Preliminary results FY23

Wetherspoon (JD) PLC
06 October 2023
 

6 October 2023

 

J D WETHERSPOON PLC

PRELIMINARY RESULTS

(For the 52 weeks ended 30 July 2023)

 

 

FINANCIAL HIGHLIGHTS

Var %

 

 



Before separately disclosed



Like-for-like sales

+12.7%


Revenue £1,925.0m (2022: £1,740.5m)

+10.6%


Profit/(loss) before tax £42.6m (2022: -£30.4m)

-ve to +ve


Operating profit £107.1m (2022: £25.7m)

+316.7%


Diluted earnings/(losses) per share 26.4p (2022: -19.6p)

-ve to +ve


Free cash inflow per share 211.4p (2022: 17.3p)

+1,122%


Full year dividend 0.0p (2022: 0.0p)

-





After separately disclosed1



Profit before tax £90.5m (2022: £26.3m)

+244.1%


Operating profit £106.0m (2022: £55.1m)

+92.4%


Diluted earnings per share 46.5p (2022: 15.0p2)

+210%


 



 

1Separately disclosed items as disclosed in note 4.

2 Restated, see note 8.



 

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

 

"Wetherspoon continues to perform well. In the first nine weeks of the current financial year, to 1 October 2023, like-for-like sales increased by 9.9%, compared with the nine weeks to 2 October 2022.

 

"As we said last year, perhaps the biggest threat to the hospitality industry is the possibility of further lockdowns and restrictions.

 

"Those interested in the UK Government's response to the pandemic may like to read the reports by Professor Francois Balloux, director of the UCL Genetics Institute, in The Guardian, and by Professor Robert Dingwall, of Trent University, in the Telegraph

 

"See pages 54-56 of Wetherspoon News

https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/wetherspoon-news-autumn-2022.pdf)

 

"The conclusion of Professor Balloux, broadly echoed by Professor Dingwall, based on an analysis by the World Health Organisation of the pandemic, is that Sweden (which did not lock down), had a Covid-19 fatality rate "of about half the UK's" and that "the worst performer, by some margin, is Peru, despite enforcing the harshest, longest lockdown."

 

"Professor Balloux concludes that "the strength of mitigation measures does not seem to be a particularly strong indicator of excess deaths."

 

"Indeed, as some commentators have noted, lockdowns were not contemplated in the UK's laboriously compiled prepandemic plans. It appears that these plans were jettisoned, early on in the pandemic, in favour of copying China's lockdown approach - an example, perhaps, of Warren Buffett's so-called "institutional imperative" - "everyone else has locked down, so we will, too".

 

"The company currently anticipates a reasonable outcome for the financial year, subject to our future sales performance.

 

 


 

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.             The financial information set out in the announcement does not constitute the company's statutory accounts for the periods ended 30 July 2023 or 31 July 2022. The financial information for the period ended 31 July 2022 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors have reported on those accounts: their report was unqualified, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. Statutory accounts for 2023 will be delivered to the registrar of companies in due course. This announcement 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 2023 has been published on the Company's website on 06 October 2023.

5.             The current financial year comprises 52 trading weeks to 28 July 2024.

6.             The next trading update will be issued on 8 November 2023.

 

 


 

CHAIRMAN'S STATEMENT

 

Financial performance

 

The company was founded in 1979 - and this is the 40th year since incorporation in 1983.

The table below outlines some key aspects of our performance during that period.

 

Summary accounts for the years 1984-2023

 

 

 

Financial year

 

Total number

of pubs

(Sites)

 

Total sales

£000

Profit/(loss)

before tax and exceptional items

£000

Earnings per

share before

separately disclosed items

pence!

 

 

Free cash flow

£000

 

Free cash flow

per share

 pence2,3

1984

1

818

(7)

0



1985

2

1,890

185

0.2



1986

2

2,197

219

0.2



1987

5

3,357

382

0.3



1988

6

3,709

248

0.3



1989

9

5,584

789

0.6

915

0.4

1990

19

7,047

603

0.4

732

0.4

1991

31

13,192

1,098

0.8

1,236

0.6

1992

45

21,380

2,020

1.9

3,563

2.1

1993

67

30,800

4,171

3.3

5,079

3.9

1994

87

46,600

6,477

3.6

5,837

3.6

1995

110

68,536

9,713

4.9

13,495

7.4

1996

146

100,480

15,200

7.8

20,968

11.2

1997

194

139,444

17,566

8.7

28,027

14.4

1998

252

188,515

20,165

9.9

28,448

14.5

1999

327

269,699

26,214

12.9

40,088

20.3

2000

428

369,628

36,052

11.8

49,296

24.2

2001

522

483,968

44,317

14.2

61,197

29.1

2002

608

601,295

53,568

16.6

71,370

33.5

2003

635

730,913

56,139

17.0

83,097

38.8

2004

643

787,126

54,074

17.7

73,477

36.7

20054

655

809,861

47,177

16.9

68,774

37.1

2006

657

847,516

58,388

24.1

69,712

42.1

2007

671

888,473

62,024

28.1

52,379

35.6

2008

694

907,500

58,228

27.6

71,411

50.6

2009

731

955,119

66,155

32.6

99,494

71.7

2010

775

996,327

71,015

36.0

71,344

52.9

2011

823

1,072,014

66,781

34.1

78,818

57.7

2012

860

1,197,129

72,363

39.8

91,542

70.4

2013

886

1,280,929

76,943

44.8

65,349

51.8

2014

927

1,409,333

79,362

47.0

92,850

74.1

2015

951

1,513,923

77,798

47.0

109,778

89.8

2016

926

1,595,197

80,610

48.3

90,485

76.7

2017

895

1,660,750

102,830

69.2

107,936

97.0

2018

883

1,693,818

107,249

79.2

93,357

88.4

2019

879

1,818,793

102,459

75.5

96,998

92.0

20206

872

1,262,048

(44,687)

(35.5)

(58,852)

(54.2)

20213

861

772,555

(154,676)

(119.2)

(83,284)

(67.8)

20223

852

1,740,477

(30,448)

(19.6)

21,922

17.3

20233

826

1,925,044

42,559

26.4

271,095

211.4


Notes

Adjustments to statutory numbers

1. Where appropriate, the earnings/losses 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. EPS and free cash flow per share are calculated using dilutive shares in issue.

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 1-4, all numbers are as reported in each year's published accounts.

6. From financial year 2020 data is based on post-IFRS 16 numbers following the transition from IAS17 to IFRS 16.

7. Free cash flow is defined in the APM section within accounting policies in the annual report. The free cash flow calculation can be found on the cash flow statement.

 

Comparison to Pre-Pandemic Period (FY19)

 

The sales recovery, following the pandemic, continued in FY23.

 

Like-for-like sales for the financial year increased by 7.4% (FY22: -4.7%), compared to FY19. Bar sales increased by 2.1%, food sales by 13.7%, slot/fruit machine sales by 43.0% and hotel sales by 15.4%.

 

Like-for-like sales, compared to FY19, have continued to improve in the first 9 weeks of the current financial year (FY24) and are 17.3% ahead of the equivalent 9-week period.

 

The comparisons in the remainder of this statement are with the previous financial year, which ended on 31 July 2022.

 

Cash flow

 

Free cash flow, including pre-tax proceeds of approximately £169 million from the sale of the majority of the company's interest rate swaps, was £271.1 million (2022: £21.9 million).

 

Excluding the proceeds from the swaps, free cash flow was approximately £102 million.

 

Free cash flow was calculated after capital payments of £47.0 million for existing pubs (2022: £45.9 million), £12.3 million for share purchases for employees (2022: £12.8 million) and payments of tax and interest.

 

Balance sheet

 

Wetherspoon's balance sheet is significantly stronger than it was in the period before the pandemic.

 

Debt levels, excluding IFRS-16 lease debt, have decreased by £163 million since January 2020, just before the first lockdown, to £641.9 million.

 

This reduction has been achieved after investments in freehold reversions (pubs where Wetherspoon was previously the tenant) of £81.7 million and £108.5 million in new pubs.

 

During the pandemic, the company raised a total of £229 million of new equity.

 

On an IFRS-16 basis, which includes notional debt from leases, debt decreased from £1.45 billion to £1.06 billion between January 2020 and the end of FY23.

 

Trading summary

 

Total sales for FY23 were £1,925 million, an increase of 10.6%, compared to the 53 weeks ended 31 July 2022.

 

Like-for-like sales, compared to FY22, increased by 12.7%. Like-for-like bar sales increased by 9.0%, food sales by 17.7%, slot/fruit machine sales by 26.4% and hotel rooms by 11.8%.

 

The operating profit, before separately disclosed items, was £107.1 million (2022: £25.7 million). The operating margin, before separately disclosed items, was 5.6% (2022: 1.5%).

 

The profit before tax and separately disclosed items was £42.6 million (2022: £30.4 million loss), including property gains of £2.2 million (2022: £2.1 million).

 

In the year, the company sold 13 pubs, terminated the leases of 14 pubs, and closed 4 pubs. This gave rise to a cash inflow of £7.0 million after associated fees. There was a loss on disposal of £9.4 million, recognised in the income statement, relating to these pubs.

