Final Results
Wetherspoon (JD) PLC
05 September 2003
J D WETHERSPOON PLC
PRESS RELEASE
J D Wetherspoon plc announces preliminary results for the year ended 27 July
2003.
Highlights
• Turnover up 22% to £730.9m
• Operating profit up 7% to £75.0m
• Profit before tax (before exceptional items) up 5% to £56.1m
• Earnings per share (before exceptional items) up 2% to 17.0p
• Like-for-like sales +4.1%
• Free cash flow per share up 19% to 39.7p
• Dividend per share increased by 10% to 3.54p
Commenting on the results, Tim Martin, the chairman of J D Wetherspoon plc,
said:
'I am pleased to report another year of progress for Wetherspoon. Sales
increased by £129.6 million to £730.9 million, a rise of 22%. Operating profit
increased by 7% to £75.0 million and profit before tax (before exceptional
items) rose by 5% to £56.1 million.
'Free cash flow, after payments of tax, interest and capital investment of £15.9
million in existing pubs, increased by 19% to £85.1 million, resulting in free
cash flow per share of 39.7p, more than double earnings per share.
'We opened 45 pubs during the year, compared with 87 in the previous year. The
total number of pubs now operated by us is 638, including 3 opened since the
year end. The new pubs are in a variety of locations throughout Britain and
Northern Ireland and have opened at initial sales levels which are encouraging
for the future. As a result of our strong cash flow, our track record over many
years and our excellent management team, I remain confident of our future
prospects.'
Tim Martin Chairman 01923 477777
John Hutson Managing Director 01923 477777
Jim Clarke Finance Director 01923 477777
Eddie Gerson Company Spokesman 07956 392234
Photographs are available at: www.newscast.co.uk 5 September 2003
CHAIRMAN'S STATEMENT AND OPERATING REVIEW
I am pleased to report another year of progress for Wetherspoon. Sales increased
by £129.6 million to £730.9 million, a rise of 22%. Operating profit increased
by 7% to £75.0 million, and profit before tax (before exceptional items) rose by
5% to £56.1 million. Earnings per share (before exceptional items) increased by
2% to 17.0p.
Cash outflow in respect of capital investment was £95.0 million, and net gearing
at the year end was 97% (2002: 98%). Net interest was covered 4.0 times (2002:
4.2 times) by operating profit. Operating margins were 10.0%, compared with
11.7% last year, mainly as a result of higher labour and other pub costs.
Free cash flow, after payments of tax, interest and capital investment of £15.9
million in existing pubs, increased by 19% to £85.1 million, resulting in free
cash flow per share of 39.7p, more than double earnings per share. Free cash
flow in the period was enhanced by lower-than-usual investment in existing pubs,
offset by a cash tax charge which rose, as expected, from 16% to 24% of profits.
Economic profit after cash tax, calculated by adding depreciation to profit
after tax (before exceptional items) and subtracting capital expenditure on
existing pubs, increased by 12% to £70.1 million, with capital investment in
existing pubs at 2.2% of turnover, compared with 3.1% of turnover in the
previous period.
During the year, the company sold 18 pubs for a net cash consideration of £10.7
million, giving rise to a loss on disposal of £2.7 million. We have also written
down the value in the balance sheet by £1.0 million on two non-trading
properties purchased for development which we now intend to sell. This has led
to a total exceptional loss in the year of £3.7 million before taxation.
We opened 45 pubs during the year, compared with 87 in the previous year. The
total number of pubs now operated by us is 638, including 3 opened since the
year end. The new pubs are in a variety of locations throughout Britain and
Northern Ireland and have opened at initial sales levels which are encouraging
for the future. Like-for-like sales increased by 4%, although like-for-like
profits declined by 1%, principally as a result of higher costs for labour,
repairs and insurance.
The number of Lloyds pubs increased to 50 and these pubs continue to show
positive sales growth.
The company continues to try to upgrade every area of the business.
Dividends
The board proposes, subject to shareholders' consent, to pay a final dividend of
2.33p per share on 28 November 2003 to those shareholders on the register at 31
October 2003, bringing the total dividend for the year to 3.54p per share, a 10%
increase on the previous year. At this level, dividends will be covered 4.8
times by earnings (before exceptional items), compared with 5.2 times in 2002.
The company has decided to cease offering a scrip alternative to dividends, now
and for the foreseeable future.
Finance
The company had £87.9 million of unutilised banking facilities and £15.2 million
of cash at the balance sheet date. Total facilities are now £412 million. The
increase in cash flow relative to capital expenditure means that the company is
in a strong position to finance future growth. All of our capital expenditure on
new pub developments was financed by organic free cash flow in the year under
review.
