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Wetherspoon (JD) PLC (JDW)

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Friday 14 September, 2012

Wetherspoon (JD) PLC

Preliminary Results

RNS Number : 2535M
Wetherspoon (JD) PLC
13 September 2012
 



14 September 2012             

PRESS RELEASE

 

J D WETHERSPOON PLC

PRELIMINARY RESULTS

(For the 53 weeks ended 29 July 2012)

 

            'Record sales, profit and earnings per share before exceptional items'        

 

 

FINANCIAL HIGHLIGHTS                                                                                                 Excluding                                                                                                                                                                  Week 53

·    Revenue £1,197.1m (2011: £1,072.0m)                                        +11.7%            +9.3%

·    Like-for-like sales                                                                               +3.2%                 

·    Free cash flow £91.5m (2011: £78.8m)                                         +16.1%

·    Free cash flow per share 73.2p (2011: 59.7p)                              +22.6%

·    Profit before tax £58.9m (2011: £61.4m)                                          -4.1%

·    Dividends per share 12.0p (2011: 12.0p)                                     

 

Before exceptional items:

·    Operating Profit £107.3m (2011: £102.3m)                                  + 4.9%            + 2.6%

·    Profit before tax £72.4m (2011: £66.8m)                                       + 8.4%           + 5.8%

·    Earnings per share 41.3p (2011: 35.3p)                                      +17.0%            +14.4%                                                                                                                              

 

Commenting on the results, Tim Martin, the chairman of J D Wetherspoon plc, said:

 

"I am pleased to report a year of further progress for the company, with record sales, profit and earnings per share before exceptional items.

 

As previously indicated, the biggest dangers to the pub industry, are the VAT disparity between supermarkets and pubs, combined with the continuing imposition of stealth taxes, such as the late-night levy and the increase in fruit/slot machine taxes.

 

In the six weeks to 9 September 2012, like-for-like sales increased by 8.4%, with total sales increasing by 12.8%, helped by a strong performance during the Olympic and Paralympic Games.

 

Sales this summer have been enhanced by a number of one-off events and we do not expect to sustain this level of growth. As previously indicated, it is anticipated that taxation and input costs will continue to rise. Overall therefore, the company is aiming for a reasonable outcome, in the current financial year."

 

Enquiries:

John Hutson

Chief Executive Officer

01923 477777

Kirk Davis

Finance Director

01923 477777

Eddie Gershon

Company spokesman

07956 392234 / 0208  3525012

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

 

 

 

 

 

 

 

Notes to editors

 

1.         JD Wetherspoon owns and operates pubs throughout the UK.  The Company aims to provide customers with good-quality food and drinks, 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 www.jdwetherspoon.co.uk

3.         This announcement has been prepared solely to provide additional information to the shareholders of JD 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 next Interim Management Statement will be issued on 8 November 2012.

 

 

 

 

 

 

 

 

2012 CHAIRMAN'S STATEMENT, OPERATING AND FINANCE REVIEW

 

'Record sales, profit and earnings per share before exceptional items'

 

I am pleased to report a year of further 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 29th year since incorporation in 1983. The table below outlines some key indicators of our performance during that period. As this demonstrates, since our flotation in 1992, earnings per share before exceptional items have grown by an average of 16.8% per annum and free cash flow per share by an average of 19.3%.

 

Summary accounts for the years ended July 1984 to 2012



























Financial year


Total sales


Profit before tax and exceptional items


Earnings per share before exceptional items


Free cash flow

Free cash flow per share



£000


£000


pence


£000


pence












1984


818


(7)


0.0





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


35.3


78,818


59.7

2012


1,197,129


72,363


41.3


91,542


73.2

 

 

Notes

 

Adjustments to statutory numbers 

 

1.         Where appropriate, the 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 have been adjusted, to exclude 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.

 

 

Like-for-like sales in the year under review increased by 3.2%, with total sales, including week 53 and new pubs, increasing by £125.1 million to £1,197.1 million, a rise of 11.7% (2011: 7.6%). Like-for-like bar sales increased by 2.8% (2011: increased by 1.7%), like-for-like food sales increased by 4.8% (2011: increased by 4.2%) and machine sales decreased by 2.8% (2011: decreased by 3.9%).

