Interim Results - 6 Months to 30 January 2000

Wetherspoon (JD) PLC 7 March 2000 J D Wetherspoon plc announces interim results for the six months to 30 January 2000. Highlights Turnover up 44% to £174.7m Profit before tax up 34% to £15.6m Earnings per share up 29% to 7.5p Interim dividend per share up 10% to 0.91p 45 new pubs opened, total now 372 Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc, said: 'I am pleased to report further substantial progress for the Company during the half year. We opened 45 pubs during the period bringing the total number to 372. The current encouraging trading performance, the further supply of good sites in the pipeline and our continuing efforts to make the business more competitive give confidence in 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 0956 392234 Chairman's statement I am pleased to report further substantial progress for the Company during the half year. Sales increased by 44% to £174.7 million. Operating profit, before the impact of increased property rentals on last year's sale and leaseback of freehold properties, increased by 40% to £24.9 million and profit before tax by 34% to £15.6million. Earnings per share rose by 29% to 7.5p. Capital investment was £79.0 million and net gearing at the period end was 77%. Interest was covered 3.8 times by operating profits. Operating margins were 14.3% compared to 14.7% last year, with higher wages and bonus payments offset by a reduction in other costs as a percentage of turnover. Free cashflow, after capital investment of £6.6 million in existing pubs and payments of tax, interest and dividends, increased by 52% to £22.2 million resulting in cashflow per share of 11.2p 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 32% to £18.4 million. Dividends The Board has declared an interim dividend of 0.91p, a 10% increase on last year. A scrip alternative will again be offered to shareholders. Further Progress We opened 45 pubs during the period bringing the total number to 372. The new pubs, as in recent years, include major cities such as Cardiff and Plymouth, as well as smaller towns like Rochester, Port Talbot, Saltcoats and Kirkcaldy. Initial trading levels at these pubs have been strong, in contrast to the relatively slow starts of the last few years. I believe our new pubs in Cambridge and Cardiff are the largest in England and Wales respectively, contributing to a 10% increase in the average size of pubs opened compared to the last financial year. Our existing pubs performed well with like-for-like sales increasing by 16.9% and like-for-like profit by 16.3%. Like-for-like sales include pubs which have been open throughout the reporting and comparative periods, apart from pubs closed for 4 consecutive days or more in either this period or the 1998/99 financial year. During the period we continued to make progress in many areas. Having satisfactorily re-negotiated our major beer supply agreements in the summer, we have now agreed improved terms for wines and spirits, crisps and nuts, soft drinks, telephone charges and a range of smaller items including serviettes, ketchup sachets and staff uniforms. We have also started a major review of pub development costs and processes in order to identify ways to improve value for money in this area. We continued our investment in staffing initiatives in order to underpin our future sales growth, which depends on attracting and retaining the best people. As well as issuing share options to 2,217 people in the last year, we paid out bonuses totalling £4million to people working in the pubs in the six month period. Each of our pubs averages six quality control visits per month by head office staff and mystery visitors. In addition, each pub receives a quarterly visit from our own health inspectors and from Egon Ronay Associates. All these visits are marked and everyone in the pubs is eligible for a monthly bonus based on the standards achieved. This concentration on standards, combined with financial benefits, is, I believe, the most comprehensive in the pub world. Food sales improved substantially in the period with like for like growth of 8%. In addition, we put in place a system whereby most head office managers worked in our kitchens for a week in November. This culminated in a successful menu launch on the 31st January incorporating many small operational improvements, including a Company-wide initiative to increase coffee and other hot drink sales. Share Placing We announced on 28th January 2000 a placing with institutional investors which raised £43.8m net of expenses. As the Company has grown, it has been financed by cashflow, loan facilities, sales and leasebacks and equity. The issue of new equity further strengthened the capital base of the Company and complemented our revised banking facilities which were put in place in September 1999. People Wetherspoon's continuing success is reliant on our ability to generate and adopt large and small ideas for improvements from people working in the Company and from our suppliers, advisors and customers. The last six months have been particularly successful in this area and I would like to thank everyone concerned for their great creativity and efforts. Prospects Like-for-like sales in February increased by 14% and total