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RNS
Wetherspoon (JD) PLC  -  JDW   

Preliminary Results

Released 07:00 14-Sep-2018

RNS Number : 7531A
Wetherspoon (JD) PLC
14 September 2018
 

14 September 2018

 

J D WETHERSPOON PLC

PRELIMINARY RESULTS

(For the 52 weeks ended 29 July 2018)

 

FINANCIAL HIGHLIGHTS

Var%

Var%**

 

 

 

Before exceptional items

 

 

-     Like-for-like sales

+5.0%

 

-     Revenue £1,693.8m (2017: £1,660.8m)

+2.0%

+4.2%

-     Profit before tax £107.2m (2017: £102.8m)

+4.3%

+6.2%

-     Operating profit £132.3m  (2017: £128.5m)

+2.9%

+4.8%

-     Earnings per share (including shares held in trust)

-     79.2p (2017: 69.2p)

+14.5%

 

-     Free cash flow per share 88.4p (2017: 97.0p)

-8.9%

 

-     Full year dividend 12.0p (2017: 12.0p)

Maintained

 

 

 

 

After exceptional items*

 

 

-     Profit before tax £89.0m (2017: £76.4m)

+16.5%

+18.6%

-     Operating profit £132.3m (2017: £128.5m)

+2.9%

+4.8%

-     Earnings per share (including shares held in trust)

-     63.2p (2017: 50.8p***)

+24.4%

 

 

* Exceptional items as disclosed in account note 4.

** Excluding week 53.

*** Exceptional deferred tax has been restated. See note 7 for further details

 

 

Commenting on the results, Tim Martin, the Chairman of

J D Wetherspoon plc, said:

 

"There will be a huge gain for business and consumers if the UK copies the free trade approach of countries like Singapore, Switzerland, New Zealand, Australia, Canada and Israel, by slashing protectionist EU import taxes ('tariffs'), on leaving the EU in March next year.

 

"These invisible tariffs are charged on over 12,000 non-EU products, including rice, oranges, coffee, wine and children's clothes. The proceeds are collected by the UK taxman and sent to Brussels.

 

"Ending tariffs will reduce shop and pub prices, improve living standards, and will help non-EU suppliers, currently discouraged by tariffs, quotas and the extensive paraphernalia of EU protectionism.

 

"If parliament votes to end tariffs and rejects the 'Chequers Deal', consumers and business will benefit additionally by avoiding a cost of £39 billion, or £60 million per UK constituency, in respect of the EU 'divorce payment' - for which there is no legal obligation.

 

"Parliament can also regain control of UK fishing waters, where 60% of the catch is currently taken by EU boats.

 

"Unfortunately, some individuals, businesses and business organisations have mistakenly, or misleadingly, repeated the myth that food prices will rise without a 'deal' with the EU.

 

"In fact, the only way prices can rise post-Brexit is if parliament votes to impose tariffs. The EU will have no say in the matter, provided that the government does not sign away the UK's rights in a 'deal' in the meantime.

 

"An article on this subject, which has appeared in several pub trade publications, can be found in appendix 1 below.

 

"Like-for-like sales in the six weeks to 9 September increased by 5.5%. The company has had a reasonable start to the financial year, but taxes, labour and interest costs are expected to be higher than those of last year, so we estimate that like-for-like sales growth of about 4.0% will be required for the company to match last year's record profits."

 

Enquiries:

 

John Hutson                           Chief Executive Officer         01923 477777

Ben Whitley                            Finance Director                   01923 477777

Eddie Gershon                       Company spokesman           07956 392234

 

Photographs are available at: www.newscast.co.uk          

 

 

Notes to editors

1.         J D Wetherspoon owns and operates pubs throughout the UK. The Company aims to provide customers with good-quality food and drink, served by well-trained and friendly staff, at reasonable prices.  The pubs are individually designed and the Company aims to maintain them in excellent condition.

2.         Visit our website jdwetherspoon.com

3.         This announcement, which does not constitute the Company's annual report for the 52 weeks ended 29 July 2018, has been prepared solely to provide additional information to the shareholders of J D Wetherspoon, in order to meet the requirements of the UK Listing Authority's Disclosure and Transparency Rules.  It should not be relied on by any other party, for other purposes.  Forward-looking statements have been made by the directors in good faith using information available up until the date that they approved this statement.  Forward-looking statements should be regarded with caution because of inherent uncertainties in economic trends and business risks.

4.         The annual report and financial statements 2018 has been published on the Company's website on 14 September 2018.

5.         The current financial year comprises 52 trading weeks to 28 July 2019.

6.         The next trading update will be issued on 7 November 2018.

 

 

CHAIRMAN'S STATEMENT

 

Financial performance

 

I am pleased to report a year of progress for the company, with record sales, profit and earnings per share before exceptional items. The company was founded in 1979 - and this is the 35th year since incorporation in 1983. The table below outlines some

key aspects of our performance during that period. Since our flotation in 1992, earnings per share before exceptional items have grown by an average of 15.4% per annum and free cash flow per share by an average of 15.5%.

 

Summary accounts for the years ended July 1984 to 2018

 

 

 

 

 

 

 

 

Financial year

Total sales

Profit/(loss)

Earnings

Free cash flow

Free cash flow

 

 

 

before tax and exceptional items

per share before exceptional items

 

per share

 

 

£000

£000

pence

£000

pence

 

1984

818

(7)

0

 

 

 

1985

1,890

185

0.2

 

 

 

1986

2,197

219

0.2

 

 

 

1987

3,357

382

0.3

 

 

 

1988

3,709

248

0.3

 

 

 

1989

5,584

789

0.6

915

0.4

 

1990

7,047

603

0.4

732

0.4

 

1991

13,192

1,098

0.8

1,236

0.6

 

1992

21,380

2,020

1.9

3,563

2.1

 

1993

30,800

4,171

3.3

5,079

3.9

 

1994

46,600

6,477

3.6

5,837

3.6

 

1995

68,536

9,713

4.9

13,495

7.4

 

1996

100,480

15,200

7.8

20,968

11.2

 

1997

139,444

17,566

8.7

28,027

14.4

 

1998

188,515

20,165

9.9

28,448

14.5

 

1999

269,699

26,214

12.9

40,088

20.3

 

2000

369,628

36,052

11.8

49,296

24.2

 

2001

483,968

44,317

14.2

61,197

29.1

 

2002

601,295

53,568

16.6

71,370

33.5

 

2003

730,913

56,139

17.0

83,097

38.8

 

2004

787,126

54,074

17.7

73,477

36.7

 

2005

809,861

47,177

16.9

68,774

37.1

 

2006

847,516

58,388

24.1

69,712

42.1

 

2007

888,473

62,024

28.1

52,379

35.6

 

2008

907,500

58,228

27.6

71,411

50.6

 

2009

955,119

66,155

32.6

99,494

71.7

 

2010

996,327

71,015

36.0

71,344

52.9

 

2011

1,072,014

66,781

34.1

78,818

57.7

 

2012

1,197,129

72,363

39.8

91,542

70.4

 

2013

1,280,929

76,943

44.8

65,349

51.8

 

2014

1,409,333

79,362

47.0

92,850

74.1

 

2015

1,513,923

77,798

47.0

109,778

89.8

 

2016

1,595,197

80,610

48.3

90,485

76.7

 

2017

1,660,750

102,830

69.2

107,936

97.0

 

2018

1,693,818

107,249

79.2

93,357

88.4

 

 

 

 

 

Notes

Adjustments to statutory numbers

1. Where appropriate, the earnings per share (EPS), as disclosed in the statutory accounts, have been recalculated to take account of share splits, the issue of new shares and capitalisation issues.

2. Free cash flow per share excludes dividends paid which were included in the free cash flow calculations in the annual report and accounts for the years 1995-2000.

3. The weighted average number of shares, EPS and free cash flow per share include those shares held in trust for employee share schemes.

4. Before 2005, the accounts were prepared under UKGAAP. All accounts from 2005 to date have been prepared under IFRS.

5. Apart from the items in notes 1 to 4, all numbers are as reported in each year's published accounts.

 

 

 

 

The comparisons below, unless stated, compare the 52-week period under review with the 53-week prior year.

 

Like-for-like sales, adjusted for 52 weeks, increased by 5.0% (2017: 4.0%). Total sales were £1,693.8m, an increase of 2.0% (2017: 4.1%). Like-for-like bar sales increased by 5.1% (2017: 3.1%), food sales by 5.1% (2017: 5.7%) and slot/fruit machine sales by 2.9% (2017: decreased by 1.2%). Hotel room sales increased by 2.3% (2017: 9.9%).

 

Operating profit, before exceptional items, increased by 2.9% to £132.3m (2017: £128.5m). The operating margin, before exceptional items, increased to 7.8% (2017: 7.7%).