 

Operating profit before exceptional items increased by 4.9% to £107.3 million (2011: £102.3 million) and, after exceptional items, decreased by 3.2% to £93.8 million (2011: £96.9 million). The operating margin, before exceptional items, decreased to 9.0% (2011: 9.5%), mainly as a result of increases in taxation, utilities and bar and food costs. The operating margin after exceptional items was 7.8% (2011: 9.0%).

 

Profit before tax and exceptional items increased by 8.4% to £72.4 million (2011: £66.8 million) and, after exceptional items, decreased by 4.1% to £58.9 million (2011: £61.4 million). Earnings per share before exceptional items increased by 17.0% to 41.3p (2011: 35.3p), while basic earnings after exceptional items increased by 0.6% to 35.6p (2011: 35.4p).

 

Net interest was covered 3.1 times by operating profit before exceptional items (2011: 2.9 times) and 2.7 times by operating profit after exceptional items (2011: 2.7 times). Total capital investment was £120.6 million in the period (2011: £126.0 million), with £75.4 million on new pub openings (2011: £87.6 million) and £45.2 million on existing pubs (2011: £38.4 million).

 

Exceptional items before tax totalled £13.5 million (2011: £5.4 million) of which £0.6 million resulted in a cash charge. The exceptional items relate to the impairment of trading pub assets of £7.8 million (2011: £4.4 million), a provision for onerous leases of £2.2 million, an IT-related asset write-off of £1.7 million, a loss on the disposal of property, plant and equipment of £1.1 million and restructuring costs of £0.6 million. The total impairment provision is now £30.1 million, compared with the original cost of our assets of £1.5 billion.

 

Free cash flow, after capital investment of £45.2 million on existing pubs (2011: £38.4 million), £5.8 million in respect of share purchases for employees under the company's share-based payment schemes (2011: £5.8 million) and payments of tax and interest, increased by £12.7 million to £91.5 million (2011: £78.8 million). Free cash flow per share was 73.2p (2011: 59.7p).

 

Property

 

The company opened 40 pubs during the year, 18 of which were freehold, while three others closed, resulting in a total estate of 860 pubs at the financial year end. The average development cost for a new pub (excluding the cost of freeholds), in the financial year under review, was £1.42 million, compared with £1.21 million a year ago, as we continue to increase expenditure on kitchens, customer areas and beer gardens. The full-year depreciation charge was £49.2 million (2011: £44.4 million).

 

We currently intend to open around 25 pubs in the year ending July 2013.

 

Taxation

 

The overall tax charge (including deferred tax) on pre-exceptional items before taking into account the effect of the tax-rate change on deferred tax is 28.6% (2011: 30.2%). The UK standard average tax rate for the period is 25.3% (2011: 27.3%). The difference between that rate and the company tax is 3.3% (2011: 2.9%), due primarily to the level of non-qualifying depreciation (depreciation which does not qualify for tax relief).

 

The current tax rate (excluding deferred tax) has fallen to 25.6% (2011: 28.7%). This is due mainly to the decrease in the UK standard average tax rate for the period by 2% and the increased availability of capital allowances in the period.

 

Financing

 

As at 29 July 2012, the company's total net debt, including bank borrowings and finance leases, but excluding derivatives, was £462.6 million (2011: £437.7 million), an increase of £24.9 million. Factors which have led to the increase in debt are 40 new pub openings costing £75.4 million, investment in existing pubs of £45.2 million, share buybacks of £22.7 million and dividend payments of £15.5million. Year-end net-debt-to-EBITDA was 2.96 times (2011: 2.98 times).

 

As at 29 July 2012, the company had £128.5 million (2011: £120.2 million) of unutilised banking facilities and cash balances, with total facilities of £575.0 million (2011: £550.0 million). The company's existing interest-rate swap arrangements remain in place.

 

Dividends and return of capital

 

The board proposes, subject to shareholders' approval, to pay a final dividend of 8.0p per share (2011: 8.0p per share), on 29 November 2012, to those shareholders on the register on 26 October 2012, giving a total dividend for the year of 12.0p per share (2011: 12.0p per share). The dividend is covered 3.0 times (2011: 3.0 times) by earnings.

 

During the year, 5,602,174 shares (representing approximately 4.3% of the issued share capital) were purchased by the company for cancellation, at a total cost of £22.7 million, representing an average cost per share of 405p.

