Preliminary Results
Wetherspoon (JD) PLC
06 September 2002
J D WETHERSPOON PLC
PRESS RELEASE
J D Wetherspoon plc announces preliminary results
for the year ended 28 July 2002.
Highlights
• Turnover up 24% to £601.3m
• Profits before tax up 21% to £53.6m
• Earnings per share up 17% to 16.6p
• Free cash flow per share 33.5p - double EPS
• Dividend per share increased by 10% to 3.22p
• Like for like sales increased by 5.0%
• 87 pubs opened
Commenting on the results, Tim Martin, the chairman of J D Wetherspoon plc,
said:
'I am pleased to report a year of excellent progress for Wetherspoon. Sales
increased by £117.3 million to £601.3 million, a rise of 24%.
We opened 87 pubs during the year, compared with 94 in the previous year. The
total number of pubs now operated by us is 610, including 2 opened since the
year end. The new pubs are in a variety of locations throughout Britain and
Northern Ireland, are slightly larger in size than recent years, and opened at
the highest level of initial sales that we have experienced.
Like-for-like sales increased by 5.9% in August, helped by good summer weather,
and total company sales increased by 25%.
As a result of another strong trading performance, a good pipeline of new sites
and our excellent team, I remain confident of our future prospects.'
Enquiries:
Tim Martin Chairman 01923 477777
John Hutson Managing Director 01923 477777
Jim Clarke Finance Director 01923 477777
Eddie Gershon Press Office 07956 392234
Photographs are available at: www.newscast.co.uk 6 September 2002
CHAIRMAN'S STATEMENT
I am pleased to report a year of excellent progress for Wetherspoon. Sales
increased by £117.3 million to £601.3 million, a rise of 24%. Operating profit
increased by 20% to £70.1 million and profit before tax rose by 21% to £53.6
million. Earnings per share increased by 17% to 16.6p.
Capital investment was £155.9 million and net gearing at the year end was 98%
(2001: 88%). Gearing excluding the impact of deferred taxation was 82%, which
compares to 75% at the end of the previous year. Net interest was covered 4.2
times (2001: 4.2 times) by operating profit. Operating margins were 11.7%
compared with 12.1% last year, mainly as a result of higher labour costs. Cash
profits per pub increased marginally to £207,400.
Free cash flow after payments of tax, interest and capital investment of £18.7
million in existing pubs increased by 17% to £71.4 million, resulting in a cash
flow per share of 33.5p, more than double earnings per share, before investment
in new pubs, loan repayments, proceeds from the sale of fixed assets and
dividends paid. Free cash flow growth was slightly lower than turnover growth
principally as a result of the cash tax charge rising from 5% to 16% of profits.
It is anticipated that the cash tax charge will rise to approximately 30% of
profits by 2010.
Economic profit, calculated by adding depreciation to profit before tax and
subtracting capital expenditure on existing pubs, increased by 22% to £71.2
million, with capital investment in existing pubs at 3.1% of turnover, compared
with 3.3% of turnover in the previous period.
We are now approaching the 10th anniversary of our flotation on the stock
market. During this period, our compound annual growth in sales has been 39%,
profits before tax 33% and earnings per share, excluding deferred taxation, 25%.
Dividends
The board proposes, subject to shareholders' consent, to pay a final dividend of
2.12p per share on 29 November 2002 to those shareholders on the register at 27
September 2002, bringing the total dividend for the year to 3.22p per share, a
10% increase on the previous year. At this level, dividends will be covered 5.2
times by earnings, compared with 4.8 times in 2001. A scrip alternative will
again be offered to shareholders.
Finance
The company had £36 million of unutilised banking facilities and £14 million of
cash at the balance sheet date. Since the year end, £55 million of new banking
facilities have been agreed. Total facilities, which are now in excess of £400
million, coupled with our strong organic free cash flow, underpin the company's
expansion plans for the foreseeable future.
The company continues to fund an increasing percentage of capital investment
from organic free cash flow. In 1998, 26% of new pub development was financed in
this way and this percentage has steadily increased so that 54% of our new pub
development, excluding capitalised interest, was financed organically in the
year under review and we anticipate internally financing an increasing
proportion of our capital expenditure over the next few years.
