4th Mar 2005 07:00
Wetherspoon (JD) PLC04 March 2005 J D WETHERSPOON PLC PRESS RELEASE J D Wetherspoon plc announces interim results for the six months to 23 January 2005. Highlights Turnover up 4% to £403.3m Operating profit* down 11% to £34.4m Profit before tax* down 20% to £22.3m Earnings per share* down 14% to 7.7p Free cash flow per share down 11% to 19.3p Interim dividend per share up 10% to 1.46p *before exceptional items Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc,said: "The half year to 23 January 2005 was a testing period for the company. Salesincreased by 4% to £403.3 million (2004: £389.0 million). Operating profit(before exceptional items) declined by 11% to £34.4 million (2004: £38.6million). We recently announced plans to make about 10% of our pubs non-smokingby May 2005, for all new openings to be non-smoking and for the rest of theestate to become non-smoking by May 2006. In spite of the recent slow tradingconditions, as a result of our strong cash generation, high level of sales perpub and dedicated team, I remain confident of future prospects". Enquiries: John Hutson Chief Executive Officer 01923 477777 Jim Clarke Finance Director 01923 477777 Eddie Gershon Company spokesman 07956 392234 Photographs are available at: www.newscast.co.uk Chairman's statement The half year to 23 January 2005 was a testing period for the company. Salesincreased by 4% to £403.3 million (2004: £389.0 million). Operating profit(before exceptional items) declined by 11% to £34.4 million (2004: £38.6million) and profit before tax and exceptional items by 20% to £22.3 million(2004: £27.8 million). Earnings per share (before exceptional items) declined by14% to 7.7p (2004: 9.0p). Capital investment was £20.8 million and net gearing at the period end was 113%(2004: 103%). Net interest was covered 2.9 times (2004: 3.6 times) by operatingprofits. Operating margins before interest and tax were 8.5% (2004: 9.9%),mainly as a result of higher labour and utility costs. Like-for-like sales increased by 0.3% in the period and sales at new pubs werein line with expectations. The company continues to review the pubs within its estate and has identified 16pubs which do not meet our current business requirements. A capital loss ondisposal is anticipated in respect of these pubs of approximately £6 millionwhich has been provided as an exceptional item in the period under review. Free cash flow, after capital investment of £8.2 million in existing pubs, £2.0million in respect to purchases of shares under the company's Share IncentivePlan and payments of tax and interest, declined by 17% to £36.5 million. Thisresulted in free cash flow per share of 19.3p (2004: 21.7p) before investment innew pubs and dividend payments. In the period under review, all our new pubcapital expenditure was financed from free cash flow. Economic profit, calculated by adding depreciation to profit after tax(excluding deferred tax) and before exceptional items and subtracting capitalinvestment in existing pubs, decreased by 14% to £30.0 million (2004: £34.7million). Dividend The Board has declared an interim dividend of 1.46p per ordinary share (2004:1.33p), a 10% increase on last year payable on 27 May 2005 to shareholders onthe register at 29 April 2005. Share buyback During the period, the company acquired 1,800,000 shares for cancellation. Thetotal cash outflow of £9.4m in the period includes £5.2m in relation to sharesacquired towards the end of the previous financial year. Financing The period under review saw a reduction in the company's total net borrowingsfrom £337.6 million to £327.3 million at the end of the previous financial year.Total facilities at 23 January 2005 were £400.0 million. The company willcontinue to monitor the wide range of funding alternatives available to ensurethe appropriate ongoing capital structure for the company. Distribution arrangements In September 2004, the company introduced a new central distribution system witha purpose built centre at Daventry. This centre is used to distribute food, aswell as a number of bar products to all our pubs. The introduction of thissystem has been significantly more expensive