 

Profit before tax and exceptional items increased by 4.3% to £107.2m (2017: £102.8m). Earnings per share (including shares held in trust by the employee share scheme), before exceptional items, were 79.2p (2017: 69.2p).

 

Net interest was covered 4.8 times by operating profit before interest, tax and exceptional items (2017: 4.6 times). Total capital investment was £110.1m in the period (2017: £208.1m). £35.9m was invested in new pubs and pub extensions (2017: £46.9m), £64.7m in existing pubs and IT (2017: £65.9m) and £9.5m in the acquisition of freehold reversions, where Wetherspoon was already a tenant (2017: £95.3m).

 

Exceptional items totalled £17.0m (2017: £20.4m), relating to pub disposals and closures. There was an £8.7m loss on disposal and an impairment charge of £9.6m for closed sites, underperforming pubs and onerous leases.

 

There were £1.3m of exceptional tax credits, owing to a reduction in the UK corporation tax rate, which creates tax credits for future years.

 

The total cash effect of exceptional items is a cash outflow of £0.6m.

 

Free cash flow, after capital payments of £68.9m for existing pubs (2017: £58.6m), £13.6m for share purchases for employees (2017: £10.4m) and payments of tax and interest, decreased by £14.6m to £93.4m (2017: £107.9 m). Free cash flow per share was 88.4p (2017: 97.0p).

 

Dividends and return of capital

The board proposes, subject to shareholders' approval, to pay an unchanged final dividend of 8.0p per share, on 29 November 2018, to shareholders on the register on 26 October 2018, giving an unchanged total dividend for the year of 12.0p per share. The dividend is covered 5.3 times (2017: 4.2 times).

 

In view of the level of capital expenditure and the potential for investments, the board has decided to maintain the dividend at its current level for the time being.

 

During the year, 3,497,500 shares (3.21% of the share capital) were purchased by the company for cancellation, at a cost of £36.2m, an average cost per share of 1,025p.

 

Over the last 12 years, my shareholding has increased from 21.2% to 31.9%, as a result of the company's share 'buybacks'. The company has in place a rule 9 'whitewash', under the UK City Code on Takeovers and Mergers, allowing further buybacks. At the Annual General Meeting this year, the company will seek approval for a renewal of the whitewash.

 

Financing

As at 29 July 2018, the company's total net debt, excluding derivatives, was £726.2m (2017: £696.3m), an increase of £29.9m.

 

Year-end net-debt-to-EBITDA was 3.39 times (2017: 3.39 times).

 

As at 29 July 2018, the company had £133.9m (2017: £163.9m) of unutilised banking facilities and cash or cash equivalents, with total facilities of £860.0m (2017: £860.0m).

 

Existing interest-rate swaps for £600m remain in place, and an additional £95m swap was added in the period.

 

Corporation tax

The current tax charge (ie the cash the company will pay to HMRC) for the period is £23.7m (2017: £24.6m), benefiting from a reduction in the rate of corporation tax and a small credit relating to previous periods. The 'accounting' tax charge, which appears in the income statement, is £23.6m (2017: £25.8m).

 

 

VAT equality

The government would generate more revenue and jobs if it were to create tax equality among supermarkets, pubs and restaurants. Supermarkets pay virtually no VAT in respect of food sales, whereas pubs pay 20%. This has enabled supermarkets to subsidise the price of alcoholic drinks, widening the price gap to the detriment of pubs and restaurants.

 

Pubs also pay around 20 pence a pint in business rates, whereas supermarkets pay only about 2 pence, creating further inequality.

 

Pubs have lost 50% of their beer sales to supermarkets in the last 35 or so years.

 

It makes no sense for supermarkets to be treated more leniently than pubs, since pubs generate far more jobs per pint or meal than supermarkets do, as well as far higher levels of tax. Pubs also make an important contribution to the social life of many communities and have better visibility and control of those who consume alcoholic drinks.

 

Tax equality is particularly important for residents of less affluent areas, since the tax differential is more important there - people can less afford to pay the difference in prices between the on and off trade.

 

As a result, there are often fewer pubs, coffee shops and restaurants, with less employment and increased high-street dereliction, in less affluent areas.

 

Tax equality would also be in line with the principle of fairness in applying taxes to different businesses.

 

Contribution to the economy

Wetherspoon is proud to pay its share of tax and, in this respect, is a major contributor to the economy. In the year under review, we paid total taxes of £728.8m, an increase of £34.2m, compared with the previous year, which equates to approximately 43% of our sales.

 

This means an average payment per pub of £825,000 per annum or £15,900 per week.

 

 

2018

2017

 

£m

£m

VAT

332.8

323.4

Alcohol duty

175.9

167.2

PAYE and NIC

109.2

96.2

Business rates

55.6

53.0

Corporation tax

26.1

20.7

Machine duty

10.5

10.5

Climate change levy

9.2

9.7

Carbon tax

3.0

3.4

Fuel duty

2.1

2.1

Landfill tax

1.7

2.5

Stamp duty

1.2

5.1

Sugar tax

0.8

-

Premise licence and TV licences

0.7

0.8

TOTAL TAX

728.8

694.6

Tax per pub (£000)

825.0

768.4

Tax as % of net sales

43.0%

41.8%

Pre-exceptional profit after tax

83.7

77.0

Profit after tax as % of sales

4.9%

4.6%

 

 

Corporate governance

The 2016 statement contained a detailed critique of corporate governance rules. There has been almost no disagreement from shareholders on the issues raised then.

 

Wetherspoon has a significant competitive edge in governance, since all of our directors, bar one, were in situ at the time of the last financial crisis.

 

In contrast, most PLCs are more vulnerable, since the average tenure of CEOs and non-executives is about five years, largely as a result of governance rules. This 'institutionalising' of inexperience seems wrong.

 

Most corporate governance bodies disapprove of my own role as chairman, since I am not regarded as 'independent', although shareholders have not followed their advice in the past. The 'Catch-22' is that most non-executives have little option but to comply with these 'rules', since boards are criticised for non-adherence.

 

Further progress

As always, the company has tried to improve as many areas of the business as possible, on a week-to-week basis, rather than aiming for 'big ideas' or grand strategies. Frequent calls on pubs by senior executives, the encouragement of criticism from pub staff and customers and the involvement of pub and area managers, among others, in weekly decisions, are the keys to success.

 

We now have 807 pubs rated on the Food Standards Agency's website - the average score is 4.97, with 97.3% of the pubs achieving a top rating of five stars and 2.4% receiving four stars. We believe this to be the highest average rating for any substantial pub company.

 

In the separate Scottish scheme, which records either a 'pass' or a 'fail', all of our 64 pubs have passed.

 

We paid £43m in respect of bonuses and free shares to employees in the year (a slight increase compared with the previous year), of which 97% was paid to staff below board level and 82% was paid to staff working in our pubs.

 

The company has been recognised as a Top Employer UK (2018) by The Top Employers Institute for the 15th consecutive year. The Institute said:

 

"J D Wetherspoon provides exceptional employee conditions, nurtures and develops talent throughout all levels of the organisation and has demonstrated its leadership status in the HR environment, always striving to optimise its employment practices and to develop its employees."

 

The company substantially increased the rates of pay in the period for hourly paid staff, at a cost of about £20m. The company intends to invest a further £27m from November this year.

 

Under government legislation, there are different minimum rates of pay for different age groups. The company pays in excess of the minimum rates for all age groups. The company currently pays a rate in excess of the minimum rate for over 25s to those aged 21 and over. As from 5 November 2018, this higher rate of pay will apply to all employees aged 18 and over.

 

In the field of charity, thanks to the generosity and work of our customers, pub and head-office teams, we continue to raise record amounts of money for CLIC Sargent, supporting young cancer patients and their families.

 

In the last year, we raised approximately £1.7m, bringing the total raised to over £16m - more than any other corporate partner has raised for this charity.

 

Property

The company opened six pubs during the year, with 18 sold or closed, resulting in a trading estate of 883 pubs at the financial year end.

 

The average development cost for a new pub (excluding the cost of freeholds) was £2.8m, compared with £2.3m a year ago. The full-year depreciation charge was £79.3m (2017: £73.9m). We currently intend to open about 5-10 pubs in the year ending July 2019.

 

Property litigation

As previously reported, Wetherspoon agreed on an out-of-court settlement with developer Anthony Lyons, formerly of property leisure agent Davis Coffer Lyons, in 2013 and received approximately £1.25m from Mr Lyons.

 

The payment relates to litigation in which Wetherspoon claimed that Mr Lyons had been an accessory to frauds committed by Wetherspoon's former retained agent Van de Berg and its directors Christian Braun, George Aldridge and Richard Harvey. Mr Lyons denied the claim - and the litigation was contested.

 

The claim related to properties in Portsmouth, Leytonstone and Newbury. The Portsmouth property was involved in the 2008/9 Van de Berg case itself.