 

Further progress

 

As in the past, the company has tried to concentrate on improving every area of the business, with a particular emphasis on customer service. In this connection, for example, we have introduced a Catering Academy, so that kitchen managers benefit from several days' off-site training. In addition, we now have a record number of employees on our apprenticeship programme and have also extended the general range of our training courses. Bonuses and free shares were at record levels during the year, amounting to £24.1 million, equivalent to 33.3% of our profits before tax, 85% of which was paid to employees working in our pubs.

 

We have continued to upgrade the range and quality of products on our drinks and food menus. We have 256 pubs recommended in the 2013 Good Beer Guide, a record number and more than any other company. In addition, 98% of our pubs are Cask Marque* approved. We are selling record numbers of breakfasts, teas and coffees, with virtually all of our pubs now open from 8am, seven days a week, and a significant number opening even earlier.

 

In the IT area, we have continued to make progress, creating a 'MyJDW' Web site - a greatly improved communications tool between the company and its 28,500 employees. We have also introduced a 'time and attendance' system which has improved the recording of employees' hours and creates the potential for improved labour-scheduling in the future. We have been working, in the course of the last financial year, on a new accounting system which 'went live' on 29 July.

 

Due to dedicated work by our pub and head office teams, we remain the biggest corporate partner for the charity Clic sargent, which supports young cancer patients and their families. In the year under review, we raised £1.4million, bringing the total raised to over £6million.

 

*Cask Marque is a system backed by several real-ale brewers, whereby inspectors independently verify the quality of ales at many of Britain's pubs.

 

Taxation and regulation

 

As the table below illustrates, the company and its employees paid total taxes of £519.3 million in the financial year, compared with £461.0 million in 2011, an increase of £58.3 million. The company pays over £11 of tax for every £1 of net profit.


2012

£m

2011

£m

VAT

241.2

204.8

Alcohol duty

136.8

120.2

PAYE and NIC

67.1

65.2

Business rates

43.9

39.8

Corporation tax

18.2

21.2

Machine duty

3.3

2.9

Fuel duty

1.9

1.9

Carbon tax

2.4

0.8

Climate change levy

1.9

1.6

Stamp duty

0.8

1.1

Landfill tax

1.3

1.1

Premise licence and TV licences

0.5

0.4

TOTAL TAX

519.3

461.0

TAX AS % OF SALES

43.4%

43.0%

PROFIT AFTER TAX (£m)

44.6

46.8

PAT AS % OF SALES

3.7%

4.4%

 

As we have previously indicated, the pub trade has lost 50% of its beer sales, for example, in the last 30 years, to supermarkets. We believe that supermarkets have been increasingly able to undercut pubs' prices, as a result of the tax disparity between these types of business. In particular, pubs pay 20% VAT in respect of food sales, while supermarkets pay virtually nothing. This enables supermarkets to cross-subsidise their alcoholic drinks' prices, resulting in large numbers of pub closures and also applying enormous pressure to those pubs which remain open.

 

We believe that the government has accepted that banks, manufacturers and many other businesses need to remain competitive, both domestically and internationally. The tax régime has often been cited as an important factor, by the prime minister and the chancellor of the exchequer, for example, in gaining a competitive advantage for the nation. In this regard, pubs need a level tax playing field with supermarkets, in order to be able to compete effectively in the long run. Unless there is tax equality, pubs will continue to lose trade to supermarkets - and this will be detrimental to the government, since pubs pay far more tax per meal or per pint, and employ more people, than do supermarkets.

 

In addition, the government continues to impose stealth taxes on the pub industry. Changes to fruit/slot machine duty, recently announced, will cost Wetherspoon an extra £2.0 million per annum, while the so-called late-night levy, which applies to pubs, but not supermarkets, will result in Wetherspoon paying an extra £2.0 million in tax, in order to be able to open between midnight and 1am, once or twice per week, at the majority of our pubs.

 

All pubs and pub companies are, or should be, happy to pay their share of tax, but the pub industry has been fleeced by the government, in the last decade and a half in particular - resulting in fewer jobs and lower taxes, but more supermarkets, in the UK.

 

Current trading and outlook

 

The biggest danger to the pub industry, as indicated above, is the VAT disparity between supermarkets and pubs, combined with the continuing imposition of stealth taxes, such as the late-night levy and the increase in fruit/slot machine taxes.

 

In the six weeks to 9 September 2012, like-for-like sales increased by 8.4%, with total sales increasing by 12.8%, helped by a strong performance during the Olympic and Paralympic Games.