Further progress
We opened 87 pubs during the year, compared with 94 in the previous year. The
total number of pubs now operated by us is 610, including 2 opened since the
year end. The new pubs are in a variety of locations throughout Britain and
Northern Ireland, are slightly larger in size than recent years, and opened at
the highest level of initial sales that we have experienced.
We acquired the first 10 Lloyds pubs 2 years ago and sales at those pubs have
more than doubled. In addition, we have opened 24 new Lloyds pubs which have
achieved extremely high levels of initial sales.
Like-for-like sales increased by 5.0% and like-for-like profits by 3.8% in the
year, resulting in our 22nd year of like-for-like increases.
As we have indicated in the past, our approach is to try and make small,
incremental improvements to the business regularly, rather than instigating
major reorganisation. To this end during the year, we have endeavoured to
upgrade every area of the business, including, for example, our IT systems, food
delivery systems, training, buying and design of new pubs.
In terms of external recognition, we are very pleased to have won the Supreme
Training Award from the British Institute of Innkeeping for the second year in a
row and to have won other awards, for example, for the quality of the design of
our pubs in Llandudno and Ross-on-Wye.
Historically, pubs in Britain have not allowed access to children. In individual
pubs over recent years, we have applied for children's licences which allow
accompanied children to use certain areas of the pub during restricted hours. In
April, we successfully extended this experiment to nearly all our pubs,
resulting in a considerable improvement in food and soft drink sales.
Following the successful introduction of cappuccinos some time ago, we now
intend to open all our pubs at 10am, approximately 1 hour earlier than
currently, for the provision of coffee and breakfasts, and believe that this
will create further momentum in the food side of the business.
Regulation
A number of organisations including the CBI (Confederation of British Industry)
have criticised the increasing amounts of regulation from the government and
from Europe.
As stated previously, increased regulation increases pub costs but the
government is also proposing to interfere with the regulation of pub licences by
transferring jurisdiction to local authorities from magistrates. This transfer
will be a laborious and expensive process and is hard to justify since areas of
licensing now controlled by local authorities are slower and more expensive than
those controlled by magistrates. The proposals are also absurd as ultimate
authority will still rest with magistrates who will deal with appeals against
local authorities. The disruption and expense of these proposals cannot be
justified and are strongly opposed by the huge majority of individual licensees.
The government indicates that their proposals will save money but the basic
licensing fee is rising from the current £10 per annum to an average of
approximately £400 per annum, leaving aside other costs. Any other proposed
savings can be just as well achieved using the magistrates' system.
The pub industry is a major employer and contributor to the Exchequer, with
around 40% of pub revenues paid in tax. In these circumstances, the government
should listen to those affected by the proposed legislation and leave
responsibility for licensing with magistrates.
People
I would like to thank again our employees, partners and suppliers for their
dedicated work in creating another year of great progress for the Company.
Prospects
Like-for-like sales increased by 5.9% in August, helped by good summer weather,
and total company sales increased by 25%.
We have 25 sites in the course of construction, 60 with the necessary
permissions for development, a further 60 on which terms have been agreed and
166 currently in negotiation.
As a result of another strong trading performance, a good pipeline of new sites
and our excellent team, I remain confident of our future prospects.
Tim Martin
Chairman
6 September 2002
Profit and loss account
for the year ended 28 July 2002
Notes 2002 2001
£000 £000
Turnover 601,295 483,968
Operating profit 2 70,085 58,380
Net interest payable 3 (16,517) (14,063)
Profit on ordinary activities before taxation 53,568 44,317
Tax on profit on ordinary activities 4 (18,152) (14,457)
Profit on ordinary activities after taxation 35,416 29,860
Dividends 5 (6,902) (6,185)
Retained profit for the year 14 28,514 23,675
Earnings per ordinary share 6 16.6p 14.2p
Fully diluted earnings per ordinary share 6 16.4p 14.0p
All activities relate to continuing operations.
The company has no recognised gains and losses other than the profit above and
therefore no separate statement of recognised gains and losses has been
presented.