 

In that case, Mr Justice Peter Smith found that Van de Berg, but not Mr Lyons (who was not a party to the case), fraudulently diverted the freehold from Wetherspoon to Moorstown Properties Limited, a company owned by Simon Conway. Moorstown leased the premises to Wetherspoon. Wetherspoon is still a leaseholder of this property - a pub called The Isambard Kingdom Brunel.

 

The properties in Leytonstone and Newbury (the other properties in the case against Mr Lyons) were not pleaded in the 2008/9 Van de Berg case. Leytonstone was leased to Wetherspoon and trades today as The Walnut Tree public house. Newbury was leased to Pelican plc and became Café Rouge.

 

As we have also reported, the company agreed to settle its final claim in this series of cases and accepted £400,000 from property investor Jason Harris, formerly of First London and now of First Urban Group. Wetherspoon alleged that Harris was an accessory to frauds committed by Van de Berg. Harris contested the claim and has not admitted liability.

 

Before the conclusion of the above cases, Wetherspoon also agreed on a settlement with Paul Ferrari of London estate agent

Ferrari Dewe & Co, in respect of properties referred to as the 'Ferrari Five' by Mr Justice Peter Smith.

 

Current trading and outlook

There will be a huge gain for business and consumers if the UK copies the free trade approach of countries like Singapore, Switzerland, New Zealand, Australia, Canada and Israel, by slashing protectionist EU import taxes ('tariffs'), on leaving the EU in March next year.

 

These invisible tariffs are charged on over 12,000 non-EU products, including rice, oranges, coffee, wine and children's clothes. The proceeds are collected by the UK taxman and sent to Brussels.

 

Ending tariffs will reduce shop and pub prices, improve living standards, and will help non-EU suppliers, currently discouraged by tariffs, quotas and the extensive paraphernalia of EU protectionism.

 

If parliament votes to end tariffs and rejects the 'Chequers Deal', consumers and business will benefit additionally by avoiding a cost of £39 billion, or £60 million per UK constituency, in respect of the EU 'divorce payment' - for which there is no legal obligation.

 

Parliament can also regain control of UK fishing waters, where 60% of the catch is currently taken by EU boats.

 

Unfortunately, some individuals, businesses and business organisations have mistakenly, or misleadingly, repeated the myth that food prices will rise without a 'deal' with the EU.

 

In fact, the only way prices can rise post-Brexit is if parliament votes to impose tariffs. The EU will have no say in the matter, provided that the government does not sign away the UK's rights in a 'deal' in the meantime.

 

An article on this subject, which has appeared in several pub trade publications, can be found in appendix 1 below.

 

Like-for-like sales in the six weeks to 9 September increased by 5.5%. The company has had a reasonable start to the financial year, but taxes, labour and interest costs are expected to be higher than those of last year, so we estimate that like-for-like sales growth of about 4.0% will be required for the company to match last year's record profits.

 

Tim Martin

Chairman
 

Tim Martin, writing in Propel, a pub trade publication:

 

Appendix 1 - Propel Newsletter, 21 August 2018, Tim Martin - free trade deal will not hike food prices, 2018

 

Opinion special: Free trade deal will not hike food prices, argues Tim Martin

 

"Like Arnold Schwarzenegger's Terminator, the cyborg assassin, fictional scare stories about food price rises post-Brexit refuse to die. For example, the Sunday Times front-page headline on 12 August said: "No deal will hike food prices by 12%."

 

The article itself said "tariffs on imports from the EU could include cheese, up by 44%, beef up by 40%, and chicken, up 22%". It quoted the chairman of a 'leading supermarket' who "warned food products imported from the EU would be hit by an average tariff of 22%" and reported "senior executives from the big four supermarkets" had made these predictions in "briefings to the Treasury".

 

The 'big four' are Tesco, Sainsbury's, Asda and Morrison's, so the reports of Treasury briefings, which haven't been denied, have clearly been authorised at the top level.

 

The briefings echo the misleading 2016 statement of Richard Baker, then chairman of Whitbread, who told the Evening Standard "failure to reach a trade deal would see tariffs… of 12% on clothes… and up to 27% on meat" and of David Tyler, then chairman of Sainsbury's, who told the Sunday Times in 2017 "if we don't get a deal and (instead) move to World Trade Organisation (WTO) rules, we could face an average tariff of 22% on foodstuffs we import from Europe". As Malcolm Walker, founder of food chain Iceland, said last week, these stories are rubbish.

 

In fact, the only way in which prices for EU imports can rise post-Brexit is if the UK government itself decides to impose taxes, also known as tariffs, on them - a sure way to lose an election. The EU has no say in the UK's import taxes after we leave.

 

Provided the government takes the sensible decision to opt for free trade, there would be no extra taxes/tariffs on EU imports. And by deciding not to impose taxes on the EU, there would be no taxes either on non-EU imports - WTO rules require all countries are treated in the same way, in the absence of a 'deal'.

 

The result of the free trade option would be a reduction in prices in shops and pubs, since the EU today charges these invisible taxes on wine, rice, coffee, oranges and more than 12,000 other non-EU products.

 

Lower prices boost living standards, but in this case they do so without affecting government income, since taxes on non-EU products today are collected by the UK and are paid to Brussels - price reductions in shops would cost the Treasury nothing.

 

In taking the free trade path, the UK would not be conducting a wild experiment. It would be following the successful approach of dynamic economies such as Singapore, Switzerland, Israel, Canada, Australia and New Zealand, which have slashed import taxes.

 

Other important benefits of free trade, disparagingly called 'no deal' by Remain spin doctors, are we regain control of the UK's fishing waters, where 60% of fish are today landed by EU boats, and we avoid the payment of £39bn to Brussels, which government lawyers have said there is no legal obligation to pay.

 

So why are the supermarkets making false claims about price rises and why are they not fighting to reduce prices? Pro-Remain ideology and ignorance are probably the answer.

 

John Allan, chairman of Tesco, like Private Frazer of Dad's Army, is renowned for his gloomy views. He said before the referendum "Brexit would ruin small firms" and, more recently, leaving the EU "too quickly would be a mess". And Allan is now president of the CBI, the employers' organisation, which strongly advocated the UK's participation in the disastrous exchange rate mechanism, the euro and staying in the EU. And Martin Scicluna, current chairman of Sainsbury's, was previously chairman of Deloitte UK, which, along with fellow accountants PWC, implored the public to vote Remain. Indeed, Deloitte Digital, part of the same company, is today urging a second referendum.

 

But the big supermarkets are playing a dangerous game, since the public implicitly expects companies to do their best for customers, by lowering prices when opportunities arise.

 

By participating in inaccurate scare stories, supermarkets appear keener on maintaining close ties to the EU, an obsession of the elite, rather than on low prices. "Pay more at the big four" is the subliminal message.

 

This approach is bad news for shareholders and customers of the big four, but is great for Aldi, Lidl, Iceland, Amazon and other 'disruptors', since they see the benefits of free trade as opportunities, not threats.

 

Once again, elite Remainers fail to understand the public is collectively far more intelligent than they are, which is why democracy works, after all."

 

Tim Martin is founder and chairman of JD Wetherspoon.

 

 

INCOME STATEMENT for the 52 weeks ended 29 July 2018

 

 

J D Wetherspoon plc, company number: 1709784

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes

52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 

 

ended

 

ended

 

ended

ended

ended

ended

 

 

29 July 2018

 

29 July 2018

 

29 July 2018

30 July 2017

30 July 2017

30 July 2017

 

 

Before

 

Exceptional

 

After

Before

Exceptional

After

 

 

exceptional

 

items

 

exceptional

exceptional

items

exceptional

 

 

items

 

(note 4)

 

items

items

(note 4)

items

 

 

£000

 

£000

 

£000

£000

£000

£000

Revenue

1

1,693,818

 

-

 

1,693,818

1,660,750

-

1,660,750

Operating costs

 

(1,561,527)

 

-

 

(1,561,527)

(1,532,242)

-

(1,532,242)

Operating profit

2

132,291

 

-

 

132,291

128,508

-

128,508

Property gains/(losses)

3

2,900

 

(18,251)

 

(15,351)

2,807

(26,868)

(24,061)

Finance income

6

48

 

-

 

48

72

402

474

Finance costs

6

(27,990)

 

-

 

(27,990)

(28,557)

-

(28,557)

Profit before tax

 

107,249

 

(18,251)

 

88,998

102,830

(26,466)

76,364

Income tax expense

7

(23,567)

 

1,278

 

(22,289)

(25,846)

6,063[3]

(19,783)[3]

Profit for the period

 

83,682

 

(16,973)

 

66,709

76,984

(20,403)[3]

56,581[3]

 

 

 

 

 

 

 

 

 

 

Earnings per share (p)

 

 

 

 

 

 

 

 

 

- Basic[1]

8

81.1

 

(16.5)

 

64.6

70.8

(18.8)[3]

52.0[3]

- Diluted[2]

8

79.2

 

(16.0)

 

63.2

69.2

(18.4)[3]

50.8[3]

 

 

 

 

 

 

 

 

 

 

Operating profit per share (p)

 

 

 

 

 

 

 

 

- Diluted[2]

8

125.3

 

-

 

125.3

115.5

-

115.5

 

 

STATEMENT OF COMPREHENSIVE INCOME for the 52 weeks ended 29 July 2018

 

 

 

Notes

52 weeks

53 weeks

 

 

 

ended

ended

 

 

 

29 July 2018

30 July 2017

 

 

 

£000

£000

Items which may be reclassified subsequently to profit or loss:

 

 

 

 

Interest-rate swaps: gain taken to other comprehensive income

 

 

14,787

24,581

Tax on items taken directly to other comprehensive income

 

7

(2,513)

(4,814)

Currency translation differences

 

 

(320)

2,104

Net gain recognised directly in other comprehensive income

 

 

11,954

21,871

Profit for the period

 

 

66,709

56,581[3]

Total comprehensive income for the period

 

 

78,663

78,452[3]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[1] Calculated excluding shares held in trust.

