Interim Results
Wetherspoon (JD) PLC
07 March 2003
J D WETHERSPOON PLC
PRESS RELEASE
J D Wetherspoon plc announces interim results for the six months to 26 January 2003.
Highlights
Turnover up 23% to £350.6m
Profit before tax up 3% to £25.6m
Earnings per share up 1% to 7.8p
Free cash flow per share up 8% to 18.9p
Interim dividend per share up 10% to 1.21p
21 pubs opened, total now 629
Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc,
said:
'I am pleased to report further progress during the half year to 26 January
2003. Sales increased by 23% to £350.6 million. Operating profit increased by
5% to £35.0 million and profit before tax by 3% to £25.6 million.
86% of capital expenditure on new pubs was financed by cash flow, compared to
54% in the equivalent period last year.
Our results for the last six months have been affected by a considerable
increase in costs as well as by the trading patterns previously announced. I
believe these cost increases will abate in the future and that, combined with
our continued sales growth and opening programme, should provide a profitable
and cash generative future for the company. We therefore remain confident of
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 progress during the half year to 26 January 2003.
Sales increased by 23% to £350.6 million. Operating profit increased by 5% to
£35.0 million and profit before tax by 3% to £25.6 million. Earnings per share
rose by 1% to 7.8p.
Capital investment was £52.6 million and net gearing at the period end was 97%
(2002: 93%). Net interest was covered 3.7 times (2002: 3.9 times) by operating
profits. Operating margins before depreciation, interest and tax were 16.1%
compared to 17.9%, mainly as a result of higher wages, excise duty, insurance
and repairs.
Free cashflow, after capital investment of £9.2 million in existing pubs and
payments of tax and interest, increased by 9% to £40.6 million resulting in free
cashflow per share of 18.9p before investment in new pubs and dividend payments.
86% of capital expenditure on new pubs was financed by cash flow, compared to
54% in the equivalent period last year.
Economic profit, calculated by adding depreciation to profit after tax
(excluding deferred tax) and subtracting capital investment in existing pubs,
increased by 4% to £32.5 million.
Dividend
The Board has declared an interim dividend of 1.21p per ordinary share, a 10%
increase on last year. A scrip alternative will again be offered to
shareholders.
Further Progress
We opened 21 pubs during the period bringing the total number to 629. The new
pubs demonstrated encouraging levels of sales and our existing pubs performed
well, with like for like sales increasing by 4.7%.
Progress continued during the period in many areas. Sales of food, traditional
ales, wines and coffee were particularly strong, reflecting trends in the
business in recent years.
Sales in Lloyds pubs continued their strong performance, with the original 10
now achieving weekly sales of over £30,000 on average. We have opened an
additional 5 Lloyds in the period bringing the number to 44, and the sales of
the entire Lloyds group has also averaged over £30,000 in the period under
review.
The company continues to concentrate on the quality of its people and the
environment we create in our pubs. In this respect, we have won the Supreme
Training Award for managed houses from the British Institute of Innkeeping for
the second year in a row, as well as winning an award for the best toilets in
England, Scotland and Wales, also for the second year in a row. Our policy on
salaries and bonuses has resulted in our lowest ever manager turnover. We
believe that this leads to significant benefits for the business in the long
term and helps to provide the standard that should be expected by our customers.
People
I would like to thank all my colleagues at Wetherspoon, and our suppliers and
partners, for their dedicated efforts in the last six months.
Prospects
Like for like sales in February 2003 increased by 4.9%, and we opened 7 new
pubs. There are 14 sites in the course of construction, 43 with the necessary
permissions for development, a further 27 on which terms have been agreed and
120 currently in negotiations. It is anticipated that we will open approximately
50 pubs in the current financial year.
Our results for the last six months have been affected by a considerable
increase in costs as well as by the trading patterns previously announced. I
believe these cost increases will abate in the future and that, combined with
our continued sales growth and opening programme, should provide a profitable
and cash generative future for the company. We therefore remain confident of
future prospects.
