Interim Results
Wetherspoon (JD) PLC
03 March 2004
J D WETHERSPOON PLC
PRESS RELEASE
J D Wetherspoon plc announces interim results for the six months to 25 January
2004.
Highlights
Turnover up 11% to £389.0m
Operating profit* up 10% to £38.6m
Profit before tax* up 9% to £27.8m
Earnings per share* up 15% to 9.0p
Free cash flow per share up 15% to 21.7p
Interim dividend per share up 10% to 1.33p
*before exceptional items
Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc,
said:
'I am pleased to report good progress in the half year to 25 January 2004.
Sales increased by 11% to £389.0 million. Earnings per share (before
exceptional items) rose by 15% to 9p.The company continues to seek improvements
in every area of the business and has produced a robust set of results despite
difficult market conditions.
As a result of continuing good like-for-like sales growth, strong cash flow and
our dedicated team, I remain confident of future prospects.'
Enquiries:
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 good progress in the half year to 25 January 2004. Sales
increased by 11% to £389.0 million. Operating profit increased by 10% to £38.6
million and profit before tax and exceptional items by 9% to £27.8 million.
Profits were slightly higher than anticipated, partly as a result of delays in
expenditure due to the late implementation of the new licensing legislation and
lower than expected costs for the new employee share scheme. Earnings per share
(before exceptional items) rose by 15% to 9p, rising at a faster rate than
profits due principally to the impact of share buybacks.
Capital investment was £32 million and net gearing at the period end was 103%
(2003: 97%). Net interest was covered 3.6 times (2003: 3.7 times) by operating
profits. Operating margins before interest and tax were 9.9% (2003: 10.0%),
mainly as a result of slightly higher wages, rent and repairs.
The company sold 10 pubs and 1 development site in the period under review,
resulting in a capital loss of £3.5 million, as previously indicated in our
first quarter update. The company has decided to dispose of a further 10 pubs
which do not meet our requirements and we anticipate a capital loss in respect
of this transaction of £3.6 million. Whilst these capital losses are
disappointing, the company continues to focus on maximising cash flow and return
on capital, as well as being conservative when considering new property
acquisitions.
Free cash flow, after capital investment of £8 million in existing pubs and
payments of tax and interest, increased by 8% to £44 million. This resulted in
free cash flow per share of 21.7p (2003: 18.9p) before investment in new pubs
and dividend payments. In the period under review, all our new pub capital
expenditure was financed from free cash flow, compared to 86% financed by free
cash flow in the equivalent period.
Economic profit, calculated by adding depreciation to profit after tax
(excluding deferred tax) and before exceptional items and subtracting capital
investment in existing pubs, increased by 7% to £34.7 million.
Dividend
The Board has declared an interim dividend of 1.33p per ordinary share, a 10%
increase on last year payable on 21 May 2004 to shareholders on the register at
19 March 2004.
Share buyback
During the period, the Company acquired 8,895,000 shares for cancellation
resulting in a cash outflow of £25.7m, including £2.7m in relation to shares
acquired towards the end of the previous financial year.
Further Progress
We opened 8 pubs in the period and sold 10, bringing the total number of pubs to
633. The new pubs demonstrated encouraging levels of sales and our existing pubs
performed well, with like-for-like sales increasing by 4.8%.
The company continues to seek improvements in every area of the business and
has, for example, introduced a new share incentive scheme for employees,
progressed plans for a new distribution system and made significant progress in
the development of improved Epos and IT systems.
Financing
The company recently completed a refinancing of the majority of its current
banking facilities. A new £250 million 5 year facility has been put in place
which is sufficient to cover our medium term expansion plans. Total banking
facilities, including our US private placement, now total £418.5 million
compared to net borrowings at the end of the period under review of £313.8
million.
People
Once again I would like to thank our employees, suppliers and partners for their
excellent work in the last six months.