[2] Calculated using issued share capital which includes shares held in trust.

[3] Prior year figures have been restated to take into account adjustment of the exceptional deferred tax. Please refer to note 7 for further details.

 

 

CASH FLOW STATEMENT for the 52 weeks ended 29 July 2018

 

 

 

J D Wetherspoon plc, company number: 1709784

 

 

 

 

 

 

 

Notes

 

 

Free cash

 

Free cash

 

 

 

 

Flow[1]

 

Flow[1]

 

 

52 weeks

 

52 weeks

53 weeks

53 weeks

 

 

ended

 

ended

ended

ended

 

 

29 July 2018

 

29 July 2018

30 July 2017

30 July 2017

 

 

£000

 

£000

£000

£000

Cash flows from operating activities

 

 

 

 

 

 

Cash generated from operations

9

228,300

 

228,300

224,403

224,403

Interest received

 

36

 

36

57

57

Net exceptional finance income

 

-

 

 

402

 

Interest paid

 

(25,824)

 

(25,824)

(26,834)

(26,834)

Corporation tax paid

 

(26,113)

 

(26,113)

(20,683)

(20,683)

Net cash inflow from operating activities

 

176,399

 

176,399

177,345

176,943

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

(63,753)

 

(63,753)

(45,056)

(45,056)

Purchase of intangible assets

 

(5,166)

 

(5,166)

(13,502)

(13,502)

Investment in new pubs and pub extensions

 

(46,386)

 

 

(40,285)

 

Freehold reversions

 

(16,278)

 

 

(88,603)

 

Proceeds of sale of property, plant and equipment

4,742

 

 

19,620

 

Net cash outflow from investing activities

 

(126,841)

 

(68,919)

(167,826)

(58,558)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Equity dividends paid

11

(12,655)

 

 

(13,352)

 

Purchase of own shares for cancellation

 

(51,647)

 

 

(28,445)

 

Purchase of own shares for share-based payments

(13,605)

 

(13,605)

(10,449)

(10,449)

Advances under bank loans

10

41,314

 

 

47,236

 

Loan issue costs

10

(518)

 

(518)

-

-

Net cash outflow from financing activities

 

(37,111)

 

(14,123)

(5,010)

(10,449)

 

 

 

 

 

 

 

Net change in cash and cash equivalents

10

12,447

 

 

4,509

 

Opening cash and cash equivalents

 

50,644

 

 

46,135

 

Closing cash and cash equivalents

 

63,091

 

 

50,644

 

Free cash flow

8

 

 

93,357

 

107,936

Free cash flow per ordinary share

8

 

 

88.4p

 

97.0p

 

 

 

 

 

 

 

 

 

 

 

 

 

[1]Free cash flow is a measure not required by accounting standards; a definition is provided in our accounting policies

 

 

BALANCE SHEET as at 29 July 2018

 

J D Wetherspoon plc, company number: 1709784

 

 

 

 

 

Notes

29 July 2018

30 July 2017

24 July 2016

 

 

 

Restated[1]

Restated[1]

 

 

£000

£000

£000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

13

1,306,073

1,282,633

1,188,512

Intangible assets

12

24,779

29,691

27,051

Investment property

14

7,494

7,550

7,605

Other non-current assets

15

7,925

8,272

9,725

Derivative financial instruments

 

14,976

11,380

-

Deferred tax assets

7

4,099

6,612

11,426

Total non-current assets

 

1,365,346

1,346,138

1,244,319

 

 

 

 

 

Assets held for sale

 

1,455

1,524

950

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

23,300

21,575

19,168

Receivables

 

23,122

21,029

27,616

Cash and cash equivalents

 

63,091

50,644

46,135

Total current assets

 

109,513

93,248

92,919

Total assets

 

1,476,314

1,440,910

1,338,188

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Borrowings

 

(8,864)

(17,461)

(112)

Derivative financial instruments

 

(160)

-

(79)

Trade and other payables

 

(290,602)

(313,525)

(266,523)

Current income tax liabilities

 

(8,950)

(12,159)

(8,247)

Provisions

 

(8,052)

(5,175)

(4,463)

Total current liabilities

 

(316,628)

(348,320)

(279,424)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

 

(780,420)

(729,487)

(696,783)

Derivative financial instruments

 

(38,925)

(50,276)

(63,398)

Deferred tax liabilities

7

(38,980)

(40,122)

(45,354)

Provisions

 

(2,453)

(1,890)

(3,387)

Other liabilities

 

(12,346)

(12,383)

(13,307)

Total non-current liabilities

 

(873,124)

(834,158)

(822,229)

Net assets

 

286,562

258,432

236,535

 

 

 

 

 

Equity

 

 

 

 

Share capital

 

2,110

2,180

2,273

Share premium account

 

143,294

143,294

143,294

Capital redemption reserve

 

2,321

2,251

2,158

Hedging reserve

 

(20,010)

(32,284)

(52,051)

Currency translation reserve

 

4,767

4,899

2,340

Retained earnings

 

154,080

138,092

138,521

Total equity

 

286,562

258,432

236,535

 

The financial statements, approved by the board of directors and authorised for issue on 13 September 2018, are signed on its behalf by:

 

 

 

 

John Hutson                                                                                            Ben Whitley

Director                                                                                                   Director

 

 

[1]Deferred tax and retained earnings have been restated, see note 7 for further details.

 

 

 

 

 

STATEMENT OF CHANGES IN EQUITY

 

J D Wetherspoon plc, company number: 1709784

 

 

 

 

 

 

 

 

 

Notes

Share

Share

Capital

Hedging

Currency

Retained

Total

 

 

 

 

capital

premium

redemption

reserve

translation

earnings

 

 

 

 

 

 

account

reserve

 

reserve

 

 

 

 

 

 

£000

£000

£000

£000

£000

£000

£000

 

 

Reported at 24 July 2016

 

2,273

143,294

2,158

(52,051)

2,340

109,434

207,448

 

 

Restatement of previous periods

7

 

 

 

 

 

29,087

29,087

 

 

Restated at 24 July 2016

 

2,273

143,294

2,158

(52,051)

2,340

138,521

236,535

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

19,767

2,559

56,126

78,452

 

 

Profit for the period

 

 

 

 

 

 

56,581

56,581

 

 

Interest-rate swaps: cash flow hedges

 

 

 

 

24,581

 

 

24,581

 

 

Tax taken directly to comprehensive income

7

 

 

 

(4,814)

 

 

(4,814)

 

 

Currency translation differences

 

 

 

 

 

2,559

(455)

2,104

 

 

Purchase of own shares for cancellation

 

(93)

 

93

 

 

(43,887)

(43,887)

 

 

Share-based payment charges

 

 

 

 

 

 

10,711

10,711

 

 

Tax on share-based payments

7

 

 

 

 

 

422

422

 

 

Purchase of own shares for share-based payments

 

 

 

 

(10,449)

(10,449)

 

 

Dividends

11

 

 

 

 

 

(13,352)

(13,352)

 

 

At 30 July 2017

 

2,180

143,294

2,251

(32,284)

4,899

138,092

258,432

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

12,274

(132)

66,521

78,663

 

 

Profit for the period

 

 

 

 

 

 

66,709

66,709

 

 

Interest-rate swaps: cash flow hedges

 

 

 

 

14,787

 

 

14,787

 

 

Tax taken directly to comprehensive income

7

 

 

 

(2,513)

 

 

(2,513)

 

 

Currency translation differences

 

 

 

 

 

(132)

(188)

(320)

 

 

Purchase of own shares for cancellation

 

(70)

 

70

 

 

(36,205)

(36,205)

 

 

Share-based payment charges

 

 

 

 

 

 

11,405

11,405

 

 

Tax on share-based payments

7

 

 

 

 

 

527

527

 

 

Purchase of own shares for share-based payments

 

 

 

 

(13,605)

(13,605)

 

 

Dividends

11

 

 

 

 

 

(12,655)

(12,655)

 

 

At 29 July 2018

 

2,110

143,294

2,321

(20,010)

4,767

154,080

286,562

 

 

The balance classified as share capital represents proceeds arising on issue of the company's equity share capital,comprising 2p ordinary shares and the cancellation of shares repurchased by the company.