 

Sales this summer have been enhanced by a number of one-off events and we do not expect to sustain this level of growth. As previously indicated, it is anticipated that taxation and input costs will continue to rise. Overall therefore, the company is aiming for a reasonable outcome, in the current financial year.

 

Tim Martin

Chairman

14 September 2012

 

 

 

  

 

 

INCOME STATEMENT for the 53 weeks ended 29 July 2012

J D Wetherspoon plc, company number: 1709784

 


Notes

53 weeks ended

29 July

2012

 

Before exceptional items

53 weeks ended

29 July

2012

 

Exceptional items

(note 4)

53 weeks ended

29 July

2012

 

After exceptional items

52 weeks ended

24 July

2011

 

Before exceptional items

52 weeks ended

24 July 2011

 

Exceptional items

(note 4)

52 weeks ended

24 July

2011

 

After exceptional items



Total

£000

Total

£000

Total

£000

Total

£000

Total

£000

Total

£000

Revenue

2

1,197,129

-

1,197,129

1,072,014

-

1,072,014

Operating costs


(1,089,811)

(13,481)

(1,103,292)

(969,705)

(5,389)

(975,094)

Operating profit

3

107,318

(13,481)

93,837

102,309

(5,389)

96,920

Finance income

6

55

-

55

36

-

36

Finance costs          

6

(35,010)

-

(35,010)

(35,564)

-

(35,564)









Profit before taxation


72,363

(13,481)

58,882

66,781

(5,389)

61,392

Income tax expense

7

(15,038)

723

(14,315)

(14,600)

-

(14,600)









Profit for the year          


57,325

(12,758)

44,567

52,181

(5,389)

46,792

Earnings per ordinary share

8

41.3


35.6

35.3


35.4

 

 

STATEMENT OF COMPREHENSIVE INCOME for the 53 weeks ended 29 July 2012

 


Notes

53 weeks ended

29 July 2012

£000

52 weeks ended

24 July

2011

£000





Interest-rate swaps: gain (loss) taken to other comprehensive income


(8,149)

3,511

Tax on items taken directly to other comprehensive income

7

717

(2,466)

Net loss/(gain) recognised directly in other comprehensive income


(7,432)

1,045

Profit for the year


44,567

46,792

Total comprehensive income for the year


37,135

47,837

 



CASH FLOW STATEMENT for the 53 weeks ended 29 July 2012

J D Wetherspoon plc, company number: 1709784

 


Notes

53 weeks ended

29 July 2012

£000

53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000

52 weeks ended

24 July 2011

£000







Cash flows from operating activities






Cash generated from operations

9

196,733

196,733

178,197

178,197

Interest received


49

49

39

39

Interest paid


(36,091)

(36,091)

(34,020)

(34,020)

Corporation tax paid


(18,168)

(18,168)

(21,215)

(21,215)

Purchase of own shares for
share-based payments


(5,756)

(5,756)

(5,783)

(5,783)







Net cash inflow from operating activities


136,767

136,767

117,218

117,218

 

Cash flows from investing activities






Purchase of property, plant and equipment


(36,578)

(36,578)

(31,787)

(31,787)

Purchase of intangible assets


(8,647)

(8,647)

(6,613)

(6,613)

Proceeds on sale of property, plant and equipment


887


1,100


Investment in new pubs and pub extensions


(74,859)


(86,793)


Purchase of lease premiums


(489)


(825)








Net cash outflow from investing activities


(119,686)

(45,225)

(124,918)

(38,400)

 

Cash flows from financing activities






Equity dividends paid

11

(15,544)


(5,211)


Proceeds from issue of ordinary shares


95


225


Purchase of own shares


(22,711)


(32,759)


Advances under bank loans

10

18,059


49,962


Advances under finance leases

10

10,474


-


Finance costs on new loan

10

(2,731)


-


Finance lease principal payments

10

(4,373)


(2,908)








Net cash inflow/(outflow) from financing activities


(16,731)


9,309


Net increase in cash and cash equivalents

10

350


1,609


Opening cash and cash equivalents


27,690


26,081


Closing cash and cash equivalents


28,040


27,690


Free cash flow



91,542


78,818







Free cash flow per ordinary share

8


73.2


59.7

 

 



BALANCE SHEET for the 53 weeks ended 29 July 2012

J D Wetherspoon plc, company number: 1709784

 