 

Earnings per share before separately disclosed items, were 27.0p (2022: losses per share of 19.6p).

 

Total capital investment was £78.5 million (2022: £122.7 million). £20.4 million was invested in new pubs and pub extensions (2022: £51.1 million), £47.0 million in existing pubs and IT (2022: £45.9 million) and £11.2 million in freehold reversions of properties where Wetherspoon was the tenant (2022: £25.8 million).

 

Separately disclosed items

 

Overall, there was a pre-tax 'separately disclosed gain' of £48.0 million (2022: £56.7 million).

 

There was a £97.7 million gain related to the fair value movement of interest rate swaps; a £9.4 million charge relating to the disposal of pubs; and a £38.3 million property impairment charge, in respect of pubs which were deemed unlikely to generate sufficient cash flows, in the future, to support their carrying value.

 

Although there have been a number of impairments over the years in respect of individual properties, the book value of the company's assets is £1.38 billion, which is approximately eight times the company's EBITDA of £170 million. There are many pubs in the estate where expected future cash flows would result in a valuation which is considerably in excess of book value. However, accounting rules do not take account of these potential valuations.

 

This historical cost accounting approach can also create anomalies in pub valuations.

 

For example, one pub in South London has made an estimated return on equity, since opening over 20 years ago, after all costs including interest and tax, of £4.4 million; yet its valuation has been impaired due to low profitability in the aftermath of the pandemic.

 

Dividends and return of capital

 

The board has not recommended the payment of a final dividend (2022: £0). There have been no share buybacks in the financial year to date (2022: £0).

 

Financing

 

As at 30 July 2023, the company's total net debt, excluding derivatives and lease liabilities, was £641.9 million (2022: £891.7 million), a decrease of £249.8 million.

 

In November 2022, the company repaid government "CLBILS" loans of £100 million, which had been due to mature in August 2023. The company has total available finance facilities of £983 million.

 

The company has interest rate swaps in place in respect of £200 million, from August 2023 to February 2025. The swap rate currently being paid, excluding the banks' margin, is 5.67%. The total cost of the company's debt, in the year under review, including the banks' margin was 6.25%.

 

Property

 

The company opened three pubs during the year and sold, closed or terminated the leases of 31 pubs. The company had a trading estate of 826 pubs at the financial year end.

 

In the last 12 years, the company has increased the ratio of freehold pubs it owns from 43% to 70%, as a result of investment in freehold reversions and opening freehold pubs.

 

As indicated above, at 30 July 2023, the net book value of the property, plant and equipment of the company was £1.38 billion.

 

The properties have not been revalued since 1999.

 

 

 

Taxation

 

The total tax charge is £8.7 million in respect of profits before separately disclosed items (2022: £5.6 million credit). 

 

The total tax charge comprises two parts. The first part is the actual current tax (the 'cash' tax) which this year is nil (2022: nil) because of losses carried forward from prior years.

 

The second part is deferred tax (the 'accounting' tax), which is tax payable in future periods, that must be recognised in the current period for accounting purposes. The accounting tax charge in the year is £8.7 million (2022: £5.6 million credit). 

 

The company is seeking a refund of historic excise duty from HMRC, totalling £524k , in relation to goods sent to the Republic of Ireland, when Wetherspoon pubs first opened in that country. The company has been charged excise duty on the same goods twice, as they were purchased in the UK, and excise duty was paid in full. Irish excise duty was then paid in addition.

 

Business rates transmogrified to a sales tax

 

Business rates are supposed to be based on the value of the building, rather than the level of trade of the tenant. This should mean that the rateable value per square foot is approximately the same for comparable pubs in similar locations. However, as a result of the valuation approach adopted by the government "Assessor" in Scotland, Wetherspoon often pays far higher rates per square foot than its competitors.

 

This is highlighted (in the tables below) by assessments for the Omni Centre, a modern leisure complex in central Edinburgh, where Wetherspoon has been assessed at more than double the rate per square foot of the average of its competitors, and for The Centre in Livingston (West Lothian), a modern shopping centre, where a similar anomaly applies.

 

As a result of applying valuation practice from another era, which assumed that pubs charged approximately the same prices, the raison d'être of the rating system - that rates are based on property values, not the tenant's trade - has been undermined.

 

Similar issues are evident in Galashiels, Arbroath, Anniesland - and, indeed, at most Wetherspoon pubs in Scotland. In effect, the application of the rating system in Scotland discriminates against businesses like Wetherspoon, which have lower prices, and encourages businesses to charge higher prices. As a result, consumers are likely to pay higher prices, which cannot be the intent of rating legislation.

 

Omni Centre, Edinburgh

Occupier Name

Rateable value (RV)

Customer area (ft²)

Rates per square foot

Playfair (JDW)

£218,750

2,756

£79.37

Unit 9 (vacant)

£48,900

1,053

£46.44

Unit 7 (vacant)

£81,800

2,283

£35.83

Frankie & Benny's

£119,500

2,731

£43.76

Nando's

£122,750

2,804

£43.78

Slug & Lettuce

£108,750

3,197

£34.02

The Filling Station

£147,750

3,375

£43.78

Tony Macaroni

£125,000

3,427

£36.48

Unit 6 (vacant)

£141,750

3,956

£35.83

Cosmo

£200,000

7,395

£27.05

Average (exc JDW)

£121,800

3,358

£38.55

 

 

 

 

 

 

 

The Centre, Livingston

Occupier Name

Rateable Value (RV)

Customer Area (ft²)

Rates per square foot

The Newyearfield (JDW)

£165,750

4,090

£40.53

Paraffin Lamp

£52,200

2,077

£25.13

Wagamana

£67,600

2,096

£32.25

Nando's

£80,700

2,196

£36.75

Chiquito

£68,500

2,221

£30.84

ASK Italian

£69,600

2,254

£30.88

Pizza Express

£68,100

2,325

£29.29

Prezzo

£70,600

2,413

£29.26

Harvester

£98,600

3,171

£31.09

Pizza Hut

£111,000

3,796

£29.24

Hot Flame

£136,500

4,661

£29.29

Average (exc JDW)

£82,340

2,721

£30.40

 

In summary, as a result of the approach taken in Scotland, business rates for pubs are de facto a sales tax, rather than a property tax, as the above examples clearly demonstrate.

 

VAT equality

 

As we have previously stated, 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 do supermarkets, 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, in these less affluent areas, there are often fewer pubs, coffee shops and restaurants, with less employment and increased high-street dereliction. Tax equality would also be in line with the principle of fairness - the same taxes should apply to businesses which sell the same products.

 

How pubs contribute to the economy

 

Wetherspoon and other pub and restaurant companies have always generated far more in taxes than are earned in profits.

 

In the financial year ended 30 July 2023, the company generated taxes of £760.2 million.

 

The table below shows the £6.0 billion of tax revenue generated by the company, its staff and customers in the last 10 years. Each pub, on average, generated £6.8 million in tax during that period. The tax generated by the company, during this 10-year period, equates to approximately 25 times the company's profits after tax.

 

 

 

 

 

 

 

 

 


2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

TOTAL

2014 to 2023

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

VAT

372.3

287.7

93.8

244.3

357.9

332.8

323.4

311.7

294.4

275.1

2,893.4

Alcohol duty

166.1

158.6

70.6

124.2

174.4

175.9

167.2

164.4

161.4

157

1,519.8

PAYE and NIC

124.0

141.9

101.5

106.6

121.4

109.2

96.2

95.1

84.8

78.4

1,059.1

Business rates

49.9

50.3

1.5

39.5

57.3

55.6

53

50.2

48.7

44.9

450.9

Corporation tax

12.2

1.5

-

21.5

19.9

26.1

20.7

19.9

15.3

18.4

155.5

Corporation tax credit (historic capital allowances)

-

-

-

-

-

-

-

-

-2

-

-2.0

Fruit/slot machine duty

15.7

12.8

4.3

9

11.6

10.5

10.5

11

11.2

11.3

107.9

Climate change levies

11.1

9.7

7.9

10

9.6

9.2

9.7

8.7

6.4

6.3

88.6

Stamp duty

0.9

2.7

1.8

4.9

3.7

1.2

5.1

2.6

1.8

2.1

26.8

Sugar tax

3.1

2.7

1.3

2

2.9

0.8

-

-

-

-

12.8

Fuel duty

1.9

1.9

1.1

1.7

2.2

2.1

2.1

2.1

2.9

2.1

20.1

Apprenticeship levy

2.5

2.2

1.9

1.2

1.3

1.7

0.6

-

-

-

11.4

Carbon tax

-

-

-

-

1.9

3

3.4

3.6

3.7

2.7

18.3

Premise licence and TV licences

0.5

0.5

0.5

1.1

0.8

0.7

0.8

0.8

1.6

0.7

8.0

Landfill tax

-

-

-

-

-

1.7

2.5

2.2

2.2

1.5

10.1

Furlough tax

-

-4.4

-213

-124.1

-

-

-

-

-

-

-341.5

Eat Out to Help Out


-

-23.2

-

-

-

-

-

-

-

-23.2

Local government grants

-

-1.4

-11.1

-

-

-

-

-

-

-

-12.5

TOTAL TAX

760.2

666.7

38.9

441.9

764.9

730.5

695.2

672.3

632.4

600.5

6,003.5

TAX PER PUB (£m)

0.92

0.78

0.05

0.51

0.87

0.83

0.78

0.71

0.67

0.66

6.78

TAX AS % OF NET SALES

39.5%

38.3%

5.0%

35.0%

42.1%

43.1%

41.9%

42.1%

41.8%

42.6%

39.0.%

PROFIT/(LOSS) AFTER TAX

33.8

-24.9

-146.5

-38.5

79.6

83.6

76.9

56.9

57.5

58.9

237.3

 

Note - this table is prepared on a cash basis. IFRS-16 from FY20 onwards.

