Interim Results
Wetherspoon (JD) PLC
1 March 2002
J D WETHERSPOON PLC
PRESS RELEASE
J D Wetherspoon plc announces interim results for the six months to 27 January
2002.
Highlights
Turnover up 26% to £285.2m
Profit before tax up 22% to £24.9m
Earnings per share up 20% to 7.7p
Free cashflow per share up 19% to 17.5p
Interim dividend per share up 10% to 1.1p
35 pubs opened, total now 556
Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc,
said:
'I am pleased to report further good progress during the half year to 27 January
2002. Sales increased by 26% to £285.2 million and profit before tax by 22% to
£24.9 million. We opened 35 pubs during the period bringing the total number to
556. The new pubs opened at a higher level of sales, reflecting the benefit of
larger sites and less competition in the property market. We are particularly
encouraged by the sales performance in smaller and medium sized towns which
increases our confidence in the number of potential sites in the UK. As a result
of the strong performance in the six month period, and the hard work and extreme
dedication of our team, 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 Company spokesman 07956 392234
Photographs are available at: www.newscast.co.uk
Chairman's statement
I am pleased to report further good progress during the half year to 27 January
2002. Sales increased by 26% to £285.2 million. Operating profit increased by
23% to £33.4 million and profit before tax by 22% to £24.9 million. Earnings
per share rose by 20% to 7.7p.
Capital investment was £67.9 million and net gearing at the period end was 93%
(2001: 79%). Interest was covered 3.9 times (2001: 4.1 times) by operating
profits. Operating margins before depreciation, interest and tax were 17.9%
compared to 18.1%.
Free cashflow, after capital investment of £7.1 million in existing pubs and
payments of tax and interest, increased by 20% to £37.1 million resulting in
cashflow per share of 17.5p before investment in new pubs and dividend payments.
Economic profit, calculated by adding depreciation to profit after tax
(excluding deferred tax) and subtracting capital investment in existing pubs,
increased by 31% to £31.3 million.
Dividend
The Board has declared an interim dividend of 1.10p per ordinary share, a 10%
increase on last year. A scrip alternative will again be offered to
shareholders.
Further Progress
We opened 35 pubs during the period bringing the total number to 556. The new
pubs opened at a higher level of sales, reflecting the benefit of larger sites
and less competition in the property market. We are particularly encouraged by
the sales performance in smaller and medium sized towns which increases our
confidence in the number of potential sites in the UK.
Our existing pubs performed well with like-for-like sales increasing by 5.5% and
like-for-like profit rising by 4.0%, following strong growth in the comparable
period last year.
During the period, the company made progress in a number of areas. Like-for-like
food sales, for example, increased by 10% and gross margins by 2%, as a result
of the strenuous efforts made to improve the speed and quality of service in
this area. Traditional ale sales continued to be extremely strong and the
independent 'Cask Marque' organisation reported that our average ale sales per
pub are more than double our nearest competitors.
Our bonus system, based partly on profits and partly on standards vetted by
mystery visitors, the Egon Ronay organisation and our own environmental health
consultants, resulted in record bonuses of £7.2 million in the period compared
to £4.9 million in the previous period. We believe that rewarding staff
achieving high standards is an important factor in the long term success of the
company.
Lloyds pubs continued to perform well with sales in the original 10 pubs
acquired in 2000, showing a like for like increase of 65%. We now have 20 Lloyds
pubs and believe there is substantial scope for further development.
Our focus on the quality of the facilities in our pubs can be illustrated by
independent recognition of the cleanliness and design of our toilets. Following
the award from the British Toilet Association last year, we were awarded the
2001 Cannon Hygiene Loo Of The Year award. In the same competition, we also won
the individual awards for the best toilets in England, Scotland and Wales which
was the first time in the history of the competition that one company had won
all the individual awards. In addition, a total of 12 separate Wetherspoon
outlets were presented with five and four star awards for their quality and
innovation.
People
I would like to thank again all my colleagues at Wetherspoon for their excellent
efforts in the last six months.
Tax and Red Tape
Various organisations, including the British Chambers of Commerce and the CBI
have commented on levels of business taxation and hugely increasing amounts of
red tape.