Notes

29 July

2012

£000

24 July

2011

£000

Assets




Non-current assets




Property, plant and equipment

12

924,341

881,271

Intangible assets

13

16,936

11,525

Deferred tax assets

7

16,198

15,569

Other non-current assets


10,682

10,520





Total non-current assets


968,157

918,885





Current assets




Inventories


20,975

21,488

Other receivables


18,685

21,623

Assets held for sale


2,055

70

Cash and cash equivalents


28,040

27,690

Total current assets


69,755

70,871





Total assets


1,037,912

989,756





Liabilities




Current liabilities




Trade and other payables


(207,114)

(189,777)

Financial liabilities


(5,880)

(3,129)

Current income tax liabilities


(9,103)

(9,457)

Total current liabilities


(222,097)

(202,363)





Non-current liabilities




Financial liabilities


(484,771)

(462,254)

Derivative financial instruments


(66,029)

(57,880)

Deferred tax liabilities

7

(67,860)

(71,448)

Other liabilities


(27,511)

(24,766)

Total non-current liabilities


(646,171)

(616,348)





Net assets


169,644

171,045





Shareholders' equity




Ordinary shares


2,521

2,632

Share premium account


143,294

143,199

Capital redemption reserve


1,910

1,798

Hedging reserve


(50,842)

(43,410)

Retained earnings


72,761

66,826

Total shareholders' equity


169,644

171,045





 



STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

 


 

 

 

 

Notes

Called- up

share capital

£000

 

Share premium account

£000

 

Capital

redemption

reserve

£000

 

 

Hedging reserve

£000

 

Retained earnings

£000

Total

£000









At 25 July 2010


2,783

142,975

1,646

(44,821)

59,558

162,141









Profit for the year


 

 

 

 

46,792

46,792

Interest-rate swaps: loss taken to equity


 

 

 

3,511

 

3,511

Tax on items taken directly to equity

7

 

 

 

(2,100)

(366)

(2,466)

Total comprehensive income



 


1,411

46,426

47,837

Exercise of options


1

224


 


225

Repurchase of shares


(152)


152


(32,596)

(32,596)

Tax on repurchase of shares


 

 

 

 

(163)

(163)

Share-based payments


 

 

 

 

4,595

4,595

Purchase of shares held in trust


 

 

 

 

(5,773)

(5,773)

Tax on purchase of shares held in trust


 

 

 


(10)

(10)

Dividends

11

 

 

 


(5,211)

(5,211)

At 24 July 2011


2,632

143,199

1,798

(43,410)

66,826

171,045









Profit for the year


 

 

 

 

44,567

44,567

Interest-rate swaps: loss taken to equity


 

 

 

(8,149)

 

(8,149)

Tax on items taken directly to equity

7

 

 

 

717


717

Total comprehensive income



 


(7,432)

44,567

37,135









Exercise of options


1

95


 


96

Repurchase of shares


(112)


112


(22,598)

(22,598)

Tax on repurchase of shares


 

 

 

 

(113)

(113)

Share-based payments


 

 

 

 

5,379

5,379

Purchase of shares held in trust


 

 

 

 

(5,727)

(5,727)

Tax on purchase of shares held in trust


 

 

 


(29)

(29)

Dividends

11

 

 

 


(15,544)

(15,544)

At 29 July 2012


2,521

143,294

1,910

(50,842)

72,761

169,644

 

 

1 Authorisation of financial statements and statement of compliance with IFRSs

 

The preliminary announcement for the 53 week period ended 29 July 2012 has been prepared in accordance with the accounting policies as disclosed in J D Wetherspoon plc's Annual Report and Accounts 2011.


The annual financial information presented in this preliminary announcement for the 53 week period ended 29 July 2012 is based on, and is consistent with, that in the Company's audited financial statements for the 53 week period ended 29 July 2012, and those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The independent auditors' report on those financial statements is unqualified and does not contain any statement under section 498 (2) or 498 (3) of the Companies Act 2006.

Information in this preliminary announcement does not constitute statutory accounts of the Company within the meaning of section 434 of the Companies Act 2006. The full financial statements for the Company for the 52 weeks ended 24 July 2011 have been delivered to the Registrar of Companies. The independent auditor's report on those financial statements was unqualified and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.