Return of capital
Towards the end of the year, 8,245,000 shares (representing approximately 4% of
the issued share capital) were purchased by the company for cancellation at a
cost of £20.1 million, representing an average cost per share of 243p. £17.4
million of the cost was an outflow in the year under review, with the balance
settled in the first week of the new financial year. As a result, we expect
earnings per share to be enhanced in the future.
Regulation and taxation
In the last few years, the pub business, in common with many other businesses,
has seen an increase in taxation and red tape. The government has decided to
hand over responsibility for pub licences from the magistrates' court to local
authorities and this will involve a substantial increase in fees and other
regulatory costs. In addition, there have been considerable increases in
taxation, including excise duty, which will cost approximately £2 million in the
current financial year, and an increase in stamp duty for new leasehold
properties, which will cost approximately £500,000 per annum. These tax
increases are in addition to the more highly publicised increases, such as those
affecting national insurance.
Pubs currently pay approximately 40% of their turnover in taxes of one kind or
another, and further increases in this burden will mean that pubs become less
competitive and more expensive, relative to an evening at home.
People
I would like to thank, again, our employees, partners and suppliers for their
dedicated work in creating another year of progress for the company.
Current trading and outlook
In August like-for-like sales increased by 3.5%, and total company sales
increased by 12%. Profits, both in the current year and going forward, are
likely to be impacted by regulatory and employee cost increases.
Whereas we continue to see opportunities for profitable expansion, the
uncertainty created by increased red tape and taxation means that it is prudent
to reduce the rate of that expansion, so that the level of capital investment
for the foreseeable future remains approximately in line with our free cash
flow. We have 7 sites in the course of construction, 33 with the necessary
permission for development, a further 10 on which terms have been agreed and 99
currently in negotiation.
As a result of our strong cash flow, our track record over many years and our
excellent management team, I remain confident of our future prospects.
Tim Martin
Chairman
5 September 2003
Profit and loss account
for the year ended 27 July 2003
Notes Before Exceptional After
exceptional items exceptional
items (note 3) items
2003 2003 2003 2002
£000 £000 £000 £000
Turnover 730,913 - 730,913 601,295
Operating profit 2 74,983 - 74,983 70,085
Loss on disposal of tangible fixed assets 3 - (3,688) (3,688) -
Net interest payable 4 (18,844) - (18,844) (16,517)
Profit on ordinary activities before taxation 56,139 (3,688) 52,451 53,568
Tax on profit on ordinary activities 5 (19,744) 1,337 (18,407) (18,152)
Profit on ordinary activities after taxation 36,395 (2,351) 34,044 35,416
Dividends 6 (7,434) - (7,434) (6,902)
Retained profit for the year 28,961 (2,351) 26,610 28,514
Earnings per ordinary share 7 17.0p 15.9p 16.6p
Fully diluted earnings per ordinary share 7 16.9p 15.9p 16.4p
All activities relate to continuing operations.
The company has no recognised gains and losses, other than the profit above and
therefore no separate statement of
recognised gains and losses has been presented.
Note of historical cost profits
2003 2002
£000 £000
Reported profit on ordinary activities before taxation 52,451 53,568
Difference between historical cost depreciation charge and actual 606 673
depreciation charge for the year, calculated on the revalued amount
Realisation of property surplus/(deficits) of previous years 341 (235)
Historical cost profit on ordinary activities before taxation 53,398 54,006
Historical cost profit for the year retained after taxation and dividends 27,557 28,952
Cash flow statement
for the year ended 27 July 2003
Notes 2003 2003 2002 2002
£000 £000 £000 £000
Net cash inflow from operating activities 8 130,565 130,565 113,700 113,700
Returns on investments and servicing of finance
Interest received 109 109 53 53
Interest paid - existing pubs (19,379) (19,379) (17,346) (17,346)
Interest paid and capitalised into new pubs (1,872) (2,254)
Net cash outflow from returns on investment and (21,142) (19,547)
servicing of finance
Taxation
Corporation tax paid (10,277) (10,277) (6,311) (6,311)
Capital expenditure and financial investment
Purchase of tangible fixed assets for existing (15,896) (15,896) (18,726) (18,726)
pubs
Proceeds of sale of tangible fixed assets 10,732 412
Purchase of own shares for ESOP trust (153) -
Investment in new pubs and pub extensions (77,275) (132,096)
Net cash outflow from capital expenditure and (82,592) (150,410)
financial investment
Equity dividends paid (5,438) (4,445)
Net cash inflow/(outflow) before financing 11,116 (67,013)
Financing
Issue of ordinary shares 233 5,750
Purchase of own shares (17,369) -
Advances under bank loans 7,527 65,037
Advances under US senior loan notes 44 44
Net cash (outflow)/inflow from financing (9,565) 70,831
Increase in cash 9 1,551 3,818
Free cash flow 7 85,122 71,370
7
Cash flow per ordinary share 39.7p 33.5p
Balance sheet
at 27 July 2003
Notes 2003 2002
£000 £000
Fixed assets
Tangible assets 11 773,823 745,041
Current assets
Stocks 9,601 8,594
Debtors due after more than one year 12 8,448 7,682
Debtors due within one year 12 9,017 8,237
Investments 301 203
Cash 15,160 13,609
42,527 38,325
Creditors due within one year 13 (135,361) (122,919)
Net current liabilities (92,834) (84,594)
Total assets less current liabilities 680,989 660,447
Creditors due after more than one year 14 (299,942) (292,915)
Provisions for liabilities and charges 15 (62,419) (57,399)
Total net assets 318,628 310,133
Capital and reserves
Called up share capital 4,149 4,292
Share premium account 126,739 124,819
Capital redemption reserve 165 -
Revaluation reserve 22,439 23,386
Profit and loss account 165,136 157,636
Equity shareholders' funds 16 318,628 310,133
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 27 July 2003
and 28 July 2002 on which unqualified reports were made by the company's
auditors.