 

 

 

 

 

 

 

 

 

 

 

 

Corporate governance

 

Wetherspoon has been a strong critic of the composition of the boards of UK-quoted companies.

 

As a result of the 'nine-year rule', limiting the tenure of NEDs and the presumption in favour of 'independent', part-time chairmen, boards are often composed of short-term directors, with very little representation from those who understand the company best - people who work for it full time, or have worked for it full time.

 

Wetherspoon's review of the boards of major banks and pub companies, which teetered on the edge of failure in the 2008-10 recession, highlighted the short "tenure", on average, of directors.

 

In contrast, Wetherspoon noted the relative success, during this fraught financial period, of pub companies Fuller's and Young's, the boards of which were dominated by experienced executives, or former executives.

 

As a result, Wetherspoon has increased the level of experience on the Wetherspoon board by appointing four "worker directors".

 

All four worker directors started on the 'shop floor' and eventually became successful pub managers. Three have been promoted to regional management roles. They have worked for the company for an average of 24 years.

 

Board composition cannot guarantee future success, but it makes sensible decisions, based on experience at the coalface of the business, more likely.

 

The UK Corporate Governance Code 2018 (the 'Code') is a vast improvement on previous codes, emphasising the importance of employees, customers and other stakeholders in commercial success. It also emphasises the importance of its comply-or-explain ethos, and the consequent need for shareholders to engage with companies in order to understand their explanations.

 

A major impediment to the effective implementation of comply or explain seems to be the undermanning of the corporate governance departments of major shareholders.

 

For example, Wetherspoon has met a compliance officer from one major institution who is responsible for around 400 companies - an impossible task.

As a result, it appears that compliance officers and governance advisors, in practice, often rely on a "tick-box" approach, which is, itself, in breach of the Code.

 

A further issue is that many major investors, in their own companies, for sensible reasons, do not observe the nine-year rule, and other rules, themselves. An approach of "do what I say, not what I do" is clearly unsustainable.

 

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. Wetherspoon paid £36.0 million in respect of bonuses and free shares to employees in the period ended 31 July 2023, of which 98.6% was paid to staff below board level and 83.4% was paid to staff working in our pubs.

 

Wetherspoon has been the biggest corporate sponsor of 'Young Lives vs Cancer' (previously CLIC Sargent), having raised a total of £22.2 million since 2002. During the pandemic, our contributions had been reduced, but, since the reopening of our pubs' there have been great efforts seen and our contributions have bounced back significantly.

 

Bonuses and free shares

 

As indicated above, Wetherspoon has, for many years (see table below), operated a bonus and share scheme for all employees. Before the pandemic, these awards increased, as earnings increased for shareholders.

 

 

 

Financial year

Bonus and free shares

Profit/(loss) after tax1

Bonus and free shares as % of profits

 

£m

£m

 

2007

19

47

41%

2008

16

36

45%

2009

21

45

45%

2010

23

51

44%

2011

23

52

43%

2012

24

57

42%

2013

29

65

44%

2014

29

59

50%

2015

31

57

53%

2016

33

57

58%

2017

44

77

57%

2018

43

84

51%

2019

46

80

58%

2020

33

(39)

-

2021

23

(146)

-

2022

30

(25)

-

2023

36

34

106%

Total

503

591

53%2

 

1 IFRS 16 was implemented in the year ending 26 July 2020 (FY20). From this period all profit numbers in the above table are on a post-IFRS 16 basis. Before this date all profit numbers are on a pre-IFRS 16 basis.

2 Excludes 2020, 2021 and 2022.

 

Length of Service

 

The attraction and retention of talented pub and kitchen managers are important for any hospitality business. As the table below demonstrates, the retention of managers has improved, even during the pandemic.

Financial year

Average pub manager length of service

Average kitchen manager length of service

 

(Years)

(Years)

2013

9.1

6.0

2014

10.0

6.1

2015

10.1

6.1

2016

11.0

7.1

2017

11.1

8.0

2018

12.0

8.1

2019

12.2

8.1

2020

12.9

9.1

2021

13.6

9.6

2022

13.9

10.4

2023

14.3

10.6

 

 

Food Hygiene Ratings

 

Wetherspoon has always emphasised the importance of hygiene standards.

 

We now have 753 pubs rated on the Food Standards Agency's website (see table below). The average score is 4.99, with 99.2% of the pubs achieving a top rating of five 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 60 pubs have passed.

 

 

 

Financial Year

Total Pubs Scored

Average Rating

Pubs with highest Rating %

2013

771

4.85

87.0

2014

824

4.91

92.0

2015

858

4.93

94.1

2016

836

4.89

91.7

2017

818

4.89

91.8

2018

807

4.97

97.3

2019

799

4.97

97.4

2020

781

4.96

97.0

2021

787

4.97

98.4

2022

775

4.98

98.6

2023

753

4.99

99.2





Property litigation

 

In 2013, Wetherspoon agreed an out-of-court settlement of approximately £1.25 million with developer Anthony Lyons, formerly of property leisure agent Davis Coffer Lyons, relating to claims 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 in respect of properties in Leytonstone (which currently trades as the Walnut Tree), Newbury (which was leased to Café Rouge) and Portsmouth (which currently trades as The Isambard Kingdom Brunel).

 

Of these three properties, only Portsmouth was pleaded by Wetherspoon in its case 2008/9 case against Van de Berg. Mr Lyons denied the claim and the litigation was contested.

 

In the Van de Berg litigation, Mr Justice Peter Smith ruled that Van de Berg, but not Mr Lyons (who was not a party to the case), fraudulently diverted the freehold of Portsmouth from Wetherspoon to Moorstown Properties Limited, a company owned by Simon Conway, which leased the property to Wetherspoon.

 

As part of a series of cases, Wetherspoon also agreed out-of-court settlements with:

 

1) Paul Ferrari of London estate agent Ferrari Dewe & Co, in respect of properties referred to as the 'Ferrari Five' by Mr Justice Peter Smith in the Van de Berg case, and

 

2) Property investor Jason Harris, formerly of First London and now of First Urban Group who paid £400,000 to to Wetherspoon to settle a claim in which it was alleged that Harris was an accessory to frauds committed by Van de Berg. Harris contested the claim and did not admit liability.

 

Messrs Ferrari and Harris both contested the claims and did not admit liability.

 

Press corrections

 

The press and media, over the decades, have generally been fair and accurate in reporting on Wetherspoon. However, in the febrile atmosphere of the first lockdown, something went awry and a number of harmful inaccuracies were published.

 

In order to try to set the record straight, a special edition of Wetherspoon News was published, which includes details of the resulting apologies and corrections. It can be found on the company's website https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/does-truth-matter_.pdf.

 

Board changes

 

Su Cacioppo retired from the Wetherspoon board on the 7th October 2022, after 31 years with the company. Su started as a pub manager in 1991, then became an area manager, before eventually becoming the board director responsible for the personnel, legal and marketing departments in 2008.

 

Sir Richard Beckett KC also retired from the board at last year's AGM, after 13 years as a non-executive director of the company, latterly as head of the nominations committee.

 

I would like to thank sincerely Su and Richard for their dedicated, creative and conscientious work over many years.

 

Pubwatch

 

Pubwatch is a forum which has improved wider town and city environments, by bringing together pubs, local authorities and the police, in a concerted way, to encourage good behaviour and to reduce antisocial activity.

 

Wetherspoon pubs are members of 538 schemes country wide.

 

The company also helps to fund National Pubwatch, founded  in 1997 by just two licensees and a police office. This is the umbrella organisation which helps to set up, co-ordinate and support local schemes.

 

It is our experience that in some towns and cities, where the authorities have struggled to control antisocial behaviour, the setting up of a Pubwatch has been instrumental in improving safety and security - of not only licensed premises, but also the town and city in general, as well as assisting the police in bringing down crime.

 

Conversely, we have found, in several towns, including some towns on the outskirts of London, that the absence of an effective Pubwatch scheme results in higher incidents of crime, disorder and antisocial behaviour.

 

In our view, Pubwatch is integral to making towns and cities a safe environment for everyone.

 

Current trading and outlook

 

Wetherspoon continues to perform well. In the first 9 weeks of the current financial year, to 1 October 2023, like-for-like sales increased by 9.9%, compared to the 9 weeks to 2 October 2022.

 

As we said last year, perhaps the biggest threat to the hospitality industry is the possibility of further lockdowns and restrictions.