Note of historical cost profits
2002 2001
£000 £000
Reported profit on ordinary activities before taxation 53,568 44,317
Difference between historical cost depreciation charge and actual 673 670
depreciation charge for the year calculated on the revalued amount
Realisation of property deficits of previous years (235) -
Historical cost profit on ordinary activities before taxation 54,006 44,987
Historical cost profit for the year retained after taxation and dividends 28,952 24,345
Cash flow statement
for the year ended 28 July 2002
Notes 2002 2001
£000 £000 £000 £000
Net cash inflow from operating activities 7 113,700 113,700 93,005 93,005
Returns on investments and servicing of finance
Interest received 53 53 976 976
Interest paid - existing pubs (17,346) (17,346) (15,436) (15,436)
Interest paid and capitalised into new pubs (2,254) (3,004)
Net cash outflow from returns on investment and (19,547) (17,464)
servicing of finance
Taxation
Corporation tax paid (6,311) (6,311) (1,556) (1,556)
Capital expenditure and financial investment
Purchase of tangible fixed assets for existing (18,726) (18,726) (15,792) (15,792)
pubs
Proceeds of sale of tangible fixed assets 412 -
Purchase of own shares for ESOP trust - (241)
Investment in new pubs and pub extensions (132,096) (127,574)
Net cash outflow from capital expenditure and (150,410) (143,607)
financial investment
Equity dividends paid (4,445) (4,529)
Net cash outflow before financing (67,013) (74,151)
Financing
Issue of ordinary shares 5,750 2,057
Advances under bank loans 65,037 40,156
Advances under US senior loan notes 44 44
Net cash inflow from financing 70,831 42,257
Increase/(Decrease) in cash 9 3,818 (31,894)
Free cash flow 6 71,370 61,197
6 33.5p
Cash flow per ordinary share 29.1p
Balance sheet
at 28 July 2002
Notes 2002 2001
£000 £000
Fixed assets
Tangible assets 10 745,041 625,903
Current assets
Stocks 8,594 7,503
Debtors due after more than one year 7,682 6,986
Debtors due within one year 8,237 6,764
Investments 203 241
Cash 13,609 9,791
38,325 31,285
Creditors due within one year 11 (122,919) (81,965)
Net current liabilities (84,594) (50,680)
Total assets less current liabilities 660,447 575,223
Creditors due after more than one year 12 (292,915) (253,581)
Provisions for liabilities and charges 13 (57,399) (47,803)
Total net assets 310,133 273,839
Capital and reserves
Called up share capital 4,292 4,224
Share premium account 124,819 116,389
Revaluation reserve 23,386 23,824
Profit and loss account 157,636 129,402
Equity shareholders' funds 14 310,133 273,839
Notes
1 These preliminary statements do not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985. They have,
however, been extracted from the statutory accounts for the periods ending 28
July 2002 and 29 July 2001 on which unqualified reports were made by the
company's auditors.
The 2001 statutory accounts have been filed with the Registrar of Companies. The
2002 statutory accounts will be sent to shareholders in October 2002 and will be
filed with the Registrar of Companies following their adoption at the
forthcoming Annual General Meeting.
2 Analysis of continuing operations
2002 2001
£000 £000
Turnover 601,295 483,968
Cost of sales (503,699) (401,800)
Gross profit 97,596 82,168
Administrative expenses (27,511) (23,788)
Operating profit 70,085 58,380
Cost of sales includes distribution costs and all pub operating costs.
3 Net interest payable
2002 2001
£000 £000
Interest payable on bank loans and overdraft 14,255 11,761
Interest payable on US senior loan notes 5,277 6,528
Less:
Interest capitalised (2,266) (2,979)
Interest receivable (749) (1,247)
Charge to profit and loss account 16,517 14,063
4 Taxation
Analysis of current period tax charge
Current tax 2002 2002 2001 2001
£000 £000 £000 £000
UK corporation tax on profits for the year at 30% 9,299 5,906
Adjustments in respect of prior years - (863)
Advance corporation tax (743) (2,701)
Total current tax 8,556 2,342
Deferred tax
Origination and reversal of timing differences 9,596 12,115
Total deferred tax 9,596 12,115
Tax on profit on ordinary activities 18,152 14,457
5 Dividends
2002 2001
£000 £000
Interim paid of 1.10p per share (2001: 1.00p) 2,353 2,109
Final proposed of 2.12p per share (2001: 1.93p) 4,549 4,076
6,902 6,185
6 Earnings and cash flow per share
The calculation of basic earnings per share is based on profits on ordinary
activities after taxation for the period of £35,416,000 (2001: £29,860,000) and
on 213,202,101 (2001: 210,542,854) ordinary shares, being the weighted average
number of ordinary shares in issue and ranking for dividend during the period.