The 2002 statutory accounts have been filed with the Registrar of Companies. The
2003 statutory accounts will be sent to shareholders in October 2003 and will be
filed with the Registrar of Companies following their adoption at the
forthcoming Annual General Meeting.
2 Analysis of continuing operations
2003 2002
£000 £000
Turnover 730,913 601,295
Cost of sales (621,894) (503,699)
Gross profit 109,019 97,596
Administrative expenses (34,036) (27,511)
Operating profit 74,983 70,085
Cost of sales includes distribution costs and all pub operating costs.
3 Exceptional items
2003 2002
£000 £000
Non-operating items:
Net loss on disposal of trading properties (2,732) -
Provision against future disposal of non trading properties (956) -
(3,688) -
4 Net interest payable
2003 2002
£000 £000
Interest payable on bank loans and overdraft 16,758 14,255
Interest payable on US senior loan notes 4,850 5,277
Less:
Interest capitalised (1,954) (2,266)
Interest receivable (810) (749)
Charge to profit and loss account 18,844 16,517
5 Taxation
a) Analysis of current period tax charge
Current tax 2003 2003 2002 2002
£000 £000 £000 £000
UK corporation tax on profits before exceptional items 13,317 9,299
Advance corporation tax - (743)
13,317 8,556
Current tax on exceptional items 70 -
Total current tax (note 5(b)) 13,387 8,556
Deferred tax
Origination and reversal of timing differences 6,427 9,596
Movement arising from disposals (exceptional items) (1,407) -
Total deferred tax 5,020 9,596
Total tax charge 18,407 18,152
b) Factors affecting current period tax charge
The UK standard rate of corporation tax is 30% (2002: 30%), whereas the current
tax assessed for the financial year ended 27 July 2003, as a percentage of
profit before tax and exceptional items, is 24% (2002: 16%); including
exceptional items, the percentage rises to 26%. The reasons for this difference
are explained below:
2003 2003 2002 2002
£000 % £000 %
Profit on ordinary activities before tax 52,451 53,568
Current tax on profit on ordinary activities, calculated at
the standard rate of corporation tax in the UK of 30% 15,735 30 16,070 30
Accelerated capital allowances (5,884) (11) (8,266) (16)
Capitalised interest allowable for tax purposes (472) (1) (586) (1)
QUEST contributions allowable for tax purposes - - (228) -
Disposals 1,107 2 - -
Other allowable deductions (182) - (106) -
Expenses not deductible for tax purposes 3,083 6 2,415 4
UK corporation tax for the year 13,387 26 9,299 17
Advance corporation tax - - (743) (1)
Current tax charge for period (note 5(a)) 13,387 26 8,556 16
c) Factors which may affect future tax charges
Current levels of investment ensure that capital allowance claims exceed
depreciation; while this will continue, the company would expect the excess of
capital allowances over depreciation to diminish over time.
No provision has been made for deferred tax on gains recognised on revaluing
properties to their market value. Such tax would become payable only if the
properties were sold without it being possible to claim roll-over relief. The
total amount unprovided for is approximately £6 million. At present, it is not
envisaged that any tax will become payable in the foreseeable future.
6 Dividends
2003 2002
£000 £000
Interim paid of 1.21p per share (2002: 1.10p) 2,600 2,353
Final proposed of 2.33p per share (2002: 2.12p) 4,834 4,549
7,434 6,902
7 Earnings and cash flow per share
The calculation of basic earnings per share is based on profits on ordinary
activities after taxation of £34,044,000 (2002: £35,416,000) and on 214,312,883
(2002: 213,202,101) ordinary shares, being the weighted average number of
ordinary shares in issue and ranking for dividend during the period.