Company sales increased by 37%. The encouraging trend in pubs opened in the last couple of years continued with like-for-like sales for 1997/98 pubs increasing by 18%, and pubs opened in 1998/99 increasing by 24%, combined with an improvement in Company operating margins. We have opened 4 new pubs since the period end and the Company now has licensing permission for 67 new pubs, 38 of which are currently in the course of construction. We also have agreed terms in principle for the acquisition of a further 116 sites. Since the period end, the Company has achieved recognition for the design of its pubs by winning the CAMRA (Campaign for Real Ale) / English Heritage Pub Design Awards 1999, in the 'conversion to pub use' category. For the first time in the history of the awards two pubs owned by the same company were successful. These were The Billiard Hall in West Bromwich and The Half Moon, Mile End, London. Further information is available on the Company's website www.jdwetherspoon.co.uk The current encouraging trading performance, the further supply of good sites in the pipeline and our continuing efforts to make the business more competitive give confidence in our future prospects. Tim Martin Chairman 7 March 2000 Profit and loss account for the six months ended 30 January 2000 Unaudited Unaudited Audited full year Half year half year 2000 1999 1999 £000 £000 £000 £000 Before After exceptional exceptional items items Turnover from continuing 174,666 121,265 269,699 269,699 operations --------- --------- --------- --------- Operating profit (2) 21,090 16,731 36,226 35,389 Profit on disposal of - - - 22,625 tangible fixed assets Net interest payable (5,505) (5,116) (10,012) (10,012) --------- --------- ---------- ---------- Profit on ordinary 15,585 11,615 26,214 48,002 activities before taxation Tax on profit on (779) (201) (751) (751) ordinary activities (3) -------- --------- ---------- ---------- Profit on ordinary 14,806 11,414 25,463 47,251 activities after taxation Dividends (1,904) (1,628) (4,809) (4,809) -------- -------- ---------- --------- Retained profit 12,902 9,786 20,654 42,442 -------- -------- --------- --------- Earnings per Ordinary 2p 7.5p 5.8p 12.9p 24.0p share (4) Fully diluted earnings 7.3p 5.8p 12.8p 23.8p per share (4) Dividend per share 0.91p 0.83p 2.43p 2.43p Statement of total recognised gains and losses for the six months ended 30 January 2000 Unaudited Unaudited Audited half year half year full year 2000 1999 1999 £000 £000 £000 Profit for the financial 14,806 11,414 47,251 period after taxation Unrealised surplus on - - 1,938 revaluation of properties ------ ------ ------- Total recognised gains 14,806 11,414 49,189 relating to the period ====== ====== ======= Cash flow statement for the six months ended 30 January 2000 Unaudite Unaudited Audited d half year full year half 1999 1999 year £000 £000 £000 £000 £000 2000 £000 Net cash inflow from 37,701 37,701 27,696 27,696 60,863 60,863 operating ------- ------- ------- activities (5) Returns on investments and servicing of finance Interest 763 763 19 19 782 782 received Interest paid (7,038) (7,038) (5,618) (5,618) (12,117) (12,117) - existing business - existing businesses Interest paid (1,668) (2,046) (2,548) - new pubs ----- (1,668) - new pubs ------- ------- -------- Net cash outflow from (7,943) (7,645) (13,883) returns on ------- ------- -------- investment and servicing of finance Taxation Advance - (636) (636) corporation tax paid Corporation (399) - - tax paid ------- ------- ------- ------- (399) (399) (636) (636) (636) (636) ------- ------- ------- ------- Capital Expenditure Purchase of (6,589) (6,589) (5,174) (5,174) (8,804) (8,804) tangible fixed assets for existing pubs Proceeds of 4,395 4,155 76,526 sale of tangible fixed assets Investment in (70,890) (65,267) (106,390) new pubs and -------- -------- --------- pub extensions Net cash (73,084) (66,286) (38,668) (outflow) / -------- -------- --------- inflow from capital expenditure Equity (2,190) (2,190) (1,653) (1,653) (3,037) (3,037) dividends paid -------- -------- -------- Net cash (45,915) (48,524) 4,639 (outflow) / -------- -------- -------- inflow before financing Financing Issue of 1,567 137 973 Ordinary shares shares Advances under 212,218 40,000 50,000 secured bank loans secured bank loans Repayments of (187,882 (1,903) (5,784) secured bank ) loans Secured bank -------- ------- ------- loans - Net cash 25,903 38,234 45,189 inflow from -------- ------- ------- financing - (Decrease) / (20,012) (10,290) 49,828 increase in -------- ------- ------- cash (6) - ------- ------- ------- Free cash flow 22,248 14,634 37,051 (4) ------- ------- ------- Cash flow per 11.2p 7.4p 18.8p Ordinary 2p share (4) Summarised balance sheet as at 30 January 2000 Unaudited Unaudited Audited Half year half year full year 2000 1999 1999 £000 £000 £000 Fixed assets Tangible assets (8) 439,691 393,103 370,148 -------- -------- -------- Current assets Investments 167 286 253 Stocks 4,003 4,086 3,845 Debtors due within one year 9,788 4,732 11,472 Debtors due after more than 5,588 - 5,588 one year Cash 42,566 2,460 62,578 ------- -------- -------- 62,112 11,564 83,736 Creditors due within one year (65,157) (58,871) (67,296) -------- -------- --------- Net current assets / (3,045) (47,307) 