during this 6 months period thananticipated. Considerable work is continuing to attempt to reduce costs for theremainder of this financial year and future years, although the new system hasgiven rise to exceptional start up charges of £2.2 million for the period underreview. It is possible that there will be further exceptional charges in thesecond half of the financial year. Non-Smoking We recently announced plans to make about 10% of our pubs non-smoking by May2005, for all new openings to be non-smoking and for the rest of the estate tobecome non-smoking by May 2006. Over the last 30 years, the number of smokers has halved to about 25% of thepopulation. Customers are generally becoming more health conscious and there isan increasing desire from staff and customers to avoid 'passive smoking'. Our research undertaken in California, which has been visited on a number ofoccasions by Wetherspoon representatives, indicates that sales have increased inthe years after a smoking ban, in spite of a dip in the one or two years afterthe ban was instigated. Our first two non-smoking pubs in Exeter and St. Albans, one trading as aWetherspoon and the other as a Lloyds, have been very successful so far withsales substantially higher than the company average. A third pub at the MerryHill Centre near Birmingham opened in the last few days. For information, I have enclosed a list of the additional 61 pubs which willswitch to a non-smoking policy before the end of May this year. Current trading and prospects Like-for-like sales in February 2005 declined by 1.9% and overall salesincreased by 2.1%. In addition to the 9 pubs opened since the end of theprevious financial year (including 3 in February 2005) there are 5 sites in thecourse of construction and the company has planning and licensing permission toopen a further 16 sites. In view of the big structural changes in the industry resulting from the newlicensing laws and the situation with regard to smoking, the company has adopteda cautious approach to capital expenditure and expansion and this will continueuntil this uncertainty is alleviated. Sales and profits in the last six months have been slower than anticipated. Thecompany continues to review its costs and expects significant savings to be madein the running of pubs and at the head office over the next few months. In spite of the recent slow trading conditions, as a result of our strong cashgeneration, high level of sales per pub and dedicated team, I remain confidentof future prospects. Tim MartinChairman4 March 2005 List of Non-Smoking Pubs Abraham Derby, Merry Hill Centre (new opening) The Paper Moon, DartfordBack of Beyond, Reading ( 9th March) The Pennsylvanian, Rickmansworth (9th March)Becketts Bank, Leeds The Playfair, EdinburghGeorge's Meeting House, Exeter (new opening) The Plimsoll Line, RedcarJewel of the Severn, Bridgnorth The Pommelers Rest, Tower BridgeLloyds No. 1 Bar, Portsmouth The Portland Hotel, ChesterfieldThe Angel, Islington The Poste of Stone, StoneThe Archibald Simpson, Aberdeen The Postern Gate, YorkThe Battesford Court, Witham The Quay, PooleThe Blue Coat, Rotherham The Quayside, Newcastle Upon TyneThe Brass Balance, Birkenhead The Rhinoceros, RotherhamThe Briar Rose, Birmingham The Ritz, LincolnThe Capital Asset, Perth The Roebuck Inn, NottinghamThe Central Bar, Cardiff The Sennockian, SevenoaksThe City Arms, Coventry The Sir John Oldcastle, FarringdonThe Clydesdale Inn, Lanark The Standard Bearer, StevenageThe Commercial Rooms, Bristol The Standing Order, DerbyThe Counting House, Dundee The Swan, WeymouthThe Counting House, Glasgow The Three John Scotts, Kingston Upon HullThe Dee Hotel, West Kirby The Tom Toya Lewis, NewportThe Gog & Magog, Plymouth The Trawl Boat Inn, St. Anne's On SeaThe Good Yarn, Uxbridge The Waterhouse, ManchesterThe Grid Inn, Southfields The Welkin, Liverpool (9th March)The King & Castle, Windsor The West Gate Inn, CanterburyThe King of Wessex, Bath (9th March) The Whiffler, NorwichThe Last Post, Loughton Waterend Barn, St Albans (new opening)The Maidenhead Inn, Basingstoke Wetherspoons, EastbourneThe Moon and Sixpence, Hatch End Wetherspoons, IpswichThe Moon Under