 

The capital redemption reserve increased owing to the purchase of a number of shares in the year.

 

Shares acquired in relation to the employee Share Incentive Plan and the Deferred Bonus Scheme are held in trust, until such time as the awards vest. At 29 July 2018, the number of shares held in trust was 2,367,991 (2017: 2,458,000), with a nominal value of £47,360 (2017: £49,160) and a market value of £28,865,810 (2017: £25,071,600); these are included in retained earnings.

 

During the year, 3,497,500 shares were repurchased by the company for cancellation, representing approximately 3.21% of the issued share capital, at a cost of £36.2m, including stamp duty, representing an average cost per share of 1,025p. At the previous year end, 30 July 2017, the company had a liability for share purchases of £15.5m, which was settled during the current year, ended 29 July 2018.

 

Hedging gain/loss arises from fair value movements in the company's financial derivative instruments, in line with the accounting policy disclosed in section 2.

 

The currency translation reserve contains the accumulated currency gains and losses on the long-term financing and balance sheet translation of the overseas branch. The currency translation difference reported in retained earnings is the restatement of the opening reserves in the overseas branch at the current year end currency exchange rate.

 

As at 29 July 2018, the company had distributable reserves of £138.8m.

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.      Revenue

 

Revenue disclosed in the income statement is analysed as follows:

 

 

 

52 weeks

53 weeks

 

ended

ended

 

29 July

30 July

 

2018

2017

 

£000

£000

 

 

 

Sales of food, beverages, hotel rooms and machine income

1,693,818

1,660,750

 

 

2.      Operating profit - analysis of costs by nature

 

This is stated after charging/(crediting):

 

 

 

52 weeks

53 weeks

 

ended

ended

 

29 July

30 July

 

2018

2017

 

£000

£000

 

 

 

 

 

 

Auditors' remuneration

52 weeks

53 weeks

 

ended

ended

 

29 July

30 July

 

2018

2017

 

£000

£000

 

 

 

 

 

 

 

 

 

 

 

Analysis of continuing operations

52 weeks

53 weeks

 

ended

ended

 

29 July

30 July

 

2018

2017

 

£000

£000

 

Included within cost of sales is £602.4m (2017: £597.8m), related to cost of inventory recognised as expense.

 

3.      Property gains and losses

 

 

52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 

ended

 

ended

 

ended

ended

ended

ended

 

29 July 2018

 

29 July 2018

 

29 July 2018

30 July 2017

30 July 2017

30 July 2017

 

Before

 

Exceptional

 

After

Before

Exceptional

After

 

exceptional

 

items

 

exceptional

exceptional

items

exceptional

 

items

 

(note 4)

 

items

items

(note 4)

items

 

£000

 

£000

 

£000

£000

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.      Exceptional items

 

 

 

52 weeks

53 weeks

 

 

ended

ended

 

 

29 July

30 July

 

 

2018

2017

 

 

£000

£000

Exceptional property losses

 

 

 

Disposal programme

 

 

 

Loss on disposal of pubs

 

8,701

18,361

Impairment property plant and equipment

 

-

5,943

Impairment of other non-current assets

 

-

141

Onerous lease reversal

 

(173)

(1,319)

Onerous lease provision

 

4,693

1,659

 

 

13,221

24,785

Other property losses

 

 

 

Impairment of property, plant and equipment

 

3,588

1,664

Impairment of other non-current assets

 

-

39

Onerous lease reversal

 

-

(696)

Onerous lease provision

 

1,442

1,076

 

 

5,030

2,083

 

 

 

 

Total exceptional property losses

 

18,251

26,868

 

 

 

 

Other exceptional items

 

 

 

Net exceptional finance income

 

-

(402)

 

 

-

(402)

 

 

 

 

Total pre-tax exceptional items

 

18,251

26,466

 

 

 

 

Exceptional tax

 

 

 

Exceptional tax items - deferred tax (note 7)

 

-

(4,155)

Tax effect on exceptional items

 

(1,278)

(1,386)

Restatement temporary differences

 

-

(2,474)

Restatement impact of change in UK tax rate

 

-

1,952

Total exceptional tax

 

(1,278)

(6,063)

 

 

 

 

Total exceptional items

 

16,973

20,403

 

Disposal programme

The company has offered several of its sites for sale. At the year end, 19 (2017: 45) sites had been sold, including sites which were closed in the previous year, one (2017: five) was classified as held for sale and an additional six (2017: three) sites have been closed as part of the disposal programme.

 

In the table above, the costs classified as loss on disposal are the losses on sold sites and associated costs to sale.

 

Onerous lease provision relates to sites which have been closed and made available for sale. A provision has been raised to cover the rental costs for the estimated period required to dispose of these sites.
 

4.      Exceptional items (continued)

 

Other property losses

Property impairment relates to the situation in which, owing to poor trading performance, pubs are unlikely to generate sufficient cash in the future to justify their current book value. In the year, an exceptional charge of £3,588,000 (2017: £1,703,000) was incurred in respect of the impairment of assets as required under IAS 36. This comprises an impairment charge of £6,898,000 (2017: £2,530,000), offset by impairment reversals of £3,310,000 (2017: £827,000).

 

The onerous lease provision relates to pubs for which future trading profits, or income from subleases, are not expected to cover the rent. The provision takes several factors into account, including the expected future profitability of the pub and also the amount estimated as payable on surrender of the lease, where this is a likely outcome. In the year, £1,442,000 (2017: £380,000) was charged net in respect of onerous leases outside of the disposal programme.

 

All exceptional items listed above generated a net cash outflow of £629,000 (2017: inflow of £12,214,000).

 

 

5.      Employee benefits expenses

 

 

 

52 weeks

53 weeks

 

 

ended

ended

 

 

29 July

30 July

 

 

2018

2017

 

 

£000

£000

Wages and salaries

 

501,229

475,420

Social Security costs

 

34,455

31,211

Other pension costs

 

4,510

3,696

Share-based payments

 

11,405

10,711

 

 

551,599

521,038

 

 

 

 

Directors' emoluments

 

2018

2017

 

 

£000

£000

Aggregate emoluments

 

1,894

2,128

Aggregate amount receivable under long-term incentive schemes

 

1,297

1,387

Company contributions to money purchase pension scheme

 

154

155

 

 

3,345

3,670

 

 

The totals below relate to the monthly average number of employees during the year, not the total number of employees at the end of the year (including directors on a service contract).

 

 

 

2018

2017

 

 

Number

Number

Full-time equivalents

 

 

 

Managerial/administration

 

4,335

3,880

Hourly paid staff

 

19,727

18,900

 

 

24,062

22,780

 

 

 

 

 

 

2018

2017

 

 

Number

Number

Total employees

 

 

 

Managerial/administration

 

4,424

4,309

Hourly paid staff

 

33,960

32,241

 

 

38,384

36,550

 

 

 

 

5.      Employee benefits expenses (continued)

 

The shares awarded as part of the above schemes are based on the cash value of the bonuses at the date of the awards. These awards vest over three years - with their cost spread equally over their three-year life. The share-based payment charge above represents the annual cost of bonuses awarded over the past three years. All awards are settled in equity.

 

The company operates two share-based compensation plans. In both schemes, the fair values of the shares granted are determined by reference to the share price at the date of the award. The shares vest at a £Nil exercise price - and there are no market-based conditions to the shares which affect their ability to vest.

 

Share-based payments

 

52 weeks

53 weeks

 

 

ended

ended

 

 

29 July

30 July

 

 

2018

2017

 

 

 

 

 

 

6.      Finance income and costs

 

 

 

52 weeks

53 weeks

 

 

ended

ended

 

 

29 July

30 July

 

 

2018

2017

 

 

£000

£000

Finance costs

 

 

 

Interest payable on bank loans and overdrafts

 

18,899

17,273

Amortisation of bank loan issue costs (note 10)

 

1,540

2,817

Interest payable on swaps

 

7,544

8,450

Interest payable on other loans

 

7

17

Total finance costs

 

27,990

28,557

 

 

 

 

Bank interest receivable

 

(48)

(72)

Total finance income

 

(48)

(72)

 

 

 

 

Net finance costs before exceptionals

 

27,942

28,485

 

 

 

 

Exceptional bank interest receivable

 

-

(402)

 

 

 

 

Net finance costs after exceptionals

 

27,942

28,083

 

The finance costs in the income statement were covered 4.8 times (2017: 4.6 times) by earnings before interest and tax, before exceptional items.