 

Those interested in the UK Government's response to the pandemic may like to read the reports by Professor Francois Balloux, director of the UCL Genetics Institute, in The Guardian, and by Professor Robert Dingwall, of Trent University, in the Telegraph

 

(see pages 54-56 of Wetherspoon News

https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/wetherspoon-news-autumn-2022.pdf)

 

The conclusion of Professor Balloux, broadly echoed by Professor Dingwall, based on an analysis by the World Health Organisation of the pandemic, is that Sweden (which did not lock down), had a Covid-19 fatality rate "of about half the UK's" and that "the worst performer, by some margin, is Peru, despite enforcing the harshest, longest lockdown."

 

Professor Balloux concludes that "the strength of mitigation measures does not seem to be a particularly strong indicator of excess deaths."

 

Indeed, as some commentators have noted, lockdowns were not contemplated in the UK's laboriously compiled prepandemic plans. It appears that these plans were jettisoned, early on in the pandemic, in favour of copying China's lockdown approach - an example, perhaps, of Warren Buffett's so-called "institutional imperative" - "everyone else has locked down, so we will, too".

 

The company currently anticipates a reasonable outcome for the financial year, subject to our future sales performance.

 


 

 

 

INCOME STATEMENT for the 52 weeks ended 30 July 2023

 

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



30 July

 

30 July

 

30 July

 

31 July

31 July

31 July



2023

 

2023

 

2023

 

2022

2022

2022



Before

 

separately

 

After

 

Before

separately

After



separately

 

disclosed

 

separately

 

separately

disclosed

separately



disclosed

 

items

 

disclosed

 

disclosed

items

disclosed



items

 

 

 

items

 

items


items



£000

 

£000

 

£000


£000

£000

£000

Revenue

1

1,925,044

 

-

 

1,925,044

 

1,740,477

-

1,740,477

Other operating (costs)/income


-

 

(1,022)

 

(1,022)

 

-

29,384

29,384

Operating costs


(1,817,982)

 

-

 

(1,817,982)

 

(1,714,757)

-

(1,714,757)

Operating profit/(loss)


107,062

 

(1,022)

 

106,040


25,720

29,384

55,104

Property gains/(losses)

3

2,231

 

(47,712)

 

(45,481)

 

2,142

(24,526)

(22,384)

Finance income

6

1,351

 

97,724

 

99,075

 

531

52,859

53,390

Finance costs

6

(68,085)

 

(1,038)

 

(69,123)

 

(58,841)

(1,000)

(59,841)

Profit/(loss) before tax


42,559

 

47,952

 

90,511


(30,448)

56,717

26,269

Income tax (charge)/credit

7

(8,734)

 

(22,190)

 

(30,924)

 

5,560

(12,562)

(7,002)

Profit/(loss) for the period


33,825

 

25,762

 

59,587


(24,888)

44,155

19,267



 

 

 

 

 

 




Profit/(loss) per ordinary share (p)

 

 

 

 

 

 

 




 - Basic

8

                        27.0

 

 

20.5

 

                 47.5

 

 

(19.6)

 

34.8

 

15.2

 - Diluted1

8

                        26.4

 

 

20.1

 

                 46.5


 

(19.6)

 

34.6

 

15.0

 1 Restated, see note 8.

 

 

STATEMENT OF COMPREHENSIVE INCOME for the 52 weeks ended 30 July 2023

 

 

 

 



 





52 weeks

ended

53 weeks

ended




30 July

31 July


Notes


2023

2022




£000

£000

Items which will be reclassified subsequently to profit or loss:





Interest-rate swaps: gain taken to other comprehensive income



37,529

48,452

Interest-rate swaps: loss reclassification to the income statement



(13,310)

(4,332)

Tax on items taken directly to other comprehensive income

7


(6,055)

(11,051)

Currency translation differences



1,633

(1,474)

Net gain recognised directly in other comprehensive income

 


19,797

31,595

Profit for the period



59,587

19,267

Total comprehensive profit for the period



79,384

50,862

 


CASH FLOW STATEMENT for the 52 weeks ended 30 July 2023

 

 

J D Wetherspoon plc, company number: 1709784


 

 

 

 




Notes


 

 

free cash

 


free cash




 

 

flow1

 


flow




52 weeks

 

52 weeks

 

53 weeks

53 weeks




ended

 

ended

 

ended

ended




30 July

 

30 July

 

31 July

31 July




2023

 

2023

 

2022

2022




£000

 

£000

 

£000

£000

Cash flows from operating activities

 








Cash generated from operations

9


270,686

 

270,686

 

178,510

178,510

Interest received

6


1,011

 

1,011

 

97

97

Interest paid

6


(50,545)

 

(50,545)

 

(41,044)

(41,044)

Cash proceeds on termination of interest-rate swaps

169,413

 

169,413

 

-

-

Corporation tax paid



(12,200)

 

(12,200)

 

(715)

(715)

Lease interest



(15,954)

 

(15,954)

 

(17,501)

(17,501)

Net cash flow from operating activities

 

 

362,411

 

362,411

 

119,347

119,347




 

 

 

 



Cash flows from investing activities

 


 

 

 

 



Reinvestment in pubs



(41,646)

 

(41,646)

 

(42,777)

(42,777)

Reinvestment in business and IT projects



(5,315)

 

(5,315)

 

(3,113)

(3,113)

Investment in new pubs and pub extensions



(20,361)

 

-

 

(51,083)

-

Freehold reversions and investment properties


(11,202)

 

-

 

(25,773)

-

Proceeds of sale of property, plant and equipment


11,349

 

-

 

10,547

-

Net cash flow from investing activities

 

 

(67,175)

 

(46,961)

 

(112,199)

(45,890)




 

 

 

 



Cash flows from financing activities

 


 

 

 

 



Purchase of own shares for share-based payments

(12,332)

 

(12,332)

 

(12,808)

(12,808)

Loan issue cost



-

 

-

 

(192)

(192)

Advances/(repayments) under bank loans



(200,033)

 

-

 

50,000

-

Other loan receivables



889

 

-

 

(3,542)

-

Lease principal payments



(32,023)

 

(32,023)

 

(38,535)

(38,535)

Asset-financing principal payments



(4,911)

 

-

 

(7,132)

-

Net cash flow from financing activities

 

 

(248,410)

 

(44,355)

 

(12,209)

(51,535)




 

 

 

 



Net change in cash and cash equivalents



46,826

 

 

 

(5,061)


Opening cash and cash equivalents



40,347

 

 

 

45,408


Closing cash and cash equivalents



87,173

 

 

 

40,347


Free cash flow1



 

 

271,095

 


21,922

 

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

 

 

 

BALANCE SHEET as at 30 July 2023

 

J D Wetherspoon plc, company number: 1709784

Notes

30 July

31 July



2023

2022



£000

£000

Assets

 



Non-current assets

 



Property, plant and equipment

13

1,377,816

1,426,862

Intangible assets

12

6,505

5,409

Investment property

14

18,740

23,364

Right-of-use assets


387,353

419,416

Other loan receivable


1,986

2,739

Derivative financial instruments


11,944

61,367

Lease assets


8,450

9,264

Total non-current assets

 

1,812,794

1,948,421

 

 

 


Current assets

 

 


Lease assets


1,361

2,001

Assets held for sale


400

800

Inventories


34,558

26,402

Receivables


27,267

29,400

Current income tax receivables


8,351

2,000

Cash and cash equivalents


87,173

40,347

Total current assets


159,110

100,950

Total assets

 

1,971,904

2,049,371

Current liabilities

 

 


Borrowings


(4,200)

(5,137)

Derivative financial instruments


(78)

-

Trade and other payables


(329,098)

(282,481)

Provisions


(2,395)

(2,661)

Lease liabilities


(51,486)

(48,471)

Total current liabilities

 

(387,257)

(338,750)

 

 

 


Non-current liabilities

 

 


Borrowings


(727,643)

(930,404)

Derivative financial instruments


-

(2,031)

Deferred tax liabilities


(65,752)

(34,718)

Lease liabilities


(391,794)

(421,583)

Total non-current liabilities

 

(1,185,189)

(1,388,736)

Total liabilities

 

(1,572,446)

(1,727,486)

Net assets

 

399,458

321,885

 

 

 


Shareholders' equity

 

 


Share capital


2,575

2,575

Share premium account


143,170

143,294

Capital redemption reserve


2,337

2,337

Other reserves


234,579

234,579

Hedging reserve


31,781

13,617

Currency translation reserve


2,148

(144)

Retained earnings


(17,132)

(74,373)

Total shareholders' equity

 

399,458

321,885

 

 

 

 

 

 

 

 

 

 

STATEMENT OF CHANGES IN EQUITY

 


Notes

Share

Share premium

Capital

Other


Currency


Total

 


capital

account

redemption

reserves

Hedging

translation

Retained

 

 




reserve


reserve

reserve

earnings

 



£000

£000

£000

£000

£000

£000

£000

£000

As at 25 July 2021

 

2,575

143,294

2,337

234,579

(19,452)

1,851

(87,207)

277,977

Total comprehensive income


-

-

-

-

33,069

(1,995)