Fully diluted earnings per share has been calculated in accordance with FRS14
and is after allowing for the dilutive effect of the conversion into ordinary
shares of the weighted average number of options outstanding during the period.
The number of shares used for the fully diluted calculation is 215,316,001
(2001: 213,486,301).
The calculation of free cash flow per share is based on the net cash generated
by business activities and available for investment in new pub developments and
extensions to existing pubs, after funding interest on existing pubs, tax and
all other reinvestment in pubs open at the start of the period ('free cash
flow'). It is calculated before taking account of proceeds from property
disposals and inflows and outflows of financing from outside sources and
dividend payments, and is based on the same number of shares in issue as that
for the calculation of basic earnings per share.
7 Net cash inflow from operating activities
2002 2001
£000 £000
Operating profit 70,085 58,380
Profit on disposal of fixed assets (24) -
Depreciation of tangible fixed assets 36,343 29,674
Change in stocks (1,091) (2,817)
Change in debtors (1,395) (409)
Change in creditors 9,782 8,177
113,700 93,005
8 Reconciliation of net cash flow to movement in net debt
2002 2001
£000 £000
Increase/(Decrease) in cash in the year 3,818 (31,894)
Cash inflow from increase in debt financing (65,081) (40,200)
Movement in net debt during the period (61,263) (72,094)
Opening net debt (241,577) (169,483)
Closing net debt (302,840) (241,577)
9 Analysis of net debt
Non Cash
Movement
2001 Cash flow £000 2002
£000 £000 £000
Cash at bank and in hand 9,791 3,818 - 13,609
Debt due within one year - - (24,831) (24,831)
Debt due after one year (251,368) (65,081) 24,831 (291,618)
Net debt (241,577) (61,263) - (302,840)
10 Tangible fixed assets
Freehold
and long
leasehold Short leasehold Equipment, Expenditure Total
property property fixtures on unopened
and properties
£000 £000 fittings £000
£000 £000
Cost or valuation
At 30 July 2001 280,362 251,304 149,876 37,212 718,754
Reclassification 23,164 4,562 - (27,726) -
Additions 60,582 38,232 33,503 23,552 155,869
Disposals (67) (336) (139) - (542)
At 28 July 2002 364,041 293,762 183,240 33,038 874,081
Depreciation
At 30 July 2001 8,755 26,856 57,240 - 92,851
Reclassification 11 (11) - - -
Charge for the year 5,508 6,583 24,252 - 36,343
Disposals (2) (42) (110) - (154)
At 28 July 2002 14,272 33,386 81,382 - 129,040
Net book value
At 28 July 2002 349,769 260,376 101,858 33,038 745,041
At 29 July 2001 271,607 224,448 92,636 37,212 625,903
11 Creditors due within one year
2002 2001
£000 £000
Bank loans 24,831 -
Trade creditors 54,352 50,418
Corporation tax 4,682 2,437
Other tax and social security 12,716 7,715
Other creditors 3,987 3,881
Dividend payable 4,549 4,076
Accruals and deferred income 17,802 13,438
122,919 81,965
12 Creditors due after one year
2002 2001
£000 £000
Bank loans repayable by instalments 204,715 164,509
US senior loan notes repayable in a single instalment in 2009 86,903 86,859
291,618 251,368
Other creditors 1,297 2,213
292,915 253,581
13 Provisions for liabilities and charges
2002 2001
£000 £000
Deferred tax
Accelerated capital allowances 49,126 40,860
Other timing differences 8,273 7,686
Advance corporation tax - (743)
Full provision for deferred tax 57,399 47,803
Provision at start of year 47,803 35,688
Deferred tax charge in profit and loss account for year 9,596 12,115
Provision at end of year 57,399 47,803
14 Capital, reserves and shareholders' funds
Called-up Share Revaluation Profit and 2002 2001
share premium reserve loss Shareholders' Shareholders'
capital account account funds funds
£000 £000 £000 £000 £000 £000
At start of year 4,224 116,389 23,824 129,402 273,839 246,830
Allotments 67 7,672 - - 7,739 3,334
Transfer - - (438) 438 - -
Profit for the year - - - 35,416 35,416 29,860
Dividends - - - (6,902) (6,902) (6,185)
QUEST Transfer 1 758 - (718) 41 -
At end of year 4,292 124,819 23,386 157,636 310,133 273,839
End
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