Like many companies,Wetherspoon pays high amounts of direct and indirect taxes.
In the six month period, we paid £108.8 million in respect of value added tax,
excise duty, business rates, corporation tax and national insurance. In
addition, employees paid £13.0 million of income tax and national insurance. In
total, these taxes amount to over 7 times our net profit, and 43% of our
turnover. It makes sense, in these circumstances, for the Government to reduce
this burden to encourage growing companies like Wetherspoon. Yet excise duties
on beer, wine and spirits remain far higher than our continental neighbours,
causing customers to shop abroad. I believe this tax disadvantage in a major
industry is bad for the long term prospects of the economy.
The Government's attitude to red tape is illustrated in our industry by its
chaotic approach to liquor licensing reform, whereby it is proposed that local
authorities take over responsibilities from magistrates courts in this area.
Local authorities now control planning permission and late night licensing. Both
these procedures are much slower and much more expensive than areas controlled
by magistrates courts, and the decisions are subject to far higher levels of
public criticism. In any event, it has been decided that appeals from the
decisions of local authorities will be heard in magistrates courts, leaving
magistrates finally in charge but only after a lengthy and expensive legal
process.
Through their 'Good Practice Guide', magistrates have been reforming their own
practices to make them less bureaucratic with considerable success. Legal fees
in this area have been reduced substantially over the years as a result. Our own
market research, supported by various other surveys, indicate that 80% of pub
licensees favour the retention of magistrates in pub licensing, combined with
liberalisation of pub hours.
Prospects
Like for like sales in February 2002 increased by 6.2%, and we opened 6 new
pubs. There are 39 sites in the course of construction, 45 with the necessary
permissions for development, a further 50 on which terms have been agreed and
227 currently in negotiations.
As a result of the strong performance in the six month period, and the hard work
and extreme dedication of our team, I remain confident of our future prospects.
Tim Martin
Chairman
1 March 2002
Profit and loss account
for the six months ended 27 January 2002
Notes Unaudited Unaudited Audited
half year half year full year
2002 2001 2001
£000 £000 (Restated) £000
Turnover 285,178 226,694 483,968
Operating profit 2 33,431 27,090 58,380
Net interest payable (8,546) (6,622) (14,063)
Profit on ordinary activities before taxation 24,885 20,468 44,317
Tax on profit on ordinary activities 3 (8,466) (7,075) (14,457)
Profit on ordinary activities after taxation 16,419 13,393 29,860
Dividends 10 (2,353) (2,108) (6,185)
Retained profit for the period 14,066 11,285 23,675
Earnings per ordinary share 4 7.7p 6.4p 14.2p
Fully diluted earnings per ordinary share 4 7.6p 6.3p 14.0p
Dividend per share 10 1.10p 1.00p 2.93p
All activities relate to continuing operations.
There were no gains or losses recognised in any of the above results other than
the profit for the period.
Refer to note 1 in respect of the restatement of the comparative figures.