Water, Cheltenham Wetherspoons, LivingstonThe Moon Under Water, Milton Keynes Wetherspoons, Metrocentre, Gateshead (9th March)The Moon Under Water, Watford Wetherspoons, SheffieldThe Old Manor, Bracknell Wetherspoons, Southport Profit and loss accountfor the six months ended 23 January 2005 Notes Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited half year half year half year half year half year full year full year 2005 2005 2005 2004 2004 2004 2004 £000 £000 £000 £000 £000 £000 £000 Before Exceptional After Before After Before After exceptional items exceptional exceptional exceptional exceptional exceptional items (note 3) items items items items items Turnover 403,341 - 403,341 388,964 388,964 787,126 787,126Operating 2 34,365 (2,229) 32,136 38,561 38,561 77,628 77,628profitExceptional 3 - (5,818) (5,818) - (7,098) - (7,758)itemsNet interest (12,021) - (12,021) (10,739) (10,739) (23,554) (23,554)payableProfit on 22,344 (8,047) 14,297 27,822 20,724 54,074 46,316ordinaryactivitiesbeforetaxationTax on profit 4 (7,773) 1,697 (6,076) (9,537) (8,047) (18,727) (17,042)on ordinaryactivitiesProfit on 14,571 (6,350) 8,221 18,285 12,677 35,347 29,274ordinaryactivitiesaftertaxationDividends 11 (2,732) - (2,732) (2,511) (2,511) (7,331) (7,331)Retained 11,839 (6,350) 5,489 15,774 10,166 28,016 21,943profit forthe period Earnings per 5 7.7p (3.4p) 4.3p 9.0p 6.3p 17.7p 14.6pordinaryshare Fully diluted 5 7.7p (3.4p) 4.3p 9.0p 6.2p 17.6p 14.6pearnings perordinaryshare Dividend per 11 - - 1.46p - 1.33p - 3.89pshare All activities relate to continuing operations. There were no gains or losses recognised in any of the above results other thanthe profit for the period. Cash flow statementfor the six months ended 23 January 2005 Notes Unaudited Unaudited Unaudited Unaudited Audited Audited half year half year half year half year full year full year 2005 2005 2004 2004 2004 2004 £000 £000 £000 £000 £000 £000 Net cash inflow from operating 6 62,002 62,002 69,289 69,289 128,874 128,874activities Returns on investments and servicing offinanceInterest received 3,571 3,571 84 84 20 20Interest paid - existing pubs (12,590) (12,590) (10,165) (10,165) (19,329) (19,329)Refinancing costs paid - - (1,325)Net cash outflow from returns oninvestment and servicing of finance (9,019) (10,081) (20,634) TaxationCorporation tax paid (6,363) (6,363) (7,087) (7,087) (13,942) (13,942) Capital expenditurePurchase of tangible fixed assets for (8,180) (8,180) (8,148) (8,148) (20,590) (20,590)existing pubsProceeds of sale of tangible fixed 6,546 6,796 7,891assetsPurchase of own shares for Share (1,989) (1,989) - (1,556) (1,556)Incentive PlanInvestment in new pubs and pub (18,616) (25,572) (54,056)extensionsNet cash outflow from capital (22,239) (26,924) (68,311)expenditure Equity dividends paid (4,839) (4,700) (7,322) Net cash inflow before financing 19,542 20,497 18,665 FinancingIssue of ordinary shares 86 349 1,219Purchase of own shares (9,416) (25,744) (48,583)(Repayments)/advances under bank loans (2,500) (2,414) 22,928Advances under US senior notes - 22 271Net cash outflow from financing (11,830) (27,787) (24,165)Increase/(decrease) in cash 7 7,712 (7,290) (5,500)Free cash flow 5 36,451 43,973 73,477 Free cash flow per ordinary share 5 19.3p 21.7p 36.7p Summarised balance sheetas at 23 January 2005 Notes Unaudited Unaudited Audited half year half year full year 2005 2004 2004 £000 £000 £000Fixed assetsTangible assets 9 772,514 766,410 783,574 Current assetsStocks 12,684 12,087 12,009Assets held for sale 4,554 3,349 1,933Debtors due after more than one year - - 9,005Debtors due within one year 11,562 15,913 11,897Cash at bank and in hand 17,372 7,870 9,660 46,172 39,219 44,504 Creditors due within one year (142,611) (138,971) (150,368)Net current liabilities (96,439) (99,752) (105,864)Total assets less current liabilities 676,075 666,658 677,710Creditors due after one year (321,030) (297,313) (322,512)Provisions for liabilities and charges (66,282) (63,555) (66,244)Total net assets 288,763 305,790 288,954 Capital and reservesCalled up share capital 3,748 3,975 3,783Share premium account 128,425 127,084 128,340Capital redemption reserve 581 343 