 

 

 

 

7.      Income tax expense

 

(a)   Tax on profit on ordinary activities

 

The standard rate of corporation tax in the UK is 19.00%. The company's profits for the accounting period are taxed at an effective rate of 19.00% (2017: 19.67%).

 

 

52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 

ended

 

ended

 

ended

ended

ended

ended

 

29 July 2018

 

29 July 2018

 

29 July 2018

30 July 2017

30 July 2017

30 July 2017

 

Before

 

Exceptional

 

After

Before

Exceptional

After

 

exceptional

 

items

 

exceptional

exceptional

items

exceptional

 

items

 

(note 4)

 

items

items

(note 4)

items

 

£000

 

£000

 

£000

£000

£000

£000

Taken through income statement

 

 

 

 

 

 

 

 

Current tax:

 

 

 

 

 

 

 

 

Current tax charge

24,466

 

(325)

 

24,141

24,837

161

24,998

Previous period adjustment

(765)

 

-

 

(765)

(246)

-

(246)

Total current tax

23,701

 

(325)

 

23,376

24,591

161

24,752

 

 

 

 

 

 

 

 

 

Deferred tax:

 

 

 

 

 

 

 

 

Temporary differences

(70)

 

(953)

 

(1,023)

1,103

(1,547)

(444)

Previous period adjustment

(64)

 

-

 

(64)

152

-

152

Impact of change in UK tax rate

-

 

-

 

-

-

(4,155)

(4,155)

Restatement of temporary differences

-

 

-

 

-

-

(2,474)

(2,474)

Restatement of impact of change in UK tax rate

-

 

-

 

-

-

1,952

1,952

Total deferred tax

(134)

 

(953)

 

(1,087)

1,255

(6,224)

(4,969)

 

 

 

 

 

 

 

 

 

Tax charge/(credit)

23,567

 

(1,278)

 

22,289

25,846

(6,063)

19,783

 

 

 

 

 

 

 

 

 

 

52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 

ended

 

ended

 

ended

ended

ended

ended

 

29 July 2018

 

29 July 2018

 

29 July 2018

30 July 2017

30 July 2017

30 July 2017

 

Before

 

Exceptional

 

After

Before

Exceptional

After

 

exceptional

 

items

 

exceptional

exceptional

items

exceptional

 

items

 

(note 4)

 

items

items

(note 4)

items

 

£000

 

£000

 

£000

£000

£000

£000

Taken through equity

 

 

 

 

 

 

 

 

Tax on share-based payments

 

 

 

 

 

 

 

 

Current tax

(472)

 

-

 

(472)

(159)

-

(159)

Deferred tax

(55)

 

-

 

(55)

(263)

-

(263)

Tax credit

(527)

 

-

 

(527)

(422)

-

(422)

 

 

 

 

 

 

 

 

 

 

52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 

ended

 

ended

 

ended

ended

ended

ended

 

29 July 2018

 

29 July 2018

 

29 July 2018

30 July 2017

30 July 2017

30 July 2017

 

Before

 

Exceptional

 

After

Before

Exceptional

After

 

exceptional

 

items

 

exceptional

exceptional

items

exceptional

 

items

 

(note 4)

 

items

items

(note 4)

items

 

£000

 

£000

 

£000

£000

£000

£000

Taken through comprehensive income

 

 

 

 

 

 

 

 

Deferred tax charge on swaps

2,513

 

-

 

2,513

4,835

-

4,835

Impact of change in UK tax rate

-

 

-

 

-

(21)

-

(21)

Tax charge

2,513

 

-

 

2,513

4,814

-

4,814

 

 

 

 

7.      Income tax expense (continued)

 

(b)   Reconciliation of the total tax charge

 

The taxation charge for the 52 weeks ended 29 July 2018 is based on the pre-exceptional profit before tax of £107.2m and the estimated effective tax rate before exceptional items for the 52 weeks ended 29 July 2018 of 22.0% (2017: 25.1%). This comprises a pre-exceptional current tax rate of 22.1% (2017: 23.9%) and a pre-exceptional deferred tax credit of 0.1% (2017: 1.2% charge).

 

The UK standard weighted average tax rate for the period is 19.00% (2017: 19.67%). The current tax rate is higher than the UK standard weighted average tax rate owing mainly to depreciation which is not eligible for tax relief.

 

 

52 weeks

 

52 weeks

53 weeks

53 weeks

 

ended

 

ended

ended

ended

 

29 Jul 2018

 

29 Jul 2018

30 Jul 2017

30 Jul 2017

 

Before

 

After

Before

After

 

exceptional

 

exceptional

exceptional

exceptional

 

items

 

items

items

items

 

£000

 

£000

£000

£000

Profit before tax

107,249

 

88,998

102,830

76,364

 

 

 

 

 

 

Profit multiplied by the UK standard rate of

20,377

 

16,910

20,227

15,021

corporation tax of 19.00% (2017: 19.67%)

 

 

 

 

 

Abortive acquisition costs and disposals

103

 

103

228

228

Other disallowables

117

 

2,315

1,004

2,520

Other allowable deductions

(106)

 

(106)

(83)

(83)

Capital gains - effects of reliefs

53

 

(471)

252

102

Non-qualifying depreciation

3,645

 

4,068

4,302

6,737

Restatement of the non-qualifying depreciation

-

 

-

-

(2,474)

Deduction for shares and SIPs

(61)

 

31

(156)

(137)

Remeasurement of other balance sheet items

(272)

 

(272)

(188)

(188)

Unrecognised losses in overseas companies

540

 

540

354

354

Adjustment in respect of change in tax rate

-

 

-

-

(4,155)

Restatement in respect of change in tax rate

-

 

-

-

1,952

Previous period adjustment - current tax

(765)

 

(765)

(246)

(246)

Previous period adjustment - deferred tax

(64)

 

(64)

152

152

Total tax expense reported in the income statement

23,567

 

22,289

25,846

19,783

 

(c)   Deferred tax

 

 

The deferred tax in the balance sheet is as follows:

 

The Finance Act 2017 included legislation to reduce the main rate of corporation tax to 17% for the financial year beginning 1 April 2020.

 

These changes have been substantively enacted at the balance sheet date and are consequently included in these financial statements.

 

 

Deferred tax liabilities

 

 

 

Accelerated tax

Other

Total

 

 

 

 

depreciation

temporary

 

 

 

 

 

 

differences

 

 

 

 

 

£000

£000

£000

At 30 July 2017 (restated)

 

 

 

40,684

3,601

44,285

Previous period movement posted to the income statement

 

 

 

-

11

11

Movement during period posted to the income statement

 

 

 

(506)

(25)

(531)

At 29 July 2018

 

 

 

40,178

3,587

43,765

 

 

 

 

 

 

 

Deferred tax assets

 

 

Share

Capital

Interest-rate

Total

 

 

 

based

losses

swaps

 

 

 

 

payments

carried

 

 

 

 

 

 

forward

 

 

 

 

 

£000

£000

£000

£000

At 30 July 2017

 

 

1,457

2,706

6,612

10,775

Previous period movement posted to the income statement

 

 

-

75

-

75

Movement during period posted to the income statement

 

 

(69)

561

-

492

Movement during period posted to comprehensive income

 

 

-

-

(2,513)

(2,513)

Movement during period posted to equity

 

 

55

-

-

55

At 29 July 2018

 

 

1,443

3,342

4,099

8,884

 

 

 

7.      Income tax expense (continued)

 

Deferred tax assets and liabilities have been offset as follows:

 

 

 

 

 

2018

2017

 

 

 

 

 

£000

£000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 29 July 2018, there are potential deferred tax assets of £1.3m (2017: £0.9m); these are not being recognised, owing to insufficient certainty of recovery. This comprises a deferred tax asset of £1.3m, relating to losses (2017: £1.0m), less a deferred tax liability of £Nil, relating to accelerated capital allowances (2017: £0.1m).

 

Restatement of deferred tax

As part of the company's review of the year end balance of assets subject to tax relief, the calculation of the value of the deferred tax liabilities has been reduced by £29.1m. Retained earnings have been increased by £29.1m. The adjustment is required to correct the value of assets subject to tax and thus the amount of tax relief to be deferred to future periods.

 

The comparative tax charge for the year ended 30 July 2017 has been adjusted as follows: £2m reduction to the restatement credit due to the change in corporation tax to 17% and £2.5m reduction to the deferred tax charge for the period.

