Interim Results
Wetherspoon (JD) PLC
01 March 2007
J D WETHERSPOON PLC
PRESS RELEASE
J D Wetherspoon plc announces interim results for the six months to 28 January
2007.
Highlights
Turnover up 8% to £438.4m (2006: £406.3m)
Operating profit up 17% to £46.3m (2006: £39.7m)
Profit before tax up 20% to £32.9m (2006: 27.4m)
Earnings per share up 37% to 14.5p (2006: 10.6p)
Free cash flow per share 17.0p (2006: 16.8p)
Interim dividend per share 4.0p (2006: 1.6p)
8 pubs opened, 3 sold, total now 662
Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc,
said:
'The half year to 28 January 2007 was a period of considerable progress for the
Company. Sales increased by 8% to £438.4 million. Earnings per share increased
by 37% to 14.5p Like-for-like sales increased by 7.4% in the period and sales at
new pubs were in line with expectations.
The Board has decided to declare an interim dividend per share of 4.0p (2006:
1.6p), an increase of 150% on last year. The Company has increased its dividend
by approximately 10% annually since our flotation in 1992. Earnings per share
have increased at a significantly higher level and the board has decided to make
this substantial adjustment, taking into account the level of sector and market
dividend cover.
Following strong like-for-like sales until Christmas, sales growth slowed in
January and February. The Company is targeting like-for-like growth in the
second half year of about 2-4%. In view of the increase in wages and utility
costs, combined with slower sales growth, the Company is cautious about the
outcome in the second half.
The Company continues to make strong efforts to improve every area of its
business and, combined with targeting continuing improvements in sales and
trading performance, and our strong cash flow, we remain confident of future
prospects'.
Enquiries:
John Hutson Chief Executive Officer 01923 477777
Jim Clarke Finance Director 01923 477777
Eddie Gershon Company spokesman 07956 392234
Photographs are available at: www.newscast.co.uk 2 March 2007
Chairman's Statement
The half year to 28 January 2007 was a period of considerable progress for the
Company. Sales increased by 8% to £438.4 million (2006: £406.3 million).
Operating profit increased by 17% to £46.3 million (2006: £39.7 million) and
profit before tax by 20% to £32.9 million (2006: £27.4 million). Earnings per
share increased by 37% to 14.5p (2006: 10.6p), a faster rate than profit due to
our share buyback programme.
Like-for-like sales increased by 7.4% in the period and sales at new pubs were
in line with expectations. The operating margin before property transactions,
interest and tax increased to 10.5% (2006: 9.8%), with higher sales leading to
improvements in this area. Net interest was covered 3.5 times (2006: 3.2 times)
by operating profit. Total capital investment was £33.2 million.
Free cash flow, after capital investment of £10.5 million in existing pubs, £1.1
million in respect of share purchases under the Company's Share Incentive Plan
and payments of tax and interest, declined to £25.6 million (2006: £28.6
million). This decline was due to higher operating profits off-set by higher
expenditure on existing pubs, a higher tax charge, timing differences in respect
of payments to trade creditors, resulting from the period ending later in the
month than in the previous year and planned increases in inventory. This
resulted in free cash flow per share of 17.0p (2006: 16.8p) before investment in
new pubs, proceeds from pub disposals and dividend payments. In the period
under review, all our new pub capital expenditure was financed from free cash
flow. In addition we purchased 7.8 million of our own shares for cancellation at
a cost of £40.8 million, with a cash outflow of £37.3 million in the period.
Dividend
The Board has decided to declare an interim dividend per share of 4.0p (2006:
1.6p), an increase of 150% on last year, payable on 25 May 2007 to shareholders
on the register at 27 April 2007. The Company has increased its dividend by
approximately 10% annually since our flotation in 1992. Earnings per share have
increased at a significantly higher level and the board has decided to make this
substantial adjustment, taking into account the level of sector and market
dividend cover.
Property
The first half saw the opening of 8 new pubs with a full year target of
approximately 20. We also completed the disposal of 3 pubs, which had previously
been identified for sale, to end the half year with 662 pubs. As previously
indicated, the rate of new pub openings is expected to increase to around 30 per
annum from the new financial year.