19,788

50,862

Loss for the period


-

-

-

-

-

-

19,267

19,267

Interest-rate swaps: cash flow hedges


-

-

-

-

48,452

-

-

48,452

Interest-rate swaps: amount reclassified to the income statement


-

-

-

-

(4,332)

-

-

(4,332)

Tax on items taken directly to comprehensive income

7

-

-

-

-

(11,051)

-

-

(11,051)

Currency translation differences


-

-

-

-

-

(1,995)

521

(1,474)











Share-based payment charges


-

-

-

-

-

-

5,874

5,874

Tax on share-based payment


-

-

-

-

-

-

(20)

(20)

Purchase of own shares for share-based payments


-

-

-

-

-

-

(12,808)

(12,808)

At 31 July 2022

 

2,575

143,294

2,337

234,579

13,617

(144)

(74,373)

321,885

 










Total comprehensive income


-

-

-

-

18,164

2,292

58,928

79,384

Profit for the period


-

-

-

-


-

59,587

59,587

Interest-rate swaps: cash flow hedges


-

-

-

-

37,529

-

-

37,529

Interest-rate swaps: amount reclassified to the income statement


-

-

-

-

(13,310)

-

-

(13,310)

Tax on items taken directly to comprehensive income

7

-

-

-

-

(6,055)

-

-

(6,055)

Currency translation differences


-

-

-

-

-

2,292

(659)

1,633











Share capital expenses


-

(124)

-

-

-

-

-

(124)

Share-based payment charges


-

-

-

-

-

-

10,545

10,545

Tax on share-based payment


-

-

-

-

-

-

100

100

Purchase of own shares for share-based payments


-

-

-

-

-

-

(12,332)

(12,332)

At 30 July 2023

 

2,575

143,170

2,337

234,579

31,781

2,148

(17,132)

399,458

 

The share premium account represents those proceeds received in excess of the nominal value of new shares issued. £124,000 has been recognised during the year (2022: nil) in relation to the issue of shares in previous periods.

 

The capital redemption reserve represents the nominal amount of share capital repurchased and cancelled in previous periods.

 

Other reserves contain net proceeds received for share placements which took place in previous periods. The other reserve as used as this is determined to be distributable for the purposes of the Companies Act 2006.

 

See note 22 for details on the hedging reserve within the accounts.

 

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 retranslation of the opening reserves in the overseas branch at the current period end's currency exchange rate.

 

As at 30 July 2023, the company had distributable reserves of £251.4 million (2022: £173.7 million).

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.      Revenue

 

 


52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022


£000

£000

Bar

1,093,368

1,024,677

Food

742,067

639,683

Slot/fruit machines

62,579

51,639

Hotel

24,939

22,848

Other

2,091

1,630


1,925,044

1,740,477

 

2.      Operating profit/(loss) - analysis of costs by nature

 

This is stated after charging/(crediting):

52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022


£000

£000

Variable concession rental payments

16,980

8,799

Short-term leases

504

10

Cancelled principal payments

-

(4,726)

Repairs and maintenance

94,011

101,520

Net rent receivable

(2,506)

(2,001)

Share-based payments (note 5)

10,546

5,874

Depreciation of property, plant and equipment (note 13)

70,173

71,227

Amortisation of intangible assets (note 12)

1,827

3,240

Depreciation of investment properties (note 14)

185

87

Amortisation of right-of-use assets

37,556

42,291

 

Analysis of continuing operations

52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022


£000

£000

Revenue

1,925,044

1,740,477

Cost of sales1

(1,765,970)

(1,640,202)

Gross profit

159,074

100,275

Administration costs

(53,034)

(45,171)

Operating profit/(loss) after separately disclosed items

106,040

55,104

1Included in cost of sales is £654.3 million (2022: £599.8 million) relating to cost of inventory recognised as expense.

 

Auditor's remuneration

52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022


£000

£000

Fees payable for the audit of the financial statements

 


- Audit fees

560

415

- Additional audit work (for previous year audit)

50

85


 


Fees payable for other services

 


- Audit related services (interim audit procedures)

82

55

Total auditor's fee

692

555

 

3.      Property losses and gains

 


52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks


ended

 

ended

 

ended

ended

ended

ended


30 July

 

30 July

 

30 July

31 July

31 July

31 July


2023

 

2023

 

2023

2022

2022

2022


Before

 

separately

 

After

Before

separately

After


separately

 

disclosed

 

separately

separately

disclosed

separately


disclosed

 

items

 

disclosed

disclosed

items

disclosed


items

 

(note 4)

 

items

items

(note 4)

items


£000

 

£000

 

£000

£000

£000

£000

Disposals

 

 

 

 

 

 



Fixed assets

-

 

8,136

 

8,136

3,492

(16)

3,476

Leases

-

 

(1,404)

 

(1,404)

(7,368)

-

(7,368)

Additional costs of disposal

42

 

2,693

 

2,735

1,857

112

1,969


42

 

9,425

 

9,467

(2,019)

96

(1,923)

Impairments

 

 

 

 

 




Property, plant and equipment (note 13)

-

 

35,966

 

35,966

-

22,871

22,871

Reversal of property, plant and equipment (note 13)

-

 

(5,430)

 

(5,430)

-

(3,420)

(3,420)

Investment properties (note 14)

-

 

4,448

 

4,448

-

1,015

1,015

Intangible assets Impairment reversal

-

 

(74)

 

(74)

-

-

-

Right-of-use assets

-

 

3,377

 

3,377

-

3,964

3,964


-

 

38,287

 

38,287

-

24,430

24,430

Other

 

 

 

 

 




Other property gains

(1,409)

 

-

 

(1,409)

(123)

-

(123)

Leases

(864)

 

-

 

(864)

-

-

-


(2,273)

 

-

 

(2,273)

(123)

-

(123)


 

 

 

 

 




Total property losses/(gains)

(2,231)

 

47,712

 

45,481

(2,142)

24,526

22,384

 

 

 

 


 

4.      Separately disclosed items

 


52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022

 

 

£000

£000

Operating items

 

 

 

Rank settlement


-

(27,771)

Local government support grants


(54)

(1,443)

Duty drawback


-

(170)

Operating income

 

(54)

(29,384)



 

 

Other


1,076

-

Operating costs

 

1,076

-

Total operating (profit)/loss


1,022

(29,384)



 

 

Property losses

 

 

 

Loss on disposal of pubs


9,425

96



9,425

96

Other property losses

 

 

 

Impairment of assets under construction


-

2,215

Impairment of intangible assets


(74)

-

Impairment of property, plant and equipment


35,966

19,904

Reversal of property, plant and equipment impairment


(5,430)

(2,668)

Impairment of investment properties


4,448

1,015

Impairment of right of use assets


3,377

3,964



38,287

24,430



 

 

Total property losses


47,712

24,526



 

 

Other items

 

 

 

Finance costs


1,038

1,000

Finance income


(97,724)

(52,859)



(96,686)

(51,859)



 

 

Taxation

 

 

 

Other tax Items


-

(2,102)

Tax effect on separately disclosed items


22,190

14,664



22,190

12,562



 

 

Total separately disclosed items


(25,762)

(44,155)

 

Rank settlement

In the previous year, the company recognised £27,771,000 from HMRC in relation to a long-standing claim, regarding the historic VAT treatment of slot/fruit machines.

 

Local government support grants

The company has recognised £54,000 (2022: £1,443,000) of local government support grants in the UK and the Republic of Ireland, associated with the COVID-19 pandemic.

 

Duty drawback

In the previous year, a credit of £170,000 was recognised for duty drawback was received for perished stock during the period in relation to the COVID-19 lockdown in the UK.

 

Other operating costs

As outlined in note 29 of the accounts, the company is in an ongoing contractual dispute with a large supplier. Costs of £1,076,000 have been recognised in relation to this dispute.

4. Separately disclosed items (continued)

 

Property losses

In the table on the previous page, those costs classified under the 'separately disclosed property losses' relate to the loss on disposal of sites sold during the year.

 

Other property losses

Property impairment relates to pubs which are deemed unlikely to generate sufficient cash flows in the future to support their carrying value. In the year, a total impairment charge of £35,966,345 (2022: £19,904,000) was incurred in respect of the of property, plant and equipment and £3,377,000 (2022: £3,964,000) was incurred in respect of right of use assets, as required under IAS 36. There were impairment reversals of £5,430,153 recognised in the year (2022: £2,668,000).

 

In the year, a total impairment charge of £4,448,441 (2022: £1,015,000) was incurred in respect of the impairment of our investment properties.

 

There was no impairment charge relating to assets under construction (2022: £2,215,000).

 

Separately disclosed finance costs

The separately disclosed finance costs of £1,038,000 relate to covenant-waiver fees (2022: £1,000,000).

 

Separately disclosed finance income

The company has separately disclosed finance income of £97,724,000 (2022: £52,859,000). £71,124,000 (2022: £48,527,000) relates to the fair value on interest-rate swaps recognised in the P&L, £13,290,000 (2022: £8,143,000) relates to hedge ineffectiveness at termination, based on highly probable cash flows and £13,310,000 (2022: £3,802,000) relates to the amortisation of the hedge reserve to the P&L relating to discontinued hedges. See note 22 in the accounts.