Tim Martin
Chairman
7 March 2003
Profit and loss account
for the six months ended 26 January 2003
Notes Unaudited Unaudited Audited
half year half year full year
2003 2002 2002
£000 £000 £000
Turnover 350,606 285,178 601,295
Operating profit 2 35,013 33,431 70,085
Net interest payable (9,402) (8,546) (16,517)
Profit on ordinary activities before 25,611 24,885 53,568
taxation
Tax on profit on ordinary activities 3 (8,913) (8,466) (18,152)
Profit on ordinary activities after taxation 16,698 16,419 35,416
Dividends 10 (2,599) (2,353) (6,902)
Retained profit for the period 14,099 14,066 28,514
Earnings per ordinary share 4 7.8p 7.7p 16.6p
Fully diluted earnings per ordinary share 4 7.8p 7.6p 16.4p
Dividend per share 10 1.21p 1.10p 3.22p
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.
Cash flow statement
for the six months ended 26 January 2003
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
half year half year half year half year full year full
2003 2003 2002 2002 2002 year
2002
£000 £000 £000 £000 £000 £000
Net cash inflow from operating 5 62,395 62,395 54,355 54,355 113,700 113,700
activities
Returns on investments and servicing of
finance
Interest received 11 11 42 42 53 53
Interest paid - existing pubs (8,573) (8,573) (8,590) (8,590) (17,346) (17,346)
Interest paid and capitalised into new (1,049) (948) (2,254)
pubs
Net cash outflow from returns on
investment and servicing of finance (9,611) (9,496) (19,547)
Taxation
Corporation tax paid (3,975) (3,975) (1,555) (1,555) (6,311) (6,311)
Capital expenditure
Purchase of tangible fixed assets for (9,220) (9,220) (7,121) (7,121) (18,726) (18,726)
existing pubs
Purchase of own shares for ESOP trust (153) - -
Proceeds of sales of tangible fixed - - 412
assets
Investment in new pubs and pub (47,491) (69,084) (132,096)
extensions
Net cash outflow from capital (56,864) (76,205) (150,410)
expenditure
Equity dividends paid (4,334) (2,810) (4,445)
Net cash outflow before financing (12,389) (35,711) (67,013)
Financing
Issue of ordinary shares 215 5,435 5,750
Advances under bank loans 9,920 29,935 65,037
Advances under US senior notes 22 22 44
Net cash inflow from financing 10,157 35,392 70,831
(Decrease)/Increase in cash 6 (2,232) (319) 3,818
Free cash flow 4 40,638 37,131 71,370
Free cash flow per ordinary share 4 18.9p 17.5p 33.5p
Summarised balance sheet
as at 26 January 2003
Notes Unaudited Unaudited Audited
half year half year full year
2003 2002 2002
£000 £000 £000
Fixed assets
Tangible assets 8 776,305 676,261 745,041
Current assets
Stocks 10,769 7,161 8,594
Debtors due after more than one year 8,053 7,323 7,682
Debtors due within one year 11,048 7,966 8,237
Investments 228 550 203
Cash 11,377 9,472 13,609
41,475 32,472 38,325
Creditors due within one year (129,554) (92,347) (122,919)
Net current liabilities (88,079) (59,875) (84,594)
Total assets less current liabilities 688,226 616,386 660,447
Creditors due after one year (302,482) (270,455) (292,915)
Provisions for liabilities and charges (61,082) (52,282) (57,399)
Total net assets 324,662 293,649 310,133
Capital and reserves
Called up share capital 4,295 4,276 4,292
Share premium account 125,246 122,531 124,819
Revaluation reserve 23,048 23,734 23,386
Profit and loss account 172,073 143,108 157,636
Equity shareholders' funds 9 324,662 293,649 310,133
Notes
1 Basis of preparation
The interim report for the six months ended 26 January 2003 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 28 July 2002. The
results for the year ended 28 July 2002 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 26 January 2003 are an extract from the unaudited interim
report for that period.