Board structure
Having founded the business in 1979, I will become non-executive Chairman from
the beginning of April 2004, working approximately 2 days per week. John Hutson
will become Chief Executive Officer and my previous executive responsibilities
will be shared between the existing executive directors and management team. We
have tried to concentrate over the years at Wetherspoon on an open style of
management involving widespread discussion and consultation throughout the
company, which reduces excessive pressure and reliance on any one individual.
This approach has helped our transition from 44 London pubs with sales of £22
million upon flotation in 1992 to a nationwide chain of over 600 pubs and sales
in the last financial year of £731 million. As a result of the talent,
dedication and long service of our management team, I am confident that the
changes outlined above will result in a continued good performance, as has been
demonstrated by the results of the last six months during my sabbatical.
Prospects
Total sales in February 2004 increased by 8% with like-for-like sales increasing
by 3.9%, and we opened 3 new pubs. There are 12 sites in the course of
construction, 26 with the necessary permissions for development, a further 9 on
which terms have been agreed and 115 currently in negotiations. It is
anticipated that we will open approximately 30 pubs in the current financial
year. For four weeks this summer the Euro 2004 football championship takes
place. Previous international football tournaments have sometimes caused a
short term dip in the company's sales performance but with no long term
implications.
As a result of continuing good like for like sales growth, combined with strong
organic cash flow and our dedicated team, I remain confident of future
prospects.
Tim Martin
Chairman
3 March 2004
Profit and loss account
for the six months ended 25 January 2004
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
half year half year half year half year full year full year
2004 2004 2004 2003 2003 2003
£000 £000 £000 £000 £000 £000
Before Exceptional After Before After
exceptional items exceptional exceptional exceptional
items items items items
(note 3)
Turnover 388,964 - 388,964 350,606 730,913 730,913
Operating profit 2 38,561 - 38,561 35,013 74,983 74,983
Loss on disposal of 3 - (7,098) (7,098) - - (3,688)
tangible fixed assets
Net interest payable (10,739) - (10,739) (9,402) (18,844) (18,844)
Profit on ordinary 27,822 (7,098) 20,724 25,611 56,139 52,451
activities before
taxation
Tax on profit on 4 (9,537) 1,490 (8,047) (8,913) (19,744) (18,407)
ordinary activities
Profit on ordinary 18,285 (5,608) 12,677 16,698 36,395 34,044
activities after
taxation
Dividends 11 (2,511) - (2,511) (2,599) (7,434) (7,434)
Retained profit for 15,774 (5,608) 10,166 14,099 28,961 26,610
the period
Earnings per ordinary 5 9.0p (2.7p) 6.3p 7.8p 17.0p 15.9p
share
Fully diluted earnings 5 9.0p (2.8p) 6.2p 7.8p 16.9p 15.9p
per ordinary share
Dividend per share 11 - - 1.33p 1.21p 3.54p 3.54p
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 25 January 2004
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
half year half year half year half year full full
2004 2004 2003 2003 year year
£000 £000 £000 £000 2003 2003
£000 £000
Net cash inflow from operating 6 69,289 69,289 62,395 62,395 130,565 130,565
activities
Returns on investments and
servicing of finance
Interest received 84 84 11 11 109 109
Interest paid - existing pubs (10,165) (10,165) (8,573) (8,573) (19,379) (19,379)
Interest paid and capitalised into - (1,049) (1,872)
new pubs
Net cash outflow from returns on
investment and servicing of finance (10,081) (9,611) (21,142)
Taxation
Corporation tax paid (7,087) (7,087) (3,975) (3,975) (10,277) (10,277)