 

Accelerated tax depreciation - restatement

 

 

 

Reported

Restatement

Total

 

 

 

 

£000

£000

£000

At 24 July 2016

 

 

 

73,957

(29,087)

44,870

Previous period movement posted to the income statement

 

 

 

515

-

515

Movement during period posted to the income statement

 

 

 

(48)

(2,474)

(2,522)

Impact of tax rate change posted to the income statement

 

 

 

(4,131)

1,952

(2,179)

At 30 July 2017

 

 

 

70,293

(29,609)

40,684

 

 

8.      Earnings and free cash flow per share

 

(a)     Weighted average number of shares

 

Earnings per share are based on the weighted average number of shares in issue of 105,605,135 (2017: 111,293,971), including those held in trust in respect of employee share schemes. Earnings per share, calculated on this basis, are usually referred to as 'diluted', since all of the shares in issue are included.

 

Accounting standards refer to 'basic earnings' per share - these exclude those shares held in trust in respect of employee share schemes.

 

Weighted average number of shares

 

 

 

52 weeks

53 weeks

 

 

 

 

 

ended

ended

 

 

 

 

 

29 July

30 July

 

 

 

 

 

2018

2017

Shares in issue (used for diluted EPS)

 

 

 

 

105,605,135

111,293,971

Shares held in trust

 

 

 

 

(2,402,603)

(2,500,717)

Shares in issue less shares held in trust (used for basic EPS)

 

103,202,532

108,793,254

 

The weighted average number of shares held in trust for employee share schemes has been adjusted to exclude those shares which have vested, yet remain in trust.

 

 

(b)     Earnings per share

 

52 weeks ended 29 July 2018

 

 

 

Profit

Basic EPS

Diluted EPS

 

 

 

 

£000

pence

pence

Earnings (profit after tax)

 

 

 

66,709

64.6

63.2

Exclude effect of exceptional items after tax

 

 

 

16,973

16.5

16.0

Earnings before exceptional items

 

 

 

83,682

81.1

79.2

Exclude effect of property gains

 

 

 

(2,900)

(2.8)

(2.7)

Underlying earnings before exceptional items

 

 

 

80,782

78.3

76.5

 

 

53 weeks ended 30 July 2017

 

 

 

Profit

Basic EPS

Diluted EPS

 

 

 

 

£000

pence

pence

Earnings (profit after tax)

 

 

 

56,581

52.0

50.8

Exclude effect of exceptional items after tax

 

 

20,403

18.8

18.4

Earnings before exceptional items

 

 

 

76,984

70.8

69.2

Exclude effect of property gains

 

 

(2,807)

(2.6)

(2.6)

Underlying earnings before exceptional items

 

 

74,177

68.2

66.6

 

The diluted earnings per share before exceptional items have increased by 14.5% (2017: 43.3%).

 

Prior year figures have been restated to take into account adjustment of the exceptional deferred tax. Please refer to note 7 for further details.

 

(c)     Free 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 current pubs, after funding interest, corporation 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, inflows and outflows of financing from outside sources and dividend payments and is based on the weighted average number of shares in issue, including those held in trust in respect of the employee share schemes.

 

 

 

 

 

Free cash

Basic free

Diluted free

 

 

 

 

 flow

cash flow

cash flow

 

 

 

 

 

per share

per share

 

 

 

 

£000

pence

pence

52 weeks ended 29 July 2018

 

 

 

93,357

90.5

88.4

53 weeks ended 30 July 2017

 

 

 

107,936

99.2

97.0

 

 

 

8.      Earnings and free cash flow per share (continued)

 

(d)     Owners' earnings per share

 

Owners' earnings measure the earnings attributable to shareholders from current activities adjusted for significant non-cash items and one-off items. Owners' earnings are calculated as profit before tax, exceptional items, depreciation and amortisation and property gains and losses less reinvestment in current properties and cash tax. Cash tax is defined as the current year's current tax charge.

 

52 weeks ended 29 July 2018

 

 

 

Owners'

Basic

Diluted

 

 

 

 

Earnings

Owners' EPS

Owners' EPS

 

 

 

 

£000

pence

pence

Profit before tax and exceptional items (income statement)

 

 

 

107,249

103.9

101.6

Exclude depreciation and amortisation (note 2)

 

 

 

79,305

76.8

75.1

Less cash reinvestment in current properties

 

 

 

(64,665)

(62.7)

(61.2)

Exclude property gains and losses (note 3)

 

 

 

(2,900)

(2.8)

(2.7)

Less cash tax (note 7)

 

 

 

(24,466)

(23.6)

(23.3)

Owners' earnings

 

 

 

94,523

91.6

89.5

 

 

 

 

 

 

 

53 weeks ended 30 July 2017

 

 

 

Owners'

Basic

Diluted

 

 

 

 

Earnings

Owners' EPS

Owners' EPS

 

 

 

 

£000

pence

pence

Profit before tax and exceptional items (income statement)

 

 

 

102,830

94.5

92.4

Exclude depreciation and amortisation (note 2)

 

 

 

73,869

67.9

66.4

Less cash reinvestment in current properties (cash flow statement)

 

(65,912)

(60.6)

(59.2)

Exclude property gains and losses (note 3)

 

 

 

(2,807)

(2.6)

(2.6)

Less cash tax (note 7)

 

 

 

(24,837)

(22.8)

(22.3)

Owners' earnings

 

 

 

83,143

76.4

74.7

 

The diluted owners' earnings per share increased by 19.8% (2017: decreased by 6.9%). The increase is calculated using figures to two decimal places.

 

Analysis of additions by type

 

 

52 weeks

53 weeks

 

 

 

ended

ended

 

 

 

29 July

30 July

 

 

 

2018

2017

Reinvestment in existing pubs

 

 

64,665

65,912

Investment in new pubs and pub extensions

 

 

35,863

46,894

Freehold reversions

 

 

9,555

95,326

 

 

 

110,083

208,132

 

 

 

 

 

Analysis of additions by category

 

 

52 weeks

53 weeks

 

 

 

ended

ended

 

 

 

29 July

30 July

 

 

 

2018

2017

Property, plant and equipment (note 13)

 

 

107,011

198,556

Intangible assets (note 12)

 

 

3,072

9,576

 

 

 

110,083

208,132

 

 

(e)     Operating profit per share

 

 

 

 

 

Operating

Basic operating

Diluted operating

 

 

 

 

profit

profit per share

profit per share

 

 

 

 

£000

pence

pence

52 weeks ended 29 July 2018

 

 

 

132,291

128.2

125.3

53 weeks ended 30 July 2017

 

 

 

128,508

118.1

115.5

 

 

 

9.      Cash generated from operations

 

 

 

 

 

 

52 weeks

53 weeks

 

 

 

 

 

ended

ended

 

 

 

 

 

29 July

30 July

 

 

 

 

 

2018

2017

 

 

 

 

 

£000

£000

Profit for the period

 

 

 

 

66,709

56,581

Adjusted for:

 

 

 

 

 

 

Tax (note 7)

 

 

 

 

22,289

19,783

Share-based charges (note 2)

 

 

 

 

11,405

10,711

Loss on disposal of property, plant and equipment (note 3)

 

 

3,211

14,484

Net impairment charge (note 3)

 

 

 

 

3,588

7,787

Interest receivable (note 6)

 

 

 

 

(48)

(72)

Amortisation of bank loan issue costs (note 6)

 

 

 

1,540

2,817

Interest payable (note 6)

 

 

 

 

26,450

25,740

Depreciation of property, plant and equipment (note 13)

 

 

70,918

66,483

Amortisation of intangible assets (note 12)

 

 

 

 

7,984

6,931

Depreciation on investment properties (note 14)

 

 

 

56

55

Amortisation of other non-current assets (note 15)

 

 

 

347

400

Net onerous lease provision

 

 

 

 

5,962

720

Aborted properties costs

 

 

 

 

541

1,157

Net exceptional finance income

 

 

 

 

-

(402)

 

 

 

 

 

220,952

213,175

Change in inventories

 

 

 

 

(1,725)

(2,407)

Change in receivables

 

 

 

 

(1,225)

4,980

Change in payables

 

 

 

 

10,298

8,655

Cash flow from operating activities

 

 

 

 

228,300

224,403

 

 

10.    Analysis of change in net debt

 

 

 

 

 

30 July

Cash

Non-cash

29 July

 

 

 

 

2017

flows

movement

2018

 

 

 

 

£000

£000

£000

£000

Borrowings

 

 

 

 

 

 

 

Cash in hand

 

 

 

50,644

12,447

-

63,091

Bank loans - due before one year

 

 

(17,347)

8,543

-

(8,804)

Other loans

 

 

 

(114)

144

(90)

(60)

Current net borrowings

 

 

 

33,183

21,134

(90)

54,227

 

 

 

 

 

 

 

 

Bank loans - due after one year

 

 

 

(729,397)

(49,483)

(1,540)

(780,420)

Other loans

 

 

 

(90)

-

90

-

Non-current net borrowings

 

 

 

(729,487)

(49,483)

(1,450)

(780,420)

 

 

 

 

 

 

 

 

Net debt

 

 

 

(696,304)

(28,349)

(1,540)

(726,193)

 

 

 

 

 

 

 

 

Derivatives

 

 

 

 

 

 

 

Interest-rate swaps asset - due after one year

 

11,380

-

3,596

14,976

Interest-rate swaps liability - due before one year

 

-

-

(160)

(160)

Interest-rate swaps liability - due after one year

 

(50,276)

-

11,351

(38,925)

Total derivatives

 

 

 

(38,896)

-

14,787

(24,109)

 

 

 

 

 

 

 

 

Net debt after derivatives

 

 

 

(735,200)

(28,349)

13,247

(750,302)

 

Non-cash movements

The non-cash movement in bank loans due after one year relates to the amortisation of bank loan issue costs.