Financing
As at 28 January 2007, the Company's total net borrowings were £385.8 million
(30 July 2006: £355.6 million) and total facilities were £472.2 million.
Profit and Share Schemes
For many years, the Company has paid a high percentage of its profits through
bonuses and share incentives to all levels of employees. In the period under
review, the company paid bonuses of £9.0 million to employees, 90% of which was
paid to people working in our pubs. In addition, we purchased £1.1 million worth
of Wetherspoon shares under the SIP Scheme; taking into account previous
purchases made, this results in a total pool of shares held on behalf of
employees worth £23 million. Pubs depend, above all, on high levels of service,
and these profit and share schemes help us to achieve the highest level of
average sales of any substantial pub company.
Marketing and Product Range
The Company continues to extend the scope and range of its products and
services. Average sales per pub have expanded from approximately £500,000 per
annum at the time of our flotation to an annualised rate of approximately £1.36
million per annum in the current year. During this time food sales have
increased from about £500 per week to about £6,700 per week at the current time.
Including drinks sales which accompany a meal, approximately 50% of our overall
sales now relate to food. In addition, in the last couple of years, we have
sought to increase coffee sales and are currently selling approximately 450,000
coffees per week. We have also extended our opening hours and are offering
breakfasts and sell approximately 230,000 of these per week.
As regards our drinks offers, we are currently placing a strong emphasis on
traditional ale sales and sell approximately 33 million pints of real ale per
annum. Ale volumes are currently growing by around 5%. We have also introduced a
number of products rarely available in British pubs including our top selling
cider Kopparberg, the number one Swedish cider; Wetherspoon sells more
Kopparberg than anyone in the world, including Sweden. Our fastest growing
bottled beer range comes from Poland and we have also introduced a range of
guest lagers on draught from around the world. This selection of bar products,
combined with our substantial investment in new technology for keeping beer at
the required temperature throughout the year, will help us to gain a commercial
advantage in the future.
Non-Smoking
The Company now operates 61 non-smoking pubs outside Scotland, which have either
been converted from 'smoking pubs' or have opened in the last couple of years as
non-smoking pubs. The converted pubs showed substantial declines in sales and
profits in the year following their conversion, but have shown encouraging
like-for-like sales and profits growth, above the Company average, in the period
under review. Scottish pubs, in which smoking was banned by legislation in March
2006, have performed at a better level than expected, with like-for-like sales
increasing by 5% in the period under review, and with profits at the same level
as the previous year.
Current trading and prospects
Following strong like-for-like sales until Christmas, sales growth slowed in
January and February. The Company is targeting like-for-like growth in the
second half year of about 2-4%. In view of the increase in wages and utility
costs, combined with slower sales growth, the Company is cautious about the
outcome in the second half.
The Company is also investing in existing pubs at a higher level than in the
corresponding period, particularly relating to preparations for the smoking ban.
This includes considerable upgrades to our kitchens and the installation of new
beer cellar technology referred to above which will enable us to achieve
consistently lower temperatures than our competitors for ciders, lagers and
wine.
The Company continues to make strong efforts to improve every area of its
business and, combined with targeting continuing improvements in sales and
trading performance, and our strong cash flow, we remain confident of future
prospects.
Tim Martin
Chairman
2 March 2007
Income statement for the 26 weeks ended 28 January 2007
Notes Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
28 January 22 January 30 July
2007 2006 2006
£000 £000 £000
Revenue 2 438,374 406,326 847,516
Operating costs (392,103) (366,634) (763,900)
39,692 83,616
Operating profit 3 46,271 39,692 83,616
Finance income 27 28 124
Finance costs (13,425) (12,367) (25,352)
Profit before tax 32,873 27,353 58,388
Taxation 4 (11,130) (9,281) (18,487)
Profit for the period 21,743 18,072 39,901
Earnings per share (pence)
Earnings per ordinary share 5 14.5 10.6 24.1
Diluted earnings per share 5 14.4 10.6 24.0
Ordinary dividends declared in respect of the period 5,902 2,618 -
Interim dividend for 2006/07 - 4.0p (2005/06 - 1.6p)
Ordinary dividends declared and paid in the period 4,537 4,749 4,749
Final dividend for 2005/06 - 3.1p (2004/05 -2.82p)
Interim dividend for 2005/06 - 1.6p - - 2,618
All activities relate to continuing operations.