Earnings per share before exceptional items is calculated as follows:
Earnings per Earnings per
share (p) share (p)
Earnings Earnings 2003 2002
£000 £000
2003 2002
Earnings and basic earnings per share 34,044 35,416 15.9 16.6
Exceptional costs, net of tax 2,351 - 1.1 -
Earnings and earnings per share before 36,395 35,416 17.0 16.6
exceptional items
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 214,725,340
(2002: 215,316,001).
The calculation of free cash flow per share is based on the net cash generated
by business activities and available for investment in new pub developments and
extensions to existing pubs, after funding interest on existing pubs, tax 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
dividend payments and is based on the same number of shares in issue as that for
the calculation of basic earnings per share.
8 Net cash inflow from operating activities
2003 2002
£000 £000
Operating profit 74,983 70,085
Profit on disposal of fixed assets - (24)
Depreciation of tangible fixed assets 43,209 36,343
Change in stocks (1,007) (1,091)
Change in debtors (944) (1,395)
Change in creditors 14,324 9,782
130,565 113,700
9 Reconciliation of net cash flow to movement in net debt
2003 2002
£000 £000
Increase in cash in the year 1,551 3,818
Cash inflow from increase in debt financing (7,571) (65,081)
Movement in net debt during the period (6,020) (61,263)
Opening net debt (302,840) (241,577)
Closing net debt (308,860) (302,840)
10 Analysis of net debt
Non-cash
movement
2002 Cash flow 2003
£000 £000 £000 £000
Cash at bank and in hand 13,609 1,551 - 15,160
Debt due within one year (24,831) 24,831 (24,799) (24,799)
Debt due after one year (291,618) (32,402) 24,799 (299,221)
Net debt (302,840) (6,020) - (308,860)
11 Tangible fixed assets
Freehold
and long
leasehold Short leasehold Equipment, Expenditure Total
property property fixtures on unopened
and properties
£000 £000 fittings
£000
£000
£000
Cost or valuation
At 29 July 2002 364,041 293,762 183,240 33,038 874,081
Reclassification 18,245 2,674 - (20,919) -
Additions 27,741 15,374 29,408 13,388 85,911
Disposals (12,791) - (4,012) - (16,803)
At 27 July 2003 397,236 311,810 208,636 25,507 943,189
Depreciation
At 29 July 2002 14,272 33,386 81,382 - 129,040
Charge for the year 6,875 8,117 28,217 - 43,209
Provision - - - 456 456
Disposals (1,235) - (2,104) - (3,339)
At 27 July 2003 19,912 41,503 107,495 456 169,366
Net book value
At 27 July 2003 377,324 270,307 101,141 25,051 773,823
At 28 July 2002 349,769 260,376 101,858 33,038 745,041
12 Debtors
2003 2002
£000 £000
Amounts falling due after more than one year:
Other debtors 8,448 7,682
Amounts falling due within one year:
Other debtors 519 1,183
Prepayments 8,498 7,054
9,017 8,237
13 Creditors due within one year
2003 2002
£000 £000
Bank loans 24,799 24,831
Trade creditors 53,066 54,352
Corporation tax 7,792 4,682
Other tax and social security 22,616 12,716
Other creditors 3,875 3,987
Dividend payable 4,834 4,549
Accruals and deferred income 18,379 17,802
135,361 122,919
14 Creditors due after one year
2003 2002
£000 £000
Bank loans repayable by instalments 212,274 204,715
US senior loan notes repayable in a single instalment in 2009 86,947 86,903
299,221 291,618
Other creditors 721 1,297
299,942 292,915
15 Provisions for liabilities and charges
2003 2002
£000 £000
Deferred tax
Accelerated capital allowances 54,151 49,602
Other timing differences 8,268 7,797
Full provision for deferred tax 62,419 57,399
Provision at start of year 57,399 47,803
Deferred tax charge in profit and loss account for year 5,020 9,596
Provision at end of year 62,419 57,399
16 Capital, reserves and shareholders' funds
Share Capital Profit 2003 2002
premium Redemption and
Called up account Reserve Revaluation Shareholders' Shareholders'
share reserve loss
capital account funds funds
£000 £000 £000 £000 £000 £000 £000
At start of year 4,292 124,819 - 23,386 157,636 310,133 273,839
Allotments 22 1,920 - - - 1,942 7,739
Transfer - - - (947) 947 - -
Purchase of (165) - 165 - (20,057) (20,057) -
shares
Profit for the - - - - 34,044 34,044 35,416
year
Dividends - - - - (7,434) (7,434) (6,902)
QUEST transfer - - - - - - 41
At end of year 4,149 126,739 165 22,439 165,136 318,628 310,133
End
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