,599) (4,809) (4,809)
Retained profit
for the year 28,668 20,654 42,442
Earnings per ordinary
share 7 16.8p 12.9p 24.0p
Fully diluted earnings
per ordinary share 7 16.4p 12.8p 23.8p
All activities relate to continuing operations.
Details of exceptional items for the year ended 1 August 1999 are given
in note 3. There were no such items in the year ended
30 July 2000.
Statement of total recognised gains and losses
2000 1999
£000 £000
Profit for the financial
year after taxation 34,267 47,251
Unrealised surplus on
revaluation of properties - 1,938
Total recognised gains
relating to the year 34,267 49,189
Note of historical cost profits
2000 1999
£000 £000
Reported profit on
ordinary activities 36,052 48,002
before taxation
Realisation of property
revaluation deficits of - (880)
previous years
Difference between
historical cost depreciation
charge and actual
depreciation charge of the year 672 495
calculated on the
revalued amount
Historical cost
profit on ordinary 36,724 47,617
activities before taxation
Historical cost
profit for the year
retained after 29,340 42,057
taxation and dividends
Cash flow statement
for the year ended 30 July 2000
Notes 2000 1999
£000 £000 £000 £000
Net cash inflow 8 76,165 76,165 60,863 60,863
from operating activities
Returns on
investments and servicing
of finance
Interest received 2,412 2,412 782 782
Interest paid -
existing pubs (13,710) (13,710) (12,117) (12,117)
Interest paid and
capitalised into new pubs (3,921) (2,548)
into new pubs
Net cash outflow
from returns on investment
and servicing of finance (15,219) (13,883)
Taxation
Advance corporation - (636)
tax paid
Corporation tax (1,100) -
paid
(1,100) (1,100) (636) (636)
Capital expenditure
Purchase of tangible (14,471) (14,471) (8,804) (8,804)
fixed assets for existing
pubs
Proceeds of sale of
tangible fixed assets 4,277 76,526
Investment in new (136,612) (106,390)
pubs and pub
extensions
Net cash outflow from (146,806) (38,668)
capital expenditures
Equity dividends paid (3,785) (3,785) (3,037) (3,037)
Net cash
(outflow)/inflow (90,745) 4,639
before financing
Financing
Issue of ordinary shares 46,566 973
Advances under bank loans 124,353 50,000
Advances under US
senior notes 86,815 -
Repayments of
secured bank loans (187,882) (5,784)
Net cash inflow
from financing 69,852 45,189
(Decrease)/increase 9 (20,893) 49,828
in cash
Free cash flow 7 45,511 37,051
7
Cash flow per 22.3p 18.8p
ordinary share
Balance sheet
at 30 July 2000
Notes 2000 1999
£000 £000
Fixed assets
Tangible assets 11 504,996 370,148
Current assets
Investments 100 253
Stocks 4,686 3,845
Debtors due within one year 7,378 11,472
Debtors due after more than
one year 5,588 5,588
Cash 41,685 62,578
59,437 83,736
Creditors due within one
year 12 (67,936) (67,296)
Net current
(liabilities)/assets (8,499) 16,440
Total assets less current
liabilities 496,497 386,588
Creditors due after
one year 13 (213,979) (180,592)
Total net assets 282,518 205,996
Capital and reserves
Called up share capital 4,198 3,962
Share premium account 113,081 65,463
Revaluation reserve 24,494 25,166
Profit and loss account 140,745 111,405
Equity shareholders' funds 14 282,518 205,996
Tim Martin
Jim Clarke
Directors
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 30 July 2000 and 1 August 1999 on which unqualified
reports were made by the company's auditors.
The 1999 statutory accounts have been filed with the Registrar of
Companies. The 2000 statutory accounts will be sent to shareholders
on 2 October 2000 and will be filed with the Registrar of Companies
following their adoption at the forthcoming Annual General Meeting.
2 Analysis of continuing operations
Before Exceptional After
Exceptional Exceptional
Items Items Items
2000 1999 1999
£000 £000 £000 £000
Turnover 369,628 269,699 - 269,699
Cost of sales (303,357) (219,035) - (219,035)
Gross profit 66,271 50,664 - 50,664
Administrative (19,993) (14,438) (837) (15,275)
expenses
Operating profit 46,278 36,226 (837) 35,389
Cost of sales includes distribution costs and all pub operating costs.