Capital expenditure
Purchase of tangible fixed assets (8,148) (8,148) (9,220) (9,220) (15,896) (15,896)
for
existing pubs
Purchase of own shares for ESOP - (153) (153)
trust
Proceeds of sale of tangible fixed 6,796 - 10,732
assets
Investment in new pubs and pub (25,572) (47,491) (77,275)
extensions
Net cash outflow from capital (26,924) (56,864) (82,592)
expenditure
Equity dividends paid (4,700) (4,334) (5,438)
Net cash outflow before financing 20,497 (12,389) 11,116
Financing
Issue of ordinary shares 349 215 233
Purchase of own shares (25,744) - (17,369)
(Repayments)/advances under bank (2,414) 9,920 7,527
loans
Advances under US senior notes 22 22 44
Net cash (outflow)/inflow from (27,787) 10,157 (9,565)
financing
(Decrease)/increase in cash 7 (7,290) (2,232) 1,551
Free cash flow 5 43,973 40,638 85,122
Free cash flow per ordinary share 5 21.7p 18.9p 39.7p
Summarised balance sheet
as at 25 January 2004
Notes Unaudited Unaudited Audited
half year half year full year
2004 2003 2003
£000 £000 £000
(restated) (restated)
Fixed assets
Tangible assets 9 766,410 776,305 773,823
Current assets
Stocks 12,087 11,854 10,752
Assets held for sale 3,349 - -
Debtors due after more than one year - 8,053 8,448
Debtors due within one year 15,913 9,963 7,866
Cash 7,870 11,377 15,160
39,219 41,247 42,226
Creditors due within one year (138,971) (129,554) (135,361)
Net current liabilities (99,752) (88,307) (93,135)
Total assets less current liabilities 666,658 687,998 680,688
Creditors due after one year (297,313) (302,482) (299,942)
Provisions for liabilities and charges (63,555) (61,082) (62,419)
Total net assets 305,790 324,434 318,327
Capital and reserves
Called up share capital 3,975 4,295 4,149
Share premium account 127,084 125,246 126,739
Capital redemption reserve 343 - 165
Revaluation reserve 23,075 23,048 22,439
Profit and loss account 151,313 171,845 164,835
Equity shareholders' funds 10 305,790 324,434 318,327
The comparative balance sheets have been restated as disclosed in note 1.
Notes
1 Basis of preparation
The interim report for the six months ended 25 January 2004 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 27 July 2003. The
results for the year ended 27 July 2003 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. The Company has early adopted UITF abstract 38 '
Accounting for ESOP trusts' in this interim report. The adoption of this
standard represents a change in accounting policy and details are given in note
10. Comparative amounts have been restated where necessary to conform to current
presentation in that certain items have been reclassified from debtors to stock.
2 Analysis of continuing operations
Unaudited Unaudited Audited
half year half year full year
2004 2003 2003
£000 £000 £000
Turnover 388,964 350,606 730,913
Cost of sales (332,345) (299,822) (621,894)
Gross profit 56,619 50,784 109,019
Administrative expenses (18,058) (15,771) (34,036)
Operating profit 38,561 35,013 74,983
Cost of sales includes distribution costs and all pub operating costs.
3 Exceptional items
Unaudited Unaudited Audited
half year half year full year
2004 2003 2003
£000 £000 £000
Non-operating items:
Net loss on disposal of trading 3,142 - 2,732
properties
Provision against future disposals of 3,590 - -
trading properties
Net loss on disposal of non trading 366 - 956
properties
7,098 - 3,688
4 Taxation
The taxation charge for the six months ended 25 January 2004 is calculated by
applying an estimate of the effective tax rate for the year ending 25 July 2004.
The UK standard rate of corporation tax is 30% (2003: 30%), whereas the latest
estimate of the current tax payable on profits before exceptional items for the
financial year ending 25 July 2004 is 25% (2003: 24%).