Statement of recognised income and expense
Unaudited (Restated) Audited
26 weeks ended Unaudited 53 weeks ended
28 January 2007 26 weeks ended 30 July 2006
£000 22 January £000
2006
£000
Cash flow hedges: gain taken to equity 3,657 1,649 4,871
Tax on items taken directly to equity (1,096) (495) (1,462)
Net gain recognised directly in equity 2,561 1,154 3,409
Profit for the period 21,743 18,072 39,901
Total recognised income for the period 24,304 19,226 43,310
Cash flow statement for the 26 weeks ended 28 January 2007
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 53 weeks 53 weeks
ended ended ended ended ended ended
28 January 28 January 22 January 22 January 30 July 30 July
2007 2007 2006 2006 2006 2006
£000 £000 £000 £000 £000 £000
Cash flows from operating
activities
Cash generated from operations 6 60,273 60,273 60,826 60,826 133,366 133,366
Interest received 27 27 125 125 290 290
Interest paid (13,025) (13,025) (15,625) (15,625) (23,441) (23,441)
Refinancing costs paid - - (1,367) (1,367) (1,412) (1,412)
Corporation tax paid (10,103) (10,103) (6,850) (6,850) (14,812) (14,812)
Purchase of own shares for share (1,053) (1,053) (1,765) (1,765) (3,469) (3,469)
based payments
Net cash inflow from operating 36,119 36,119 35,344 35,344 90,522 90,522
activities
Cash flows from investing
activities
Purchase of property, plant and (10,548) (10,548) (6,695) (6,695) (20,810) (20,810)
equipment and intangible assets
for existing pubs
Proceeds of sale of property, 3,773 2,448 4,645
plant and equipment
Investment in new pubs and pub (22,686) (9,242) (16,766)
extensions
Net cash outflow from investing (29,461) (13,489) (32,931)
activities
Cash flows from financing
activities
Equity dividends paid 8 (4,537) (4,749) (7,367)
Issue of ordinary shares 4,954 1,082 6,974
Purchase of own shares (37,288) (24,042) (78,683)
Advances under bank loans 28,106 286,786 304,504
Repayments under bank loans - (280,000) (280,000)
Net cash outflow from financing (8,765) (20,923) (54,572)
activities
Net (decrease)/increase in cash (2,107) 932 3,019
and cash equivalents
Opening cash and cash equivalents 21,092 18,073 18,073
Closing cash and cash equivalents 18,985 19,005 21,092
Free cash flow 25,571 28,649 69,712
Free cash flow per ordinary share 5 17.0p 16.8p 42.1p
Balance sheet as at 28 January 2007
Notes Unaudited 28 (Restated) Audited
January Unaudited 22 30 July
2007 January 2006 2006
£000 £000 £000
Assets
Non-current assets
Property, plant and equipment 751,868 747,535 743,826
Intangible assets 2,831 2,929 2,858
Other non-current assets 10,756 9,352 10,004
Total non-current assets 765,455 759,816 756,688
Current assets
Inventories 18,129 13,639 13,688
Trade and other receivables 12,174 16,158 10,027
Cash and cash equivalents 18,985 19,005 21,092
Total current assets 49,288 48,802 44,807
Assets held for sale 923 - 2,431
Total assets 815,666 808,618 803,926
Liabilities
Current liabilities
Trade and other payables (118,234) (110,106) (118,130)
Current income tax liabilities (10,679) (9,079) (10,809)
Total current liabilities (128,913) (119,185) (128,939)
Non-current liabilities
Financial liabilities (392,720) (357,914) (368,717)
Derivative financial instruments (15,603) (11,464) (15,156)
Deferred tax liabilities (85,970) (84,445) (82,958)
Provisions and other liabilities (6,620) (6,718) (6,581)
Total non-current liabilities (500,913) (460,541) (473,412)