2 Operating profit
Unaudited Unaudited Audited
half year half year full year
2003 2002 2002
£000 £000 £000
Turnover 350,606 285,178 601,295
Cost of sales (299,822) (238,036) (503,699)
Gross profit 50,784 47,142 97,596
Administrative expenses (15,771) (13,711) (27,511)
Operating profit 35,013 33,431 70,085
Cost of sales includes distribution costs and all pub operating costs.
3 Taxation
The taxation charge for the six months ended 26 January 2003 is calculated by
applying an estimate of the effective tax rate for the year ending 27 July 2003.
The UK standard rate of corporation tax is 30% (2002: 30%), whereas the latest
estimate of the current tax payable on profits for the financial year ending 27
July 2003 is 20% (2002: 16%).
Unaudited Unaudited Audited
half year half year full year
2003 2002 2002
£000 £000 £000
Current tax 5,230 3,987 8,556
Deferred tax 3,683 4,479 9,596
Tax on profit on ordinary activities 8,913 8,466 18,152
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 £16,698,000 (2002: £16,419,000) and
on 214,694,977 (2002: 212,189,707) 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 215,159,001
(2002: 214,703,771).
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 for the
calculation of basic earnings per share.
5 Net cash inflow from operating activities
Unaudited Unaudited Audited
half year half year full year
2003 2002 2002
£000 £000 £000
Operating profit 35,013 33,431 70,085
Profit on disposal of fixed assets - - (24)
Depreciation of tangible fixed assets 21,308 17,504 36,343
Change in stocks (2,175) 342 (1,091)
Change in debtors (2,814) (511) (1,395)
Change in creditors 11,063 3,589 9,782
62,395 54,355 113,700
6 Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
half year half year full year
2003 2002 2002
£000 £000 £000
(Decrease)/Increase in cash in the period (2,232) (319) 3,818
Cash inflow from increase in debt financing (9,942) (29,957) (65,081)
Movement in net debt during the period (12,174) (30,276) (61,263)
Opening net debt (302,840) (241,577) (241,577)
Closing net debt (315,014) (271,853) (302,840)
7 Analysis of net debt
Audited Cash Non-Cash Unaudited
full year flow Movement half year
2002 2003 2003
£000 £000 £000 £000
Cash at bank and in hand 13,609 (2,232) 0 11,377
Debt due within one year (24,831) 12,414 (12,414) (24,831)
Debt due after one year (291,618) (22,356) 12,414 (301,560)
Net debt (302,840) (12,174) 0 (315,014)
8 Tangible fixed assets
Unaudited Unaudited Audited
half year half year full year
2003 2002 2002
£000 £000 £000
Opening net book value 745,041 625,903 625,903
Additions 52,572 67,862 155,869
Disposals - - (388)
Depreciation (21,308) (17,504) (36,343)
Closing net book value 776,305 676,261 745,041
9 Capital, reserves and shareholders' funds
Called up Share Revaluation Profit and Unaudited Audited
premium reserve loss half year full year
share account account 2003 2002
capital shareholders' shareholders'
funds funds
£000 £000 £000 £000 £000 £000
At start of period 4,292 124,819 23,386 157,636 310,133 273,839
Allotments 3 427 - - 430 7,739
Transfer - - (338) 338 - -
Profit for the period - - - 16,698 16,698 35,416
Dividends - - - (2,599) (2,599) (6,902)
Shares allotted and contributed - - - - - 41
to QUEST
At end of period 4,295 125,246 23,048 172,073 324,662 310,133
10 Dividend
On 23 May 2003 the company will pay an interim dividend of 1.21 pence per share,
for the half year ended 26 January 2003 to shareholders on the register at the
close of business on 21 March 2003.
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 25 April 2003.
Independent review report to J D Wetherspoon plc
Introduction
We have been instructed by the company to review the financial information which
comprises a summarised profit and loss account, summarised balance sheet
information, summarised 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.
This report has been prepared for and only for the company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
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 26 January 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
London
7 March 2003
Notes:
(a) The maintenance and integrity of the JD Wetherspoon plc
website is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may have occurred to the
interim report since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial information may differ from legislation in other
jurisdictions.
End
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