 

Taxation

The tax effect on separately disclosed items is a charge of £22,190,000 (2022: £14,664,000) and relates primarily to; derivative contracts (£16,345,000 charge) (2022: £10,009,000).

 

5.      Employee benefits expenses

 


52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022

 

£000

£000

Wages and salaries

668,397

639,366

Employee support grants

(768)

(4,473)

Social security costs

41,262

41,637

Other pension costs

10,675

9,657

Share-based payments

10,545

5,874


730,111

692,061


 



 

 

Directors' emoluments

2023

2022

 

£000

£000

Aggregate emoluments

1,788

1,984

Aggregate amount receivable under long-term incentive schemes

455

527

Company contributions to money purchase pension scheme

173

195


2,416

2,706

 

Employee support grants disclosed above are amounts claimed by the company under the coronavirus job retention schemes in the UK and the Republic of Ireland.

 

For further details of directors' emoluments including the highest paid director and details on the number of directors' accruing a pension, please see the directors' remuneration report on pages 67-75 of the annual report.

 

 

 

 

 

 

5. Employee benefits expenses (continued)

 


2023

2022


Number

Number

Full-time equivalents

 

 

Head office

362

332

Pub managerial

4,549

4,648

Pub hourly paid staff

19,539

19,791


24,450

24,771


 

 


2023

2022


Number

Number

Total employees

 

 

Head office

379

342

Pub managerial

4,678

4,757

Pub hourly paid staff

37,151

37,028

 

42,208

42,127

 

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

 

Share - based payments

52 weeks

53 weeks


ended

ended


30 July

31 July

 

2023

2022

Shares awarded during the year (shares)

3,627,591

2,048,275

Average price of shares awarded (pence)

534

909

Market value of shares vested during the year (£000)

1,464

7,122

Share awards not yet vested (£000)

16,632

11,275

 

For details of the share incentive plan and the deferred bonus scheme, refer to the directors' remuneration report on pages 67-75 of the annual report.

 

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 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.

 


 

 

 

 

 

 

6.      Finance income and costs

 


52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022

 

£000

£000

Finance costs

 

 

Interest payable on bank loans and overdrafts

43,469

22,869

Amortisation of bank loan issue costs (note 10)

1,246

1,983

Interest payable on swaps

1,894

9,220

Interest payable on asset-financing

205

448

Interest payable on private placement

4,977

6,238

Finance costs excluding lease interest

51,791

40,758


 

 

Interest payable on leases

16,294

18,083

Total finance costs

68,085

58,841


 

 

Bank interest receivable

(1,011)

(103)

Lease interest receivable

(340)

(428)

Total finance income

(1,351)

(531)


 

 

Net finance costs before separately disclosed items

66,734

58,310


 

 

Separately disclosed finance costs (note 4)

1,038

1,000

Separately disclosed finance income (note 4)

(97,724)

(52,859)


(96,686)

(51,859)


 

 

Net finance (income)/costs after separately disclosed items

(29,952)

6,451

 

 


 

7.      Income tax expense

 

(a)   Tax on profit/(loss) on ordinary activities

 

The standard rate of corporation tax in the UK is 25.0%, having increased from 19% on 1 April 2023. The company's profits for the accounting period are taxed at a rate of 21.0% (2022: 19.0%) being the blended tax rate applicable in the period.


52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 


ended

 

ended

 

ended

ended

ended

ended

 


30 July 2023

 

30 July 2023

 

30 July 2023

31 July 2022

31 July 2022

31 July 2022

 


Before

 

separately

 

After

Before

separately

After

 


separately

 

disclosed

 

separately

separately

disclosed

separately

 


disclosed

 

items

 

disclosed

disclosed

items

disclosed

 


items

 

(note 4)

 

items

items

(note 4)

items

 


£000

 

£000

 

£000

£000

£000

£000

 

Taken through income statement

 

 

 

 

 

 



 

Current income tax:

 

 

 

 

 

 



 

Current income tax charge

-

 

5,552

 

5,552

22

-

22



Previous period adjustment

-

 

293

 

293

-

2

2

 


Total current income tax

-

 

5,845

 

5,845

22

2

24




 

 

 

 

 






Deferred tax:

 

 

 

 

 






Origination and reversal of temporary differences

13,602

 

16,345

 

29,947

(4,529)

14,662

10,133



Prior year deferred tax credit

(4,868)

 

-

 

(4,868)

(1,053)

-

(1,053)



Impact of change in UK tax rate

-

 

-

 

-

-

(2,102)

(2,102)

 


Total deferred tax

8,734

 

16,345

 

25,079

(5,582)

12,560

6,978




 

 

 

 

 




 


Tax charge/(credit)

8,734

 

22,190

 

30,924

(5,560)

12,562

7,002

 





 

 





 


52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 


ended

 

ended

 

ended

ended

ended

ended

 


30 July 2023

 

30 July 2023

 

30 July 2023

31 July 2022

31 July 2022

31 July 2022

 


Before

 

separately

 

After

Before

separately

After

 


separately

 

disclosed

 

separately

separately

disclosed

separately

 


disclosed

 

items

 

disclosed

disclosed

items

disclosed

 


items

 

(note 4)

 

items

items

(note 4)

items

 


£000

 

£000

 

£000

£000

£000

£000

 

Taken through equity

 

 

 

 

 

 



 

Current tax

-

 

-

 

-

(2)

-

(2)

 

Deferred tax

(100)

 

-

 

(100)

22

-

22

 

Tax (credit)/charge

(100)

 

-

 

(100)

20

-

20

 




 

 





 


52 weeks

 

52 weeks

 

52 weeks

53 weeks

53 weeks

53 weeks

 


ended

 

ended

 

ended

ended

ended

ended

 


30 July 2023

 

30 July 2023

 

30 July 2023

31 July 2022

31 July 2022

31 July 2022

 


Before

 

separately

 

After

Before

separately

After

 


separately

 

disclosed

 

separately

separately

disclosed

separately

 


disclosed

 

items

 

disclosed

disclosed

items

disclosed

 


items

 

(note 4)

 

items

items

(note 4)

items

 


£000

 

£000

 

£000

£000

£000

£000

 

Taken through comprehensive income




 

 

 



 

Deferred tax charge on swaps

-

 

6,055

 

6,055

8,404

-

8,404

 

Impact of change in UK tax rate

-

 

-

 

-

2,647

-

2,647

 

Tax charge

-

 

6,055

 

6,055

11,051

-

11,051

 

 

 

 

 

7.             Income tax expense (continued)

 

(b)   Reconciliation of the total tax charge

 

The taxation charge for the 52 weeks ended 30 July 2023 is based on the pre-separately disclosed profit before tax of £42.6 million and the estimated effective tax rate before separately disclosed items for the 52 weeks ended 30 July 2023 of 20.5% (July 2022: 18.3%). This comprises a pre- separately disclosed current tax rate of 0% (July 2022: 0.1%) and a pre- separately disclosed deferred tax charge of 20.5% (July 2022: 18.3% charge).

 

The UK standard weighted average tax rate for the period is 21% (2022:19%). The current tax rate is lower than the UK standard weighted average tax rate owing to tax losses brought forward and previously disallowed interest being deductible in the period.


52 weeks

 

52 weeks

53 weeks

53 weeks


ended

 

ended

ended

ended


30 July 2023

 

30 July 2023

31 July 2022

31 July 2022


Before

 

After

Before

After


separately

 

separately

separately

separately


disclosed

 

disclosed

disclosed

disclosed


items

 

items

items

items


£000

 

£000

£000

£000

Profit/(loss) before income tax

42,559

 

90,511

(30,448)

26,269


 

 

 



Profit/(loss) multiplied by the UK standard rate of

8,937

 

19,008

(5,785)

4,991

corporation tax of 21.0% (2022: 19.0%)

 

 

 



Abortive acquisition costs and disposals

427

 

427

498

498

Expenditure not allowable

711

 

711

1,001

1,001

Fair value movement on SWAP disregarded for tax

(2,599)

 

                          484

-

34

Other allowable deductions

(13)

 

(13)

168

(9)

Non-qualifying depreciation and loss on disposal

5,875

 

                 8,489

60

4,105

Capital gains - effect of reliefs

1,175

 

1,175

396

380

Share options and SIPs

188

 

188

(669)

(669)

Deferred tax on balance-sheet-only items

(182)

 

(182)

(162)

(162)

Effect of different tax rates and unrecognised losses in overseas companies

2,871

 

2,871

(14)

(14)

Rate change adjustment

(3,788)

 

                      2,341

-

(2,102)

Previous year adjustment - current tax

                             -  

 

                          293

-

2

Previous year adjustment - deferred tax

(4,868)

 

(4,868)

(1,053)

(1,053)

Total tax expense/(income) reported in the income statement

8,734

 

30,924

(5,560)

7,002

 

 

 


 

 

 

7.      Income tax expense (continued)

 

(c)   Deferred tax

 

The deferred tax in the balance sheet is as follows:

 

The main rate of corporation tax increased to 25% on 1 April 2023. Deferred tax balances have been recognised at the rate they are expected to reverse.