Cash flow statement
for the six months ended 27 January 2002
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
half year half year half year half year full year full year
2002 2002 2001 2001 2001 2001
£000 £000 £000 £000 £000 £000
Net cash inflow from operating 5 54,355 54,355 47,069 47,069 93,005 93,005
activities
Returns on investments and servicing of
finance
Interest received 42 42 849 849 976 976
Interest paid - existing pubs (8,590) (8,590) (7,403) (7,403) (15,436) (15,436)
Interest paid and capitalised into new (948) (1,545) (3,004)
pubs
Purchase of current asset investments - (241) (241)
Net cash outflow from returns on
investment and servicing of finance (9,496) (8,340) (17,705)
Taxation
Corporation tax paid (1,555) (1,555) (205) (205) (1,556) (1,556)
Capital expenditure
Purchase of tangible fixed assets for (7,121) (7,121) (9,335) (9,335) (15,792) (15,792)
existing pubs
Investment in new pubs and pub (69,084) (63,366) (127,574)
extensions
Net cash outflow from capital (76,205) (72,701) (143,366)
expenditure
Equity dividends paid (2,810) (2,990) (4,529)
Net cash outflow before financing (35,711) (37,167) (74,151)
Financing
Issue of ordinary shares 5,435 1,148 2,057
Advances under bank loans 29,935 2,591 40,156
Advances under US senior notes 22 - 44
Net cash inflow from financing 35,392 3,739 42,257
Decrease in cash 6 (319) (33,428) (31,894)
Free cash flow 4 37,131 30,975 61,197
Free cash flow per ordinary share 4 17.5p 14.7p 29.1p
Summarised balance sheet
as at 27 January 2002
Notes Unaudited Unaudited Audited
half year half year full year
2002 2001 2001
£000 £000 £000
(Restated)
Fixed assets
Tangible assets 8 676,261 565,036 625,903
Current assets
Investments 550 241 241
Stocks 7,161 6,001 7,503
Debtors due within one year 7,966 6,903 6,764
Debtors due after more than one year 7,323 6,612 6,986
Cash 9,472 8,257 9,791
32,472 28,014 31,285
Creditors due within one year (92,347) (75,349) (81,965)
Net current liabilities (59,875) (47,335) (50,680)
Total assets less current liabilities 616,386 517,701 575,223
Creditors due after one year (270,455) (216,197) (253,581)
Provisions for liabilities and charges (52,282) (41,535) (47,803)
Total net assets 293,649 259,969 273,839
Capital and reserves
Called up share capital 4,276 4,214 4,224
Share premium account 122,531 114,919 116,389
Revaluation reserve 23,734 24,158 23,824
Profit and loss account 143,108 116,678 129,402
Equity shareholders' funds 9 293,649 259,969 273,839
Refer to note 1 in respect of the restatement of the comparative figures.
Notes
1 Basis of preparation
The interim report for the six months ended 27 January 2002 is unaudited and
does not constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. It has been prepared under the historical cost convention
modified by the revaluation of freehold and leasehold properties, and on a basis
consistent with the accounting policies for the year ended 29 July 2001. The
results for the year ended 29 July 2001 and the balance sheet at that date are
an extract from the statutory accounts for that year, which have been filed with
the Registrar of Companies and on which the Company's auditors gave an
unqualified report under Section 235 of the Companies Act 1985, which did not
contain a statement under Section 237(2) or (3) of that Act. The results for
the six months ended 28 January 2001 are an extract from the unaudited interim
report for that period restated as follows. The company adopted FRS19, deferred
taxation, in the accounts for the year ended 29 July 2001. The results for the
six months ended 28 January 2001 have been restated to reflect the impact of
adopting FRS19, resulting in an increase in the tax charge for that period of
£5,847,000 and an increase in the provision for deferred taxation of
£41,535,000.
2 Operating profit
Unaudited Unaudited Audited
half year half year full year
2002 2001 2001
£000 £000 £000
Turnover 285,178 226,694 483,968
Cost of sales (238,036) (188,515) (401,800)
Gross profit 47,142 38,179 82,168
Administrative expenses (13,711) (11,089) (23,788)
Operating profit 33,431 27,090 58,380
Cost of sales includes distribution costs and all pub operating costs.
3 Taxation
The taxation charge for the six months ending 27 January 2002 is calculated by
applying an estimate of the effective tax rate for the year ended 28 July 2002.
The UK standard rate of corporation tax is 30% (2001: 30%), whereas the latest
estimate of the current tax payable on profits for the financial year ended 28
July 2002 is 16% (2000: 5%).
Unaudited Unaudited Audited
half year half year full year
2002 2001 2001
£000 £000 £000
(restated)
Current tax 3,987 1,228 2,342
Deferred tax 4,479 5,847 12,115
Tax on profit on ordinary activities 8,466 7,075 14,457
4 Earnings and cash flow per share
The calculation of basic earnings per share is based on profit on ordinary
activities after taxation for the period of £16,419,000 (2001 as restated:
£13,393,000) and on 212,189,707 (2001: 210,172,175) ordinary shares, 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 214,703,771
(2001: 213,055,507)
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,
after funding interest on existing pubs, tax and all other reinvestment in pubs
open at the start of the period. It is calculated before taking into account
inflows and outflows of financing from outside sources and dividend payments,
and is based on the same number of shares in issue as for the calculation of
basic earnings per share.