 

The movement in interest-rate swaps relates to the change in the 'mark to market' valuations for the year.

 

 

11.    Dividends paid and proposed

 

 

 

 

 

 

 

52 weeks

53 weeks

 

 

 

 

 

 

ended

ended

 

 

 

 

 

 

29 July

30 July

 

 

 

 

 

 

2018

2017

 

 

 

 

 

 

£000

£000

Declared and paid during the year:

 

 

 

 

 

 

 

Dividends on ordinary shares:

 

 

 

 

 

 

 

- final for 2015/16: 8.0p (2014/15: 8.0p)

 

 

 

-

8,933

- interim for 2016/17: 4.0p (2015/16: 4.0p)

 

 

 

-

4,419

- final for 2016/17: 8.0p (2015/16: 8.0p)

 

 

 

 

8,437

-

- interim for 2017/18: 4.0p (2016/17: 4.0p)

 

 

 

4,218

-

 

 

 

 

 

 

12,655

13,352

Proposed for approval by shareholders at the AGM:

 

 

 

 

 

- final for 2017/18: 8.0p (2016/17: 8.0p)

 

 

 

8,428

8,488

Dividend cover (times)

 

 

 

 

 

5.3

4.2

 

Dividend cover is calculated as profit after tax and exceptional items over dividend paid.

 

 

12.    Intangible assets

 

 

 

 

£000

Cost:

 

 

 

At 24 July 2016

 

 

56,591

Additions

 

 

9,576

Disposals

 

 

(493)

At 30 July 2017

 

 

65,674

Additions

 

 

3,072

Disposals

 

 

(3)

At 29 July 2018

 

 

68,743

 

 

 

 

 

 

 

 

Accumulated amortisation:

 

 

 

At 24 July 2016

 

 

(29,540)

Provided during the period

 

 

(6,931)

Impairment loss

 

 

1

Reclassification

 

 

487

At 30 July 2017

 

 

(35,983)

Provided during the period

 

 

(7,984)

Disposals

 

 

3

At 29 July 2018

 

 

(43,964)

 

 

 

 

Net book amount at 29 July 2018

 

 

24,779

Net book amount at 30 July 2017

 

 

29,691

Net book amount at 24 July 2016

 

 

27,051

 

The majority of intangible assets relates to computer software and software development. Examples include the development costs of our SAP accounting system, our 'Wisdom' property-maintenance system and the 'Wetherspoon app'.

 

Included in the intangible assets is £1,799,000 of software in the course of development (2017: £1,474,000).

 

 

13.    Property, plant and equipment

 

 

 

 

Freehold and

Short-

Equipment,

Assets

Total

 

 

 

long-leasehold

leasehold

fixtures

under

 

 

 

 

property

property

and fittings

construction

 

 

 

 

£000

£000

£000

£000

£000

Cost:

 

 

 

 

 

 

 

At 24 July 2016

 

 

935,742

413,661

541,125

60,545

1,951,073

Additions

 

 

112,737

5,766

45,473

34,580

198,556

Transfers

 

 

20,928

3,270

3,834

(28,032)

-

Exchange differences

 

 

869

162

317

741

2,089

Transfer to held for sale

 

 

(3,489)

(3,493)

(2,682)

-

(9,664)

Disposals

 

 

(32,162)

(25,446)

(26,266)

-

(83,874)

Reclassification

 

 

32,311

(32,311)

-

-

-

At 30 July 2017

 

 

1,066,936

361,609

561,801

67,834

2,058,180

Additions

 

 

28,048

6,834

56,650

15,479

107,011

Transfers

 

 

20,675

1,491

6,914

(29,080)

-

Exchange differences

 

 

(87)

(16)

(31)

(31)

(165)

Transfer to held for sale

 

 

(1,509)

-

(347)

-

(1,856)

Disposals

 

 

(9,302)

(7,644)

(7,187)

-

(24,133)

Reclassification

 

 

6,114

(6,114)

-

-

-

At 29 July 2018

 

 

1,110,875

356,160

617,800

54,202

2,139,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and impairment:

 

 

 

 

 

At 24 July 2016

 

 

(181,040)

(207,144)

(374,377)

-

(762,561)

Provided during the period

 

 

(15,802)

(13,023)

(37,658)

-

(66,483)

Exchange differences

 

 

(36)

(23)

(186)

-

(245)

Impairment loss

 

 

(2,862)

(3,473)

(1,272)

-

(7,607)

Transfer to held for sale

 

 

1,926

3,552

2,657

-

8,135

Disposals

 

 

12,621

20,137

20,456

-

53,214

Reclassification

 

 

(20,181)

20,181

-

-

-

At 30 July 2017

 

 

(205,374)

(179,793)

(390,380)

-

(775,547)

Provided during the period

 

 

(16,428)

(12,966)

(41,524)

-

(70,918)

Exchange differences

 

 

(36)

(14)

(109)

-

(159)

Impairment loss

 

 

(953)

(1,516)

(1,119)

-

(3,588)

Transfer to held for sale

 

 

129

-

272

-

401

Disposals

 

 

3,075

7,264

6,508

-

16,847

Reclassification

 

 

(2,450)

2,450

-

-

-

At 29 July 2018

 

 

(222,037)

(184,575)

(426,352)

-

(832,964)

 

 

 

 

 

 

 

 

Net book amount at 29 July 2018

 

888,838

171,585

191,448

54,202

1,306,073

Net book amount at 30 July 2017

 

861,562

181,816

171,421

67,834

1,282,633

Net book amount at 24 July 2016

 

 

754,702

206,517

166,748

60,545

1,188,512

 

Impairment of property, plant and equipment

In assessing whether a pub has been impaired, the book value of the pub is compared with its anticipated future cash flows and fair value. Assumptions are used about sales, costs and profit, using a pre-tax discount rate for future years of 7% (2017: 8%).

 

If the value, based on the higher of future anticipated cash flows and fair value, is lower than the book value, the difference is written off as property impairment.

 

As a result of this exercise, a net impairment loss of £3,588,000 (2017: £7,607,000) was charged to property losses in the income statement, as described in note 4. 

 

Management believes that a reasonable change in any of the key assumptions, for example the discount rate applied to each pub, could cause the carrying value of the pub to exceed its recoverable amount, but that the change would be immaterial.

 

14.    Investment property

 

The company owns two (2017: two) freehold properties with existing tenants and these assets have been classified

as investment properties.

 

 

 

 

£000

Cost:

 

 

 

At 24 July 2016

 

 

7,751

At 30 July 2017

 

 

7,751

At 29 July 2018

 

 

7,751

 

 

 

 

Accumulated depreciation:

 

 

 

At 24 July 2016

 

 

(146)

Provided during the period

 

 

(55)

At 30 July 2017

 

 

(201)

Provided during the period

 

 

(56)

At 29 July 2018

 

 

(257)

 

 

 

 

Net book amount at 29 July 2018

 

 

7,494

Net book amount at 30 July 2017

 

 

7,550

Net book amount at 24 July 2016

 

 

7,605

 

Rental income received in the period from investment properties was £314,000 (2017: £356,000).

Operating costs, excluding depreciation, incurred in relation to these properties amounted to £23,000 (2017: £4,000).

 

 

15.    Other non-current assets

 

 

 

 

Lease

 

 

 

premiums

 

 

 

£000

Cost:

 

 

 

At 24 July 2016

 

 

16,230

Transfer to held for sale

 

 

(257)

Disposals

 

 

(3,246)

At 30 July 2017

 

 

12,727

At 29 July 2018

 

 

12,727

 

 

 

 

 

 

 

 

Accumulated depreciation:

 

 

 

At 24 July 2016

 

 

(6,505)

Provided during the period

 

 

(400)

Transfer to held for sale

 

 

(180)

Disposals

 

 

262

Reclassification

 

 

2,368

At 30 July 2017

 

 

(4,455)

Provided during the period

 

 

(347)

At 29 July 2018

 

 

(4,802)

 

 

 

 

Net book amount at 29 July 2018

 

 

7,925

Net book amount at 30 July 2017

 

 

8,272

Net book amount at 24 July 2016

 

 

9,725

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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