Deferred tax liabilities

Accelerated tax depreciation

Other temporary differences

Interest-rate swap

Total

 


£000

£000

£000

£000

 






 

At 31 July 2022

50,788

5,518

14,834

71,140

 

Previous year movement posted to the income statement

(3,392)

157

(1,629)

(4,863)

 

Movement during year posted to the income statement

2,652

1,162

7,772

11,586

 

Movement during year posted to comprehensive income

6,055

6,055

 

At 30 July 2023

50,048

6,837

27,032

83,918

 

Deferred tax assets

 

Share-based payments

Tax losses & interest capacity carried forward

Interest-rate swap

Total



£000

£000

£000






At 31 July 2022

646

35,776

-

36,422

Previous year movement posted to the income statement

-

5

-

5

Movement during year posted to the income statement

298

(18,659)


(18,361)

Movement during year posted to equity

100

-

-

100

At 30 July 2023

1,044

17,122

-

18,166









 

The company has recognised deferred tax assets of £18.2 million (2022: £36.4 million), which are expected to be offset against future profits. This includes a deferred tax asset of £17.1 million (2022: £35.8 million), in respect of UK tax losses. Included within other temporary differences is £6.8 million (2022: £5.5 million) of chargeable gains rolled over on the acquisition of new assets.

 

Deferred tax assets and liabilities have been offset as follows:





2023

2022





£000

£000

Deferred tax liabilities




83,918

71,140

Offset against deferred tax assets




(18,166)

(36,422)

Deferred tax liabilities




65,752

34,718





 


Deferred tax assets




18,166

36,422

Offset against deferred tax liabilities




(18,166)

(36,422)

Deferred tax asset




-

-

 

As at 30 July 2023, the company had a potential deferred tax asset of £9.7 million (2022: £10.9 million) relating to capital losses (gross tax losses £34.5 million (2022: £35.0 million)) and tax losses in the Republic of Ireland (gross tax losses £24.2 million (2022: £18.4 million)). Both types of losses do not expire and will be available to use in future periods indefinitely. A deferred tax asset has not been recognised, as there is insufficient certainty of recovery.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.      Earnings and free cash flow per share

 

Weighted average number of shares

 

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) after tax for the period by the weighted average number of ordinary shares in issue during the financial year of 128,750,155 (2022: 128,750,155) less the weighted average number of shares held in trust during the financial year of 3,296,278 (2022: 1,924,810). Shares held in trust are shares purchased by the company to satisfy employee share schemes that have not yet vested.

 

Diluted earnings/(loss) per share is calculated by dividing the profit/(loss) after tax for the period by the weighted average number of ordinary shares in issue during the financial year adjusted for both shares held in trust and the effects of potentially dilutive shares. For the company, the dilutive shares are those that relate to employee share schemes that have not been purchased in advance and have not yet vested. In the event of making a loss during the year, the diluted loss per share is capped at the basic earnings per share as the impact of dilution cannot result in a reduction in the loss per share.

 

Weighted average number of shares

52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022

Shares in issue

128,750,155

128,750,155

Shares held in trust

(3,296,278)

(1,924,810)

Shares in issue - Basic

125,453,877

126,825,345

Dilutive shares1

2,810,231

1,866,335

Shares in issue - Diluted1

128,264,108

128,691,680

 

 

Earnings / (loss) per share

 

52 weeks ended 30 July 2023

Profit/(loss)

Basic EPS

Diluted EPS


£000

pence

pence

Earnings (profit after tax)

59,587

47.5

46.5

Exclude effect of separately disclosed items after tax

(25,762)

(20.5)

(20.1)

Earnings before separately disclosed items

33,825

27.0

26.4

Exclude effect of property gains/(losses)

(2,231)

(1.8)

(1.7)

Underlying earnings before separately disclosed items

31,594

25.2

24.7

 

 

53 weeks ended 31 July 2022

Profit/(loss)

Basic EPS

Diluted EPS


£000

pence

Pence

19,267

15.2

15.0

Exclude effect of separately disclosed items after tax1

(44,155)

(34.8)

(34.6)

(24,888)

(19.6)

(19.6)

(2,142)

(1.7)

(1.7)

Underlying earnings before separately disclosed items

(27,030)

(21.3)

(21.3)

 

1 Impact of dilutive shares was omitted in error from FY22 earnings (profit after tax) per share.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.      Cash used/in generated from operations

 


52 weeks

53 weeks


ended

ended


30 July

31 July


2023

2022

 

£000

£000

Profit for the period

59,587

19,267

Adjusted for:

 

 

Tax (note 7)

30,924

7,002

Share-based charges (note 5)

10,545

5,874

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

10,871

3,476

Disposal of capitalised leases (note 3)

(2,273)

(7,368)

Net impairment charge (note 3)

38,287

24,430

Interest receivable (note 6)

(1,011)

(103)

Interest payable (note 6)

50,234

41,395

Lease interest receivable (note 6)

(340)

(428)

Lease interest payable (note 6)

22,796

18,083

Separately disclosed Interest (note 6)

(96,686)

(51,859)

Amortisation of bank loan issue costs (note 6)

1,246

1,983

Depreciation of property, plant and equipment (note 13)

70,173

71,227

Amortisation of intangible assets (note 12)

1,827

3,240

Depreciation on investment properties (note 14)

185

87

Aborted properties costs

1,719

2,947

Cancelled principal payments

-

(4,726)

Foreign exchange movements

1,633

(1,474)

Amortisation of right-of-use assets

37,556

42,291


237,273

175,344

Change in inventories

(8,157)

452

Change in receivables

2,133

(12,171)

Change in payables

39,437

14,885

Cash flow from operating activities

270,686

178,510

 

 


 

 

10.    Analysis of change in net debt

 



31 July

Cash

Other

30 July

 


2022

flows

changes

2023



£000

£000

£000

£000

Borrowings

 




 

Cash and cash equivalents


40,347

46,826

-

87,173

Other loan receivable - due before one year


803

-

-

803

Asset-financing obligations - due before one year


(5,137)

889

48

(4,200)

Current net borrowings


36,013

47,715

48

83,776

 





 

Bank loans - due after one year


(828,616)

200,033

(1,201)

(629,784)

Asset-financing obligations - due after one year


(3,974)

4,019

(45)

-

Other loan receivable - due after one year


2,739

(753)

-

1,986

Private placement - due after one year


(97,814)

-

(46)

(97,860)

Non-current net borrowings


(927,665)

203,299

(1,292)

(725,658)

 





 

Net debt


(891,652)

251,014

(1,244)

(641,882)

 





 

Derivatives

 




 

Interest-rate swaps asset - due after one year


61,367

(169,413)

119,990

11,944

Interest rate swaps liability - due before one year


-

-

(78)

(78)

Interest-rate swaps liability - due after one year


(2,031)

-

2,031

-

Total derivatives


59,336

(169,413)

121,943

11,866

 





 

Net debt after derivatives


(832,316)

81,601

120,699

(630,016)

 





 

Leases

 




 

Lease assets - due before one year


2,001

(1,677)

1,037

1,361

Lease assets - due after one year


9,264

-

(813)

8,451

Lease obligations - due before one year


(48,471)

32,926

(35,941)

(51,486)

Lease obligations - due after one year


(421,582)

-

29,788

(391,794)

Net lease liabilities


(458,788)

31,249

(5,929)

(433,468)

 






Net debt after derivatives and lease liabilities


(1,291,104)

112,850

114,770

(1,063,484)

 

Lease obligations represent long-term payables, while lease assets represent long-term receivables - both are, therefore, disclosed in the table above.

 

The non-cash movement in bank loans and the private placement relate to the amortisation of loan issue costs. The amortisation charge for the year of £1,246,000 (2022: £1,983,000) is disclosed in note 6. These are arrangement fees paid in respect of new borrowings and are charged to the income statement over the expected life of the loans.

 

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

 

Non-cash movement in net lease liabilities

30 July

 

2023


£000

Recognition of new leases (note 23)

(16,820)

Remeasurements of existing leases liabilities (note 23)

2,450

Remeasurements of existing leases assets (note 23)

223

Disposal of lease (note 23)

2,969

Lease transfers to property, plant and equipment

5,333

Cancelled principal payments (note 23)

-

Exchange differences (note 23)

(84)

Non-cash movement in net lease liabilities

(5,929)

 

 

 

 

11.    Dividends paid and proposed

 

No final dividend has been proposed for approval at the annual general meeting for the 52 weeks ended 30 July 2023 (2022: Nil). The board will continue to review the dividend policy.