 

 

2 Revenue

 

Revenue disclosed in the income statement is analysed as follows:


53 weeks ended

29 July 2012

£000

52 weeks

ended

24 July 2011

£000




Sales of food, beverages, hotel rooms and machine income

1,197,129

1,072,014

 

 

3 Operating profit before exceptional items - analysis of costs by nature

 

This is stated after charging/(crediting):


53 weeks ended

29 July 2012

£000

52 weeks

ended

24 July 2011

£000

Concession rental payments

14,831

13,586

Operating lease payments

53,230

50,877

Repairs and maintenance

44,575

37,275

Rent receivable

(540)

(565)

Depreciation of property, plant and equipment (note 12)

47,416

42,866

Amortisation of intangible assets (note 13)

1,423

1,223

Amortisation of non-current assets (note 14)

327

306

Share-based charges (note 5)

5,379

4,595




Auditors' remuneration



Audit services:



- audit fees

156

150

- other services supplied pursuant to relevant legislation

29

28

- other services

64

105

Total auditors' fees

249

283

 

Analysis of continuing operations

 


53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000

Revenue

1,197,129

1,072,014

Cost of sales

(1,045,404)

(927,045)




Gross profit

151,725

144,969




Administration costs

(44,407)

(42,660)




Operating profit before exceptional items

107,318

102,309

Exceptional items (note 4)

(13,481)

(5,389)

Operating profit after exceptional items

93,837

96,920

 

  

4 Exceptional items

 

In the table below, property impairment relates to situations where pubs are worth considerably less than the company paid for them, owing to a poor trading performance, so that they could not be sold or generate sufficient cash in the future to justify their book value.

 

Onerous leases relate to pubs where their trading profits do not cover the rent.

 

Property-related disposals and write-offs are in respect of the losses following the closure/disposal of three sites and write-off of redundant assets during the year.

 

 


53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000




Property impairment

7,823

4,410

Onerous leases

2,229

-

Restructuring costs

625

-

Write-off of IT-related assets

1,742

-

Loss on disposal of property, plant and equipment

1,062

979




Operating exceptional items

13,481

5,389

 

During the year under review, an exceptional charge of £7,823,000 (2011: £4,410,000) relates to the impairment of property, plant and equipment, following a review of the company's assets, as required under IAS 36.

 

5 Employee benefits expense


53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000

Wages and salaries

305,156

273,685

Social Security costs

19,544

18,609

Pension costs

1,668

1,668

Share-based charges

5,379

4,595


331,747

298,557

 

The totals below relate to the average number of employees during the year, not the total number of employees at the end of the year.


2012

Number

2011

Number

Full-time equivalents



Managerial/administration

3,584

3,454

Hourly paid staff

10,819

9,557


14,403

13,011





2012

Number

2011

Number




Total employees



Managerial/administration

3,953

3,828

Hourly paid staff

22,912

20,239


26,865

24,067

 

 

  

Directors' emoluments

 


2012

£000

2011

£000

Aggregate emoluments (excluding share-based payments)

1,544

1,478

Contributions to a defined contribution scheme

101

95


1,645

1,573

 

Retirement benefits are accruing to 3 (2011: 3) directors, under a defined contribution scheme.

 

 

6 Finance income and costs


53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000

Finance costs



Interest payable on bank loans and overdrafts

32,826

33,143

Amortisation of bank loan issue costs

1,709

1,948

Interest payable on obligations under finance leases

475

473

Total finance costs

35,010

35,564




Bank interest receivable

(55)

(36)

Total finance income

(55)

(36)




Total net finance costs

34,955

35,528

 

 


53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000

Analysis of finance income and costs in categories in accordance with IAS 39



Loans and receivables

(55)

(36)

Financial liabilities carried at amortised cost

15,996

16,136

Financial derivatives

18,475

18,751

Other financial expenses

539

677

Total net finance cost

34,955

35,528

 


 

7 Income tax expense

 

(a) Tax on profit on ordinary activities

 

Tax charged in the income statement

 

The standard rate of corporation tax in the UK changed from 26% to 24% with effect from 1 April 2012.  Accordingly, the company's profits for this accounting period are taxed at an effective rate of 25.3% (2011: 27.3%).