545Revaluation reserve 22,755 23,075 23,117Profit and loss account 133,254 151,313 133,169Equity shareholders' funds 10 288,763 305,790 288,954 Notes1 Basis of preparation The interim report for the six months ended 23 January 2005 is unaudited anddoes not constitute statutory accounts within the meaning of Section 240 of theCompanies Act 1985. It has been prepared under the historical cost conventionmodified by the revaluation of freehold and leasehold properties, and on a basisconsistent with the accounting policies for the year ended 25 July 2004. Theresults for the year ended 25 July 2004 and the balance sheet at that date arean extract from the statutory accounts for that year, which have been filed withthe Registrar of Companies and on which the Company's auditors gave anunqualified report under Section 235 of the Companies Act 1985, which did notcontain a statement under Section 237(2) or (3) of that Act. The results forthe six months ended 25 January 2004 are an extract from the unaudited interimreport for that period. Comparative amounts have been restated where necessaryto conform to current presentation in that certain items have been reclassifiedfrom administrative expenses to cost of sales. 2 Analysis of continuing operations Unaudited Unaudited Audited half year half year full year 2005 2004 2004 £000 £000 £000 Turnover 403,341 388,964 787,126Cost of sales (350,035) (332,345) (672,481)Gross profit 53,306 56,619 114,645Administrative expenses (18,941) (18,058) (37,017)Operating profit before exceptional items 34,365 38,561 77,628 Cost of sales includes distribution costs and all pub operating costs. 3 Exceptional items Unaudited Unaudited Audited half year half year full year 2005 2004 2004 £000 £000 £000Operating items:Distribution start up costs 2,229 - - Non-operating items:Net loss on disposal and anticipated disposal 5,818 6,732 6,159of trading propertiesNet loss on disposal and anticipated disposal - 366 1,599of non trading properties 8,047 7,098 7,758 4 Taxation The taxation charge for the six months ended 23 January 2005 is calculated byapplying an estimate of the effective tax rate for the year ending 31 July 2005.The UK standard rate of corporation tax is 30% (2004: 30%), and the latestestimate of the current tax payable on profits before exceptional items for thefinancial year ending 24 July 2005 is 30% (2004: 25%). Unaudited Unaudited Unaudited Unaudited Unaudited Audited Audited half year half year half year half year half year full year full year 2005 2005 2005 2004 2004 2004 2004 £000 £000 £000 £000 £000 £000 £000 Before Exceptional After Before After Before After exceptional items exceptional exceptional exceptional exceptional exceptional items items items items items items Current tax 6,705 (669) 6,036 6,858 6,911 13,165 13,217Deferred tax 1,068 (1,028) 40 2,679 1,136 5,562 3,825Tax on profit on 7,773 (1,697) 6,076 9,537 8,047 18,727 17,042ordinary activities 5 Earnings and cash flow per share The calculation of basic earnings per share is based on profits on ordinaryactivities after taxation of £8,221,000 (2004: £12,677,000) and on 188,616,286(2004: 202,693,580) ordinary shares, being the weighted average number ofordinary shares in issue and ranking for dividend during the period. Earnings per share before exceptional items is calculated as follows: Unaudited Unaudited half year half year Earnings per Earnings per Earnings Earnings share share 2005 2004 2005 2004 £000 £000 pence pence Earnings and basic earnings per share 8,221 12,677 4.3 6.3Exceptional costs, net of tax 6,350 5,608 3.4 2.7Earnings and earnings per share before 14,571 18,285 7.7 9.0exceptional items Fully diluted earnings per share has been calculated in accordance with FRS14and is after allowing for the dilutive effect of the conversion into ordinaryshares of the weighted average number of options outstanding during the period.The number of shares used for the fully diluted calculation is 188,845,052(2004: 203,205,682). The calculation of free cash flow per share is based on the net cash generatedby business activities and available for investment in new pub developments andextensions to existing pubs, after funding interest, tax, all other reinvestmentin pubs open at the start of the period and the purchase of own shares under theemployee Share Incentive Plan ('free cash flow'). It is calculated before takingaccount of proceeds from property disposals and inflows and outflows offinancing from outside sources, dividend payments and and is based on the samenumber of shares in issue as that for the calculation of basic earnings pershare. 