5 Net cash inflow from operating activities
Unaudited Unaudited Audited
half year half year full year
2002 2001 2001
£000 £000 £000
Operating profit 33,431 27,090 58,380
Depreciation of tangible fixed assets 17,504 13,883 29,674
Change in stocks 342 (1,315) (2,817)
Change in debtors (511) (533) (409)
Change in creditors 3,589 7,944 8,177
54,355 47,069 93,005
6 Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
half year half year full year
2002 2001 2001
£000 £000 £000
Decrease in cash in the period (319) (33,428) (31,894)
Cash inflow from increase in debt financing (29,957) (2,591) (40,200)
Movement in net debt during the period (30,276) (36,019) (72,094)
Opening net debt (241,577) (169,483) (169,483)
Closing net debt (271,853) (205,502) (241,577)
7 Analysis of net debt
Audited Unaudited
full year Cash half year
2001 flow 2002
£000 £000 £000
Cash at bank and in hand 9,791 (319) 9,472
Debt due within one year - (12,500) (12,500)
Debt due after one year (251,368) (17,457) (268,825)
Net debt (241,577) (30,276) (271,853)
8 Tangible fixed assets
Unaudited Unaudited Audited
half year half year full year
2002 2001 2001
£000 £000 £000
Opening net book value 625,903 504,996 504,996
Additions 67,862 73,923 150,581
Depreciation (17,504) (13,883) (29,674)
Closing net book value 676,261 565,036 625,903
9 Capital, reserves and shareholders' funds
Unaudited Audited
Called up Share Revaluation Profit and half year full year
share premium reserve loss 2002 2001
capital account account shareholders' shareholders'
funds funds
£000 £000 £000 £000 £000 £000
(Restated)
At start of period 4,224 116,389 23,824 129,402 273,839 246,830
Allotments 48 5,387 5,435 3,334
Transfer (90) 90 - -
Profit for the period 16,419 16,419 29,860
Dividends (2,353) (2,353) (6,185)
Shares allotted and contributed 4 755 (450) 309 -
to QUEST
At end of period 4,276 122,531 23,734 143,108 293,649 273,839
The company has allotted shares to a QUEST established by the company in 1999 to
acquire new shares in the company for the benefit of employees and directors of
the company. 194,583 shares were allotted to the QUEST on 25 January 2002 in
respect of options held by employees and directors under the company's Save As
You Earn option scheme exercisable between 1 February 2002 and 1 August 2002.
The difference between market value at allotment and exercise price has been
transferred directly to the profit and loss account. The excess of the market
value of the shares on allotment and the nominal value, which amounts to
£754,983 has been taken to the share premium account.
The shares held in the QUEST at 27 January 2002 have been included as current
asset investments at a value of £309,387 which is equivalent to the amount
receivable from employees and directors on exercise of their options.
10 Dividend
On 17 May 2002 the company will pay an interim dividend of 1.1 pence per share,
for the half year ended 27 January 2002 to shareholders on the register at the
close of business on 15 March 2002.
As in previous years, a scrip alternative will be offered. Many shareholders
already participate in the scrip dividend scheme and wish to receive shares in
lieu of cash, while others have previously received cash dividends and may wish
to continue doing so. In either case shareholders need take no further action.
If any shareholder wishes to alter the form in which he/she receive their
dividends, he/she should advise the company's registrars, Computershare Investor
Services plc, PO Box 82, The Pavilions, Bridgewater Road, Bristol, BS99 7NH in
writing no later than 19 April 2002.
Independent Review Report to J D Wetherspoon plc
Introduction
We have been instructed by the company to review the financial information which
comprises a profit and loss account, statement of total gains and losses,
summarised balance sheet information as at 27 January 2002, cash flow statement,
comparative figures and associated notes. We have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and, based
thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion
on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 27 January 2002.
PricewaterhouseCoopers
Chartered Accountants
London
1 March 2002
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