Net assets 185,840 228,892 201,575
Shareholders' equity
Ordinary shares 2,951 3,312 3,076
Share premium account 140,455 129,679 135,532
Capital redemption reserve 1,461 1,030 1,305
Retained earnings 40,973 94,871 61,662
Total shareholders' equity 9 185,840 228,892 201,575
Notes
1 Interim statement
Basis of preparation
This interim statement of JD Wetherspoon plc (the 'Company'), which is abridged
and unaudited, has been prepared in accordance with International Financial
Reporting Standards expected to apply at 29 July 2007 and which were applied at
30 July 2006.
As permitted this interim report has been prepared in accordance with UK listing
rules and not in accordance with IAS 34 'Interim Financial Reporting'.
Certain balances in the comparative income statement have been reclassified to
reflect the correct accounting treatment of fair value hedges in line with the
requirements of IAS 39.
The financial information for the year ended 30 July 2006 is extracted from the
statutory accounts of the Company for that year and does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. These
published accounts were reported on by the auditors without qualification or
restatement under Sections 237(2) or (3) of the Companies Act 1985 and have been
delivered to the Registrar of Companies.
The interim accounts for the six months ended 28 January 2007 and the
comparatives to 22 January 2006 are unaudited but have been reviewed by the
auditors. A copy of the review report is included at the end of this report.
2 Revenue
Revenue disclosed in the income statement is analysed as follows: Unaudited Unaudited Audited 53
26 weeks ended 26 weeks ended weeks ended
28 January 22 January 30 July 2006
2007 2006 £000
£000 £000
Sales of goods and services 438,374 406,326 847,516
The company trades in one business segment, (that of public houses) and one
geographical segment, being the United Kingdom.
3 Operating profit
This is stated after charging/crediting: Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks
28 January 22 January ended
2007 2006 30 July
2006
£000 £000 £000
Operating lease payments:
- property rents 26,242 25,597 52,808
- equipment and vehicles 89 102 195
Repairs and maintenance 15,445 14,855 32,948
Rent receivable (169) (311) (545)
Depreciation of property, plant and equipment 21,127 20,501 42,127
Amortisation of intangible assets 543 540 1,079
Amortisation of non-current assets 250 95 187
Share based-payments charge 1,352 811 2,480
Profit on disposal of trading properties 829 - -
Impairment of fixed assets (618) - -
4 Taxation
The taxation charge for the six months ended 28 January 2007 is calculated by
applying an estimate of the effective tax rate of 33.9% for the year ending 29
July 2007 (2006: 31.7%). The UK standard rate of corporation tax is 30% (2006:
30%), and the latest estimate of the current tax payable on profits for the
financial year ending 29 July 2007 is 30% (2006: 31%).
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
28 January 22 January 30 July
2007 2006 2006
£000 £000 £000
Current tax 9,973 8,373 18,065
Deferred tax 1,157 908 422
Tax charge in the income statement 11,130 9,281 18,487
5 Earnings and cash flow per share
Basic earnings per share has been calculated by dividing the profit attributable
to equity holders of £21,743,000 (January 2006: £18,072,000; July 2006:
£39,901,000) by the weighted average number of shares in issue during the year
of 149,989,023 (January 2006: 170,220,787; July 2006: 165,694,582).
Diluted earnings per share has been calculated on a similar basis, taking
account of 915,222 (January 2006: 316,553; July 2006: 545,980) dilutive
potential shares under option, giving a weighted average number of ordinary
shares adjusted for the effect of dilution of 150,904,245 (January 2006:
170,537,340; July 2006: 166,240,832).