3 Exceptional items
2000 1999
£000 £000
Charged against operating
profit:
Additional costs relating to a - (837)
review of capitalised
expenditure on unopened
properties
Non-operating items: - 22,625
Net profit on disposal of
trading properties, other
properties and fixed asset
investments
- 21,788
4 Net interest payable
2000 1999
£000 £000
Interest payable on bank loans
and overdraft 11,767 14,358
Interest payable on US notes 5,526 -
Less:
Interest capitalised (3,846) (3,282)
Interest receivable (3,221) (1,064)
Charge to profit and loss account 10,226 10,012
5 Taxation
Current tax 2000 1999
£000 £000
UK Corporation tax on profits for
the year at 30% (1999: 31%) 2,342 1,802
Adjustments in respect of
prior periods (66) (299)
Advance Corporation tax (491) (752)
1,785 751
At the balance sheet date, advance corporation tax of £2.6 million (1999:
£3.1 million) remained available for offset against future mainstream
corporation tax liabilities.
Deferred tax
On a full provision basis, the maximum potential liability to deferred
tax (excluding property gains) would be
£33.3 million (1999: £26.1 million), representing accelerated capital
allowances and pre-opening costs of £35.9 million (1999: £29.2 million)
offset by surplus ACT of £2.6 million (1999: £3.1 million). Based on the
company's investment plans, no liability to deferred tax would arise in
the ordinary course of the company's business.
No provision has been made for tax on any gains which might arise in the
event of properties being sold at their revalued amounts, as the proceeds
from any such disposal would be used to fund the continuing expansion
programme, and would therefore attract roll-over relief.
6 Dividends
2000 1999
£000 £000
Interim paid of 0.91p per share
(1999: 0.83p) 1,904 1,639
Final proposed of 1.76p per share
(1999: 1.60p) 3,695 3,170
5,599 4,809
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 £34,267,000 (1999:
£25,463,000 before exceptional items, £47,251,000 after exceptional
items) and on 204,035,428 ordinary shares (1999: 197,270,170), 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 calculation is 208,311,375 (1999: 198,829,600).
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 account of 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
2000 1999
£000 £000
Operating profit before
exceptional items 46,278 36,226
Depreciation of tangible
fixed assets 20,946 15,771
Change in stocks (841) (650)
Change in debtors 779 1,102
Change in creditors 9,003 8,414
76,165 60,863
9 Reconciliation of net cash flow to movement in net debt
2000 1999
£000 £000
(Decrease)/increase in cash
in the year (20,893) 49,828
Cash inflow from increase in
debt financing (23,286) (44,216)
Movement in net debt during
the period (44,179) 5,612
Net debt at 1 August 1999 (125,304) (130,916)
Net debt at 30 July 2000 (169,483) (125,304)
10 Analysis of net debt
1999 Cash flow 2000
£000 £000 £000
Cash at bank and in hand 62,578 (20,893) 41,685
Debt due within one year (10,819) 10,819 -
Debt due after one year (177,063) (34,105) (211,168)
Net Debt (125,304) (44,179) (169,483)
11 Tangible fixed assets
Freehold Short Equipment Expenditure Total
land leasehold fixtures on unopened
and land and and properties
buildings buildings fittings
£000 £000 £000 £000 £000
Cost or
valuation
At 2 August 1999 94,276 196,546 79,127 42,430 412,379
Reclassification 19,154 6,637 6,501 (32,292) -
Additions 58,218 27,960 31,160 38,456 155,794
At 30 July 2000 171,648 231,143 116,788 48,594 568,173
Depreciation
At 2 August 1999 1,793 12,980 27,458 - 42,231
Reclassification 0 (402) 402 - -
Charge for the year 2,195 5,278 13,473 - 20,946
At 30 July 2000 3,988 17,856 41,333 - 63,177
Net book value
At 30 July 2000 167,660 213,287 75,455 48,594 504,996
At 1 August 1999 92,483 183,566 51,669 42,430 370,148
12 Creditors due within one year
2000 1999
£000 £000
Bank loans - 10,819
Trade creditors 40,420 30,477
Corporation tax 1,651 966
Other tax and social security 4,829 5,594
Other creditors 3,848 3,226
Dividend payable 3,695 3,170
Accruals and deferred income 13,493 13,044
67,936 67,296
13 Creditors due after one year
2000 1999
£000 £000
Bank loans repayable by instalments 124,353 177,063
US senior notes due 2009 86,815 -
211,168 177,063
Other creditors 2,811 3,529
213,979 180,592
14 Capital, reserves and shareholders' funds
Called Share Revaluation Profit 2000 1999
up premium reserve and Shareholders' Shareholders'
share account loss
capital
£000 £000 £000 £000 £000 £000
At start of year 3,962 65,463 25,166 111,405 205,996 159,192
Allotments 236 47,618 47,854 2,424
Revaluation - 1,938
Transfer (672) 672 - -
Profit for the year 34,267 34,267 47,251
year
Dividends (5,599) (5,599) (4,809)
At end of year 4,198 113,081 24,494 140,745 282,518 205,996
15. Dividends
The Directors are recommending a final dividend of 1.76p net per share
payable on 30 November 2000 to shareholders on the register at the close
of business on 29 September 2000. In respect of the scrip dividend
alternative, the final date for election is 20 October 2000.