Unaudited Unaudited Unaudited Unaudited Audited Audited
half year half year half year half year full year full year
2004 2004 2004 2003 2003 2003
£000 £000 £000 £000 £000 £000
Before Exceptional After Before After
exceptional items exceptional exceptional exceptional
items items items items
Current tax 6,858 53 6,911 5,230 13,317 13,387
Deferred tax 2,679 (1,543) 1,136 3,683 6,427 5,020
Tax on profit on ordinary 9,537 (1,490) 8,047 8,913 19,744 18,407
activities
5 Earnings and cash flow per share
The calculation of basic earnings per share is based on profits on ordinary
activities after taxation of £12,677,000 (2003: £16,698,000) and on 202,693,580
(2003: 214,694,977) 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:
Unaudited Unaudited
half year half year
Earnings Earnings Earnings per Earnings per
share share
2004 2003 2004 2003
£000 £000 pence pence
Earnings and basic earnings per share 12,677 16,698 6.3 7.8
Exceptional costs, net of tax 5,608 - 2.7 -
Earnings and earnings per share before 18,285 16,698 9.0 7.8
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 203,205,682
(2003: 215,159,001).
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, dividend
payments and purchase of own shares and is based on the same number of shares in
issue as that for the calculation of basic earnings per share.
6 Net cash inflow from operating activities
Unaudited Unaudited Audited
half year half year full year
2004 2003 2003
£000 £000 £000
Operating profit 38,561 35,013 74,983
Depreciation of tangible fixed assets 21,887 21,308 43,209
Change in stocks (1,335) (3,260) (2,158)
Change in debtors 674 (1,729) 207
Change in creditors 9,502 11,063 14,324
69,289 62,395 130,565
7 Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
half year half year full year
2004 2003 2003
£000 £000 £000
(Decrease)/increase in cash in the period (7,290) (2,232) 1,551
Cash outflow/(inflow) from movement in debt financing 2,392 (9,942) (7,571)
Movement in net debt during the period (4,898) (12,174) (6,020)
Opening net debt (308,860) (302,840) (302,840)
Closing net debt (313,758) (315,014) (308,860)
8 Analysis of net debt
Audited Cash Non-cash Unaudited
full year flow movement half year
2003 2004 2004
£000 £000 £000 £000
Cash at bank and in hand 15,160 (7,290) - 7,870
Debt due within one year (24,799) 24,799 (24,800) (24,800)
Debt due after one year (299,221) (22,407) 24,800 (296,828)
Net debt (308,860) (4,898) - (313,758)
9 Tangible fixed assets
Unaudited Unaudited Audited
half year half year full year
2004 2003 2003
£000 £000 £000
Opening net book value 773,823 745,041 745,041
Additions 32,002 52,572 85,911
Disposals (10,739) - (13,464)
Transfers to assets held for sale (6,789) - -
Provision - - (456)
Depreciation (21,887) (21,308) (43,209)
Closing net book value 766,410 776,305 773,823
10 Capital, reserves and shareholders' funds
Unaudited
Called up Share Capital Revaluation Profit and half year
premium reserve loss
share account redemption account 2004
capital shareholders'
reserve funds
£000 £000 £000 £000 £000 £000
At start of period as previously 4,149 126,739 165 22,439 165,136 318,628
stated
Prior year adjustment - UITF38 - - - - (301) (301)
At start of period as restated 4,149 126,739 165 22,439 164,835 318,327
Allotments 4 345 - - - 349
Transfer - - - 636 (636) -
Purchase of shares (178) - 178 - (23,052) (23,052)
Profit for the period - - - - 12,677 12,677
Dividends - - - - (2,511) (2,511)
At end of period 3,975 127,084 343 23,075 151,313 305,790
The prior year adjustment relates to the early adoption of UITF abstract 38 '
Accounting for ESOP trusts'.
11 Dividend
On 21 May 2004 the company will pay an interim dividend of 1.33 pence per share,
for the half year ended 25 January 2004 to shareholders on the register at the
close of business on 19 March 2004. The unpaid dividends in respect of the year
ended 27 July 2003 due on own shares purchased by the company have been credited
to the dividend line in the profit and loss account.
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 as at 25 January 2004, 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, including the conclusion, 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 25 January 2004.
PricewaterhouseCoopers LLP
Chartered Accountants
London
3 March 2004
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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