 


53 weeks ended

29 July 2012

Before exceptional items

£000

53 weeks ended

29 July 2012

After exceptional items

£000

52 weeks ended

24 July 2011

Before exceptional items

£000

52 weeks ended

24 July 2011

After exceptional items

£000

Current income tax:





Current income tax charge

18,538

17,815

19,169

19,169

Total current income tax

18,538

17,815

19,169

19,169






Deferred tax:





Origination and reversal of temporary differences

2,127

2,127

980

980

Impact of change in UK tax rate

(5,627)

(5,627)

(5,549)

(5,549)

Total deferred tax

(3,500)

(3,500)

(4,569)

(4,569)






Tax charge in the income statement

15,038

14,315

14,600

14,600






Tax relating to items charged or credited to other comprehensive income





Deferred tax:





Tax (credit)/charge on interest-rate swaps

(717)

(717)

2,100

2,100

Tax (credit) charge in the statement of comprehensive income

(717)

(717)

2,100

2,100

 

8 Earnings and cash flow per share

 

Basic earnings per share have been calculated by dividing the profit attributable to equity holders of £44,567,000 (2011: £46,792,000) by the weighted average number of shares in issue during the year of 125,079,021 (2011: 132,019,936).

 

The weighted average number of shares has been adjusted to exclude shares held in respect of the employee Share Incentive Plan and the 2005 Deferred Bonus Scheme.

 

Earnings before exceptional items per share have been calculated before items detailed in note 3 and take account of 6,227 (2011: 23,250) potential dilutive shares under option during the year, giving a weighted average number of ordinary shares adjusted for the effect of dilution of 125,085,248 (2011: 132,043,186).

 

Adjusted earnings exclude an adjustment in respect of the corporation tax-rate change of £5,627,000 (2011: £5,549,000) and exceptional items.

 

Earnings per share

 

53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000

Earnings (profit after tax)

44,567

46,792

Exclude one-off tax benefit (rate change)

(5,627)

(5,549)

Adjusted earnings after exceptional items

38,940

41,243

Exclude effect of exceptional items net of tax

12,758

5,389

Adjusted earnings before exceptional items

51,698

46,632




Basic EPS/diluted EPS

35.6p

35.4p

Adjusted earnings before exceptional items

41.3p

35.3p

Adjusted earnings after exceptional items

31.1p

31.2p

 

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, corporate 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.

 

Free cash flow per share

53 weeks ended

29 July 2012

52 weeks

ended

24 July 2011




Free cash flow (£000)

91,542

78,818

Free cash flow per share (p)

73.2

59.7

 

9 Cash generated from operations

 


53 weeks ended

29 July 2012

£000

52 weeks

ended

24 July 2011

£000

Profit before taxation

44,567

46,792

Adjusted for:



Tax

14,315

14,600

Impairment charge

7,823

4,410

Onerous lease provision

2,229

-

Loss on disposal of property, plant and equipment

2,804

979

Amortisation of intangible assets

1,423

1,223

Depreciation of property, plant and equipment

47,416

42,866

Lease premium amortisation

327

306

Share-based charges

5,379

4,595

Interest receivable

(55)

(36)

Amortisation of bank loan issue costs

1,709

1,948

Interest payable

33,301

33,616


161,238

151,299

Change in inventories

514

(1,577)

Change in receivables

2,598

(1,896)

Change in payables

32,383

30,371

Net cash inflow from operating activities

196,733

178,197

 



10 Analysis of changes in net debt

 


At 24 July 2011

£000

Cash flows

 

£000

Non-cash movement

£000

At 29 July 2012

£000

Cash on hand

27,690

350

-

28,040

Debt due after one year

(457,522)

(15,328)

(1,709)

(474,559)

Bank borrowing

(429,832)

(14,978)

(1,709)

(446,519)

Finance lease creditor - due less than one year

(3,129)

4,373

(7,124)

(5,880)

Finance lease creditor - due after one year

(4,732)

(10,474)

4,994

(10,212)

Net borrowings

(437,693)

(21,079)

(3,839)

(462,611)

Derivative - interest-rate swaps

(57,880)

-

(8,149)

(66,029)






Net debt

(495,573)

(21,079)

(11,988)

(528,640)

 

11 Dividends paid and proposed


53 weeks ended

29 July 2012

£000

52 weeks ended

24 July 2011

£000




Declared and paid during the year:



Dividends on ordinary shares:



- Final for 2010/11: 8.0p (2009/10: 0.0p)

10,475

-

- interim for 2011/12: 4.0p (2010/11: 4.0p)

5,069

5,211




Dividends paid

15,544

5,211




Proposed for approval by shareholders at the AGM:



- final dividend for 2011/12: 8.0p (2010/11: 8.0p)

10,006

10,402

 

As detailed in the interim accounts, the board declared and paid an interim dividend of 4.0p for the financial year ended 29 July 2012.