16,440 (liabilities) -------- -------- --------- Total assets less current 436,646 345,796 386,588 liabilities Creditors due after one year (215,199) (175,484) (180,592) --------- ---------- --------- 221,447 170,312 205,996 --------- ---------- --------- Capital and reserves Called up share capital 3,990 3,947 3,962 Share premium account 67,984 64,388 65,463 Revaluation reserve 25,166 22,843 25,166 Profit and loss account 124,307 79,134 111,405 --------- --------- --------- Equity shareholders' funds 221,447 170,312 205,996 (9) --------- --------- --------- Notes 1 Basis of preparation The interim report for the six months ended 30 January 2000 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 1 August 1999. The results for the year ended 1 August 1999 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 31 January 1999 are an extract from the unaudited interim report for that period. 2 Operating profit Unaudited Unaudited Audited half year half year Full year 2000 1999 1999 £000 £000 £000 Turnover 174,666 121,265 269,699 Cost of sales (144,429) (98,058) (219,035) --------- -------- --------- Gross profit 30,237 23,207 50,664 Administrative expenses (9,147) (6,476) (15,275) --------- -------- --------- Operating profit 21,090 16,731 35,389 --------- -------- --------- Cost of sales includes distribution costs and all pub operating costs. 3 Taxation The charge to corporation tax on the trading profit of the period, net of ACT offset, was £0.779 million, and does not bear a normal relationship to profit before tax because of the availability of tax allowances relating to capital expenditure in the current and past periods. 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 £14,806,000 (1999: £11,414,000) and on 198,545,089 Ordinary shares (1999: 196,806,621), 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 203,063,102 (1999: 198,059,658). 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 the trading area of 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 into account 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. 5 Net cash inflow from operating activities Unaudited Unaudited Audited Half year half year full year 2000 1999 1999 £000 £000 £000 Operating profit 21,090 16,731 36,226 Depreciation of tangible 9,420 7,486 15,771 fixed assets Change in stocks (158) (891) (650) Change in debtors (2,100) 4,164 1,102 Change in creditors 9,449 206 8,414 ------- ------- ------- 37,701 27,696 60,863 ------- ------- ------- 6 Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Audited half year half year full year 2000 1999 1999 £000 £000 £000 (Decrease) / increase in (20,012) (10,290) 49,828 cash in the year Cash inflow from increase in (24,336) (38,097) (44,216) debt financing -------- -------- -------- Movement in net (debt) / (44,348) (48,387) 5,612 funds during the period Net debt at 1 August 1999 (125,304) (130,916) (130,916) -------- -------- -------- Net debt at 30 January 2000 (169,652) (179,303) (125,304) ======== ========= ========= 7 Analysis of net debt Audited Unaudited Full year Cash half year 1999 Flow 2000 £000 £000 £000 Cash at bank and in hand 62,578 (20,012) 42,566 Debt due within one year (10,819) 10,819 - Debt due after one year (177,063) (35,155) (212,218) --------- --------- ---------- Net debt (125,304) (44,348) (169,652) --------- --------- ---------- 8 Tangible fixed assets Unaudited Unaudited Audited Half year half year full year 2000 1999 1999 £000 £000 £000 Opening book value 370,148 334,695 334,695 Additions 78,963 67,634 109,842 Disposals 0 (1,740) (60,556) Revaluation 0 0 1,938 Depreciation (9,420) (7,486) (15,771) -------- --------- --------- Closing book value 439,691 393,103 370,148 -------- --------- --------- 9 Reconciliation of movements in shareholders' funds Unaudited Audited Called up Share Re- Profit half year Full share premium valuation and loss 2000 year capital account reserve account Share- 1999 holders' Share- funds holders £000 £000 £000 £000 £000 ' funds £000 At start of 3,962 65,463 25,166 111,405 205,996 159,192 period Allotments 28 2,521 2,549 2,424 Revaluation - 1,938 Profit for 14,806 14,806 47,251 the period Dividends (1,904) (1,904) (4,809) ------- ------- ------- -------- -------- ------- At end of 3,990 67,984 25,166 124,307 221,447 205,996 period ------- ------- ------- -------- ------- ------- 10 Dividend The dividend of 0.91p will be paid on 15 May 2000 to those shareholders who are on the register on 31 March 2000. 11 Post balance sheet event On 28 January, the company announced the issue of 9,915,000 new ordinary shares raising £43.8 million (net of expenses). Dealings in these shares commenced on 3 February 2000. Independent Review Report To J D Wetherspoon Plc Introduction We have been instructed by the company to review the financial information set out on pages 4 to 9 and we have read the other information contained in the interim report for 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 Listing Rules of the London Stock Exchange 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. 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 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 30 January 2000. PricewaterhouseCoopers Chartered Accountants London 7 March 2000

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