TIDMJDW
RNS Number : 6509N
Wetherspoon (JD) PLC
01 October 2021
01 October 2021
J D WETHERSPOON PLC
PRELIMINARY RESULTS
(For the 52 weeks ended 25 July 2021)
FINANCIAL HIGHLIGHTS Var %
Before exceptional items (pre-IFRS 16)
Like-for-like sales -38.4%
Revenue GBP772.6m (2020: GBP1,262.0m) -38.8%
Loss before tax -GBP154.7m (2020: -GBP34.1m) -353.7%
Operating (loss)/profit -GBP105.1m (2020: GBP7.2m) +ve to -ve
Losses per share (including shares held in trust)
-110.3p (2020: -27.6p) -300.0%
Free cash outflow per share -67.8p (2020: -54.2p) -23.2%
Full year dividend 0.0p (2020: 0.0p) unchanged
Before exceptional items (post-IFRS 16)
Loss before tax -GBP167.2m (2020: -GBP44.7m) -274.0%
Operating (loss)/profit -GBP100.4m (2020: GBP17.0m) +ve to -ve
Losses per share (including shares held in trust)
-119.2p (2020: -35.5p) -256.1%
After exceptional items* (post-IFRS 16)
Loss before tax -GBP194.6m (2020: -GBP105.4m) -84.6%
Operating (loss)/profit -GBP109.3m (2020: 3.8m) +ve to -ve
(Losses)/Earnings per share (including shares held
in trust) -147.4p (2020: -89.9p) -64.0%
*Exceptional items as disclosed in account note 4.
Commenting on the results, Tim Martin, the Chairman of J D
Wetherspoon plc, said:
"Like-for-like sales in the first nine weeks of the current
financial year were 8.7% lower than the same weeks in August and
September 2019, before the pandemic started. In the last four weeks
of the period, like-for-like sales were minus 6.4%.
"Excluding airport pubs, where like-for-like sales declined by
47.3%, like-for-like sales declined by 7.1% in the first nine
weeks, and by 4.9% in the last four.
"Total employee numbers averaged 39,025 in the financial year,
which increased to 42,003 for the week ending 20 September
2021.
"On average, Wetherspoon has received a reasonable number of
applications for vacancies, as indicated by the increase in
employee numbers, but some areas of the country, especially
"staycation" areas in the West Country and elsewhere, have found it
hard to attract staff.
"During the pandemic, the pressure on pub managers and staff has
been particularly acute, with a number of nationwide and regional
pub closures and reopenings, often with very little warning, each
of which resulted in different regulations.
"In the last year, the country moved, in succession, from
lockdown, to 'Eat Out to Help Out', to curfews, to firebreaks, to
pints with a substantial meal only, to different tier systems and
to further lockdowns.
"Pub management teams, and indeed the entire hospitality
industry, had an almost impossible burden in trying to communicate
often conflicting and arbitrary rules to customers.
"One of the most surprising statistics has been the apparent low
level of transmission of the virus in pubs.
"For example, in more than 50 million customer visits, recorded
in the second half of 2020, before the introduction of vaccines,
Wetherspoon had zero outbreaks of the virus, as defined by the
health authorities, among customers.
"Yet there has clearly been a high level of transmission in some
other environments, including private parties, weddings, production
facilities, university halls of residence and homes.
"Pubs have been at the forefront of business closures during the
pandemic, at great cost to the industry - but at even greater cost
to the Treasury.
"In spite of these obstacles, Wetherspoon is cautiously
optimistic about the outcome for the financial year, on the basis
that there is no further resort to lockdowns or onerous
restrictions.
"The biggest threat to the pub industry, and also, inter alia,
to restaurants, theatres, cinemas, airlines and travel companies,
relates to the precedent set by the government for the use of
lockdowns and draconian restrictions, imposed under emergency
powers. This threat, which is also a threat to civil society and
democracy, has been regularly articulated by many commentators,
including the former