 

12.    Intangible assets

 






Computer

Assets

 

 





software and

under

 






development

construction

Total




 

 

£000

£000

£000

Cost:

 







At 25 July 2021




32,747

4

32,751

Additions





2,875

429

3,304

Disposals





(20)

-

(20)

At 31 July 2022




35,602

433

36,035

Additions





1,169

1,689

2,858

Disposals





-

(9)

(9)

At 30 July 2023

 

 

 

36,771

2,113

38,884

 

 

Accumulated depreciation:

 





At 25 July 2021




(27,393)

-

(27,393)

Provided during the period



(3,240)

-

(3,240)

Disposals





7

-

7

At 31 July 2022




(30,626)

-

(30,626)

Provided during the period



(1,827)

-

(1,827)

Reversal of impairment losses



74

-

74

At 30 July 2023

 

 

 

(32,379)

-

(32,379)

 








Net book amount at 30 July 2023

 

 

4,392

2,113

6,505

Net book amount at 31 July 2022




4,976

433

5,409

Net book amount at 25 July 2021




5,354

4

5,358

 

The majority of intangible assets relate to computer software and software development. Examples include the development costs of the Wetherspoon customer-facing app and other bespoke J D Wetherspoon applications.



 

13.    Property, plant and equipment


Freehold and long leasehold property

Short leasehold property

Equipment fixtures and fittings

Assets under construction

Total

Cost






At 25 July 2021

1,428,542

286,934

700,311

63,868

2,479,655

Additions

37,019

8,407

33,146

33,700

112,272

Transfers to investment property

-

-

-

(2,170)

(2,170)

Transfers

15,948

1,185

2,572

(19,705)

-

Exchange differences

(1,257)

(53)

(201)

(242)

(1,753)

Transfer to held for sale

(1,739)

-

-

-

(1,739)

Disposals

(13,614)

(3,708)

(4,713)

-

(22,035)

Reclassifications

12,435

(12,435)

-

-

-

At 31 July 2022

1,477,334

280,330

731,115

75,451

2,564,230

Additions

19,315

5,983

32,148

10,323

67,769

Transfers

6,551

1,967

7,900

(16,418)

-

Transfers from capitalised leases

(464)

-

-

-

(464)

Exchange differences

1,289

57

214

253

1,813

Transfer to held for sale

(527)

-

(419)

-

(946)

Disposals

(16,448)

(8,750)

(7,574)

(4,719)

(37,491)

Reclassifications

7,003

(7,003)

-

-

-

At 30 July 2023

1,494,053

272,584

763,384

64,890

2,594,911

 

          

Accumulated depreciation and impairment

At 25 July 2021

(332,433)

(171,358)

(552,038)

0

(1,055,829)

Provided during the period

(21,336)

(9,704)

(40,186)

0

(71,227)

Transfers from investment property

0

0

0

0

0

Exchange differences

122

19

148

0

289

Impairment loss

(18,617)

279

1,102

(2,215)

(19,451)

Transfer to held for sale

939

0

0

0

939

Disposals

3,752

2,288

1,871

0

7,911

Reclassification

(6,960)

6,960

0

0

0

At 31 July 2022

(374,533)

(171,516)

(589,104)

(2,215)

(1,137,368)

Provided during the period

(21,958)

(9,056)

(39,159)

0

(70,173)

Transfers from investment property

0

0

0

0

0

Exchange differences

(35)

(13)

(184)

0

(232)

Impairment loss

(30,478)

(5,488)

0

0

(35,966)

Reversal of impairment losses

700

3,440

1,290

0

5,430

Transfer to held for sale

206

0

341

0

547

Disposals

5,514

7,534

6,005

1,614

20,667

Reclassifications

(4,523)

4,523

0

0

0

At 30 July 2023

(425,107)

(170,576)

(620,811)

(601)

(1,217,095)

 

 

 

 

 

 

Net book amount at 30 July 2023

1,068,946

102,008

142,573

64,289

1,377,816

Net book amount at 31 July 2022

1,102,801

108,814

142,011

73,236

1,426,862

Net book amount at 25 July 2021

1,096,109

115,576

148,273

63,868

1,423,826

 

During the period, an amount of £41,646,000 (2022: £42,777,000) was spent on the reinvestment of existing pubs. £11,202,000 (2022: £25,773,000) was spent on freehold reversions. £20,361,000 (2022: £58,789,000) was spent on investment in new pubs and pub extensions. This led to a total capital expenditure of £73,209,000 (2022: £127,339,000).

 



 

Reclassifications relate to assets transferred from short leasehold property to freehold and long leasehold property upon a freehold reversion.

14.    Investment property

 

The company owns six (2022: six) freehold properties with existing tenants - and these assets have been classified

as investment properties:

 




 

 

 

 

£000

Cost:

 







At 25 July 2021






10,602

Transfer from property, plant and equipment




2,170

Additions







11,763

At 31 July 2022






24,535

Transfer from property, plant and equipment




-

Additions







9

At 30 July 2023

 

 

 

 

 

24,544

 

 

Accumulated depreciation and impairment:

 





At 25 July 2021






(69)

Provided during the period





(87)

Impairment loss






(1,015)

At 31 July 2022






(1,171)

Provided during the period





(185)

Impairment loss







(4,448)

At 30 July 2023

 

 

 

 

 

(5,804)

 








Net book amount at 30 July 2023

 

 

 

 

18,740

Net book amount at 31 July 2022






23,364

Net book amount at 25 July 2021






10,533

 

Rental income received in the period from investment properties was £1,197,000 (2022: £790,000).

 

At the year end, the investment properties were independently valued at £18,740,000 giving rise to an impairment charge of £4,448,000 (2022: £1,015,000) was incurred to adjust their net book value.

 

 

15.    Events after the balance sheet date

On 22 August 2023, the company disposed of all interest rate swaps in place, receiving £14.8 million to do so. At the same time, the company took out a new interest-rate swap of £200 million from 23 August 2023 through to 6 February 2025 at a rate of 5.665%. On 25 September 2023, the company took out a further interest-rate swap of £400 million from 6 February 2025 to 6 February 2028 at a rate of 4.225%.

 

On 21 September 2023, the company announced that 11 of its pubs will be put on the market as part of a one-off disposal programme. Management has concluded this to be a non-adjusting event on the basis that events and conditions arose after the end of the financial period.

 

 

16.    Contingent liability

The company is in an on-going contractual dispute with a large supplier. The outcome of the dispute is yet to be determined and will be resolved by a legal process. Disclosing any further information at this stage about the ongoing contractual dispute, its financial effect (if any) and uncertainties relating to the amount or timing of any outflow might be prejudicial to the company's position.

 

 

 

 

 

 

 

 

17.    Going Concern

 

The directors have made enquiries into the adequacy of the Company's financial resources, through a review of the Company's budget and medium-term financial plan, including capital expenditure plans and cash flow forecasts. In line with accounting standards, the going concern assessment period is the 12-months from the date of approval of these accounts (approximately the end of quarter 1 of FY25). Given the proximity to the going concern review period, the Company has also considered the February 2025 expiry of its current revolving credit facility in its assessment.

 

The Company has modelled a 'base case' forecast in which recent momentum of sales, profit and cash flow growth is sustained. The Company has anticipated within this forecast continued high levels of inflation, particularly on wages, utility costs and repairs. The base case scenario indicates that the Company will have sufficient resources to continue to settle its debts as they fall due and operate within its leverage covenants for the going concern assessment period.

 

A more cautious but plausible scenario has been analysed, in which sales for FY24 are in line with FY23 (ie no sales growth). The Company has reviewed, and is satisfied with, the mitigating actions that it could take if such an outcome were to occur. Such actions could include reducing discretionary capital expenditure, reducing costs or implementing price increases. Under this scenario, the Company would still have sufficient resources to settle liabilities as they fall due and sensible headroom on its covenants through the duration of the going concern review period.

 

The Company has also performed a 'reverse stress case' which shows that the Company could withstand a 12% reduction in sales from those assessed in the 'base case' throughout the going concern period, as well as costs assumed to increase at a similar level to the downside scenario, before the covenant levels would be exceeded towards the end of the period. The directors consider this scenario to be remote as, other than when the business was closed during the pandemic, it has never seen sales decline at anywhere close to that rate. Furthermore, the Company could take additional mitigating actions, in such a scenario, to prevent any covenant breach.

 

The directors have determined that, over the period of the going concern assessment, there is not expected to be a significant impact resulting from climate change.

 

Following the cessation of a period of lender-agreed relaxed covenants to 30 July 2023, the Company has reverted to its original covenant targets and the Company is confident that these targets will be met in the going concern assessment period.

 

As set out in Note 20 of the accounts, the secured Revolving Credit Facility totalling £875 million of which £630 million was drawn at 30 July 2023, matures in February 2024 (£20m) and February 2025 (£855m).

 

As the directors believe that the positive trading and cash flow trends which have been experienced in the period to 30 July 2023 will continue, coupled with increasing certainty over cost inflation, the Company has chosen not to formally commence any refinancing exercise as at the date of these accounts.

 

Given the Company's strong financial position and current trading performance, the directors are confident that the Company will be able to refinance its debt facilities when it is required to do so. The Company has had frequent conversations to date with its longstanding lending syndicate and advisors.

 

These discussions have highlighted multiple refinancing options and very good levels of support. These factors, combined with the alternative liquidity options available to the Company, provide the Directors with appropriate assurance that the prospect of not being able to refinance is remote and as such no material uncertainty exists.

 

After due consideration of the matters set out above, the directors have satisfied themselves that the Company will continue in operational existence for the foreseeable future. For this reason, the Company continues to adopt the going-concern basis in preparing its financial statements.

 

 

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