Earnings per share
Unaudited Unaudited Audited
26 weeks 26 weeks 53 weeks
ended ended ended
28 January 22 January 30 July
2007 2006 2006
Profit for the period (£000) 21,743 18,072 39,901
Basic earnings per shares 14.5p 10.6p 24.1p
Diluted earnings per share 14.4p 10.6p 24.0p
Cash flow per share
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, tax, all other reinvestment
in pubs open at the start of the period and the purchase of own shares under the
employee Share Incentive Plan ('free cash flow'). It is calculated before taking
account of proceeds from property disposals and inflows of financing from
outside sources, dividend payments and is based on the same number of shares in
issue as that for the calculation of basic earnings per share.
6 Cash generated from operations
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks
28 January 2007 22 January 2006 ended
30 July 2006
£000 £000 £000
Profit attributable to shareholders 21,743 18,072 39,901
Adjusted for:
Tax 11,130 9,281 18,487
Amortisation of intangible assets 543 540 1,079
Depreciation of property, plant and equipment 21,127 20,501 42,127
Lease premium amortisation 250 95 187
Impairment of fixed assets 618
Profit on disposal of trading properties (829)
Share-based payments charge 1,352 811 2,480
Interest income (27) (28) (124)
Interest expense 13,283 12,367 25,176
Amortisation of bank loan issue costs 142 - 176
69,332 61,639 129,489
Change in inventories (4,441) (862) (911)
Change in receivables (2,149) (1,536) 2,003
Change in payables (2,469) 1,585 2,785
Net cash inflow from operating activities 60,273 60,826 133,366
7 Analysis of changes in net debt
30 July 2006 Cash flows Non-cash 28 January 2007
movement £000
£000 £000 £000
Cash in bank and in hand 21,092 (2,107) - 18,985
Debt due after one year (368,717) (24,003) - (392,720)
Derivative financial instrument - fair value hedge (8,005) - (4,104) (12,109)
Net borrowings (355,630) (26,110) (4,104) (385,844)
Derivative financial instrument - cash flow hedge (7,151) - 3,657 (3,494)
Net debt (362,781) (26,110) (447) (389,338)
8 Dividends paid and proposed
Unaudited Unaudited Audited
26 weeks ended 26 weeks ended 53 weeks
28 January 22 January ended
30 July
2007 2006 2006
£000 £000 £000
Declared and paid in the period
Final dividend for 2005/06 - 3.1p (2004/05 - 2.82p) 4,537 4,749 4,749
Interim dividend for 2005/06 - 1.6p - - 2,618
Dividends paid 4,537 4,749 7,367
Dividends per share declared in respect of the period
Final dividend - - 3.1p
Interim dividend 4.0p 1.6p 1.6p
4.0p 1.6p 4.7p
On 25 May 2007 the Company will pay an interim dividend of 4.0 pence per share,
for the half year ended 28 January 2007 to shareholders on the register at the
close of business on 27 April 2007.
9. Statement of changes in shareholders' equity
Unaudited Unaudited Audited
28 January 22 January 30 July
2007 2006 2006
£000 £000 £000
At beginning of period as previously reported 201,575 246,745 246,745
Effect of adopting IAS 32 and IAS 39 - (8,415) (8,415)
At beginning of period (restated) 201,575 238,330 238,330
Exercise of options 4,954 1,082 6,974
Re-purchase of shares (40,755) (24,042) (78,683)
Share based payments charge 1,352 811 2,480
Purchase of shares held in trust (1,053) (1,766) (3,469)
Profit for the period 21,743 18,072 39,901
Cash flow hedges: profit taken to equity 3,657 1,649 4,871
Tax on items taken directly to equity (1,096) (495) (1,462)
Dividends (4,537) (4,749) (7,367)
Closing shareholders' equity 185,840 228,892 201,575
Independent review report to JD Wetherspoon plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 28 January 2007 which comprises the interim balance sheet
as at 28 January 2007 and the related interim statements of income, cash flows
and changes in shareholders' equity for the six months then ended and related
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 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.
This interim report has been prepared in accordance with the basis set out in
Note 1.
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 disclosed accounting policies have been applied.
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 and therefore provides a lower level of assurance. 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 28 January 2007.
PricewaterhouseCoopers LLP
Chartered Accountants
London
2 March 2007
Notes:
(a) The maintenance and integrity of the JD Wetherspoon plc web site 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 web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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