6 Net cash inflow from operating activities Unaudited Unaudited Audited half year half year full year 2005 2004 2004 £000 £000 £000 Operating profit 34,365 38,561 77,628Depreciation of tangible fixed assets 22,522 21,887 43,948Employee incentive plan 405 - 149Change in stocks (675) (1,335) (1,257)Change in debtors 391 674 (37)Change in creditors 7,292 9,502 8,443Net cash inflow from operating activities pre exceptional 64,300 69,289 128,874Outflow related to exceptional items (2,298) - -Net cash inflow from operating activities 62,002 69,289 128,874 7 Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Audited half year half year full year 2005 2004 2004 £000 £000 £000 Increase/(decrease) in cash in the year 7,712 (7,290) (5,500)Cash outflow/(inflow) from movement in debt financing 2,500 2,392 (23,199)Movement in net debt during the period 10,212 (4,898) (28,699)Opening net debt (337,559) (308,860) (308,860)Closing net debt (327,347) (313,758) (337,559) 8 Analysis of net debt Audited Non-cash Unaudited full year Cash movement half year 2004 flow 2005 2005 £000 £000 £000 £000 Cash at bank and in hand 9,660 7,712 - 17,372Debt due within one year (25,000) 25,000 (25,000) (25,000)Debt due after one year (322,219) (22,500) 25,000 (319,719)Net debt (337,559) 10,212 - (327,347) 9 Tangible fixed assets Unaudited Unaudited Audited half year half year full year 2005 2004 2004 £000 £000 £000 Opening net book value 783,574 773,823 773,823Additions 20,841 32,002 73,543Disposals (47) (10,739) (17,229)Transfers to assets held for sale (9,332) (6,789) (2,615)Depreciation (22,522) (21,887) (43,948)Closing net book value 772,514 766,410 783,574 10 Capital, reserves and shareholders' funds Called up Share Capital Revaluation Profit and Unaudited share premium redemption reserve loss half year capital account reserve account 2005 shareholders' funds £000 £000 £000 £000 £000 £000 At start of period 3,783 128,340 545 23,117 133,169 288,954Allotments 1 75 - - - 76Transfer - - - (362) 362 -Re-purchase of shares (36) - 36 - (4,184) (4,184)Amount deducted in respect of SIP - - - - (1,582) (1,582)Profit for the period - - - - 8,221 8,221Dividends - - - - (2,732) (2,732)QUEST transfer - 10 - - - 10At end of period 3,748 128,425 581 22,755 133,254 288,763 11 Dividend On 27 May 2005 the company will pay an interim dividend of 1.46 pence per share,for the half year ended 23 January 2005 to shareholders on the register at theclose of business on 29 April 2005. The unpaid dividends in respect of the yearended 25 July 2004 due on own shares purchased by the company have been creditedto the dividend line in the profit and loss account. Independent review report to J D Wetherspoon plc Introduction We have been instructed by the company to review the financial information whichcomprises a summarised profit and loss account, summarised balance sheetinformation as at 23 January 2005, summarised cash flow statement, comparativefigures and associated notes. We have read the other information contained inthe interim report and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an audit opinionon the financial information. This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 23 January 2005. PricewaterhouseCoopers LLPChartered AccountantsLondon4 March 2005 Notes: (a) The maintenance and integrity of the JD Wetherspoon plcwebsite is the responsibility of the directors; the work carried out by theauditors does not involve consideration of these matters and, accordingly, theauditors accept no responsibility for any changes that may have occurred to theinterim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparationand dissemination of financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Wetherspoon (J.D)