 

  

12 Property, plant and equipment


Freehold and long leasehold property

£000

Short leasehold property

 

£000

Equipment, fixtures and fittings

 

£000

Expenditure on unopened properties

£000

 

 

 

Total

£000







Cost:






At 25 July 2010

553,699

382,646

316,062

28,677

1,281,084

Additions

15,167

3,401

28,655

75,485

122,708

Transfers

58,728

6,791

13,431

(78,950)

-

Transfer to/from assets held for sale



-

(611)

(611)

Disposals

(2,848)

(1,387)

(2,185)

(1,496)

(7,916)

At 24 July 2011

624,746

391,451

355,963

23,105

1,395,265

Additions

8,102

6,302

26,083

61,652

102,139

Transfers

34,903

19,395

14,881

(69,179)

-

Transfer to/from assets held for sale

(4,001)

(895)

(952)

611

(5,237)

Disposals

-

(2,355)

(6,245)

(633)

(9,233)

Reclassification

4,309

(3,809)

-

-

500

At 29 July 2012

668,059

410,089

389,730

15,556

1,483,434







Accumulated depreciation and impairment:






At 25 July 2010

87,849

146,880

234,421

1,220

470,370

Provided during the period

12,118

9,906

20,842

-

42,866

Impairment loss

2,231

2,031

148

-

4,410

Disposals

(395)

(798)

(1,639)

(820)

(3,652)

Reclassification

1,503

(1,503)

-

-

-

At 24 July 2011

103,306

156,516

253,772

400

513,994

Provided during the period

11,201

12,582

23,633

-

47,416

Impairment loss

7,317

715

(209)

-

7,823

Disposals

-

(1,725)

(5,660)

-

(7,385)

Transfer to/from assets held for sale

(2,748)

(315)

(660)

541

(3,182)

Reclassification

906

(479)

-

-

427

At 29 July 2012

119,982

167,294

270,876

941

559,093







Net book amount at 29 July 2012

548,077

242,795

118,854

14,615

924,341







Net book amount at 24 July 2011

521,440

234,935

102,191

22,705

881,271







Net book amount at 25 July 2010

465,850

235,766

81,641

27,457

810,714

 

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 profit.

 

If the value, based on future anticipated profit, is lower than the book value, the difference is written off as a property impairment.

 

For the year under review, the company projected cash flows for the pubs under review for the 52 weeks to July 2013, with certain assumptions about sales, costs and profit, using a pre-tax discount rate for future years of 10% (2011: 10%).

 

As a result of this exercise, an impairment loss of £7,823,000 (2011: £4,410,000) was charged to operating costs in the income statement.

 

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.

 

13 Intangible assets


IT software costs

£000

Cost:


At 25 July 2010

16,987

Additions

6,049

Disposals

(49)

At 24 July 2011

22,987

Additions

8,647

Disposals

(2,021)

At 29 July 2012

29,613



Accumulated amortisation


At 25 July 2010

10,287

Amortisation during the period

1,223

Disposals

(48)

At 24 July 2011

11,462

Amortisation during the period

1,423

Disposals

(208)

At 29 July 2012

12,677



Net book amount at 29 July 2012

16,936



Net book amount at 24 July 2011

11,525



Net book amount at 25 July 2010

6,700

 

Amortisation of £1,423,000 (2011: £1,223,000) is included in operating costs in the income statement.

 

The majority of intangible assets relates to computer software and development.

 

Included within the intangible assets is £10,575,000 of assets in the course of development (2011: £5,819,000).

 

14 Other non-current assets

 

These assets relate to lease premiums whereby the company has paid a tenant a sum of money to take over the benefit of a lease.


Lease premiums

£000

Cost:


At 25 July 2010

13,163

Additions

825

At 24 July 2011

13,988

Additions

489

Reclassification

(500)

At 29 July 2012

13,977



Accumulated amortisation


At 25 July 2010

3,162

Amortisation during the period

306

At 24 July 2011

3,468

Amortisation during the period

327

Transfer to/from assets held for sale

(73)

Reclassification

(427)

At 29 July 2012

3,295



Net book amount at 29 July 2012

10,682



Net book amount at 24 July 2011

10,520



Net book amount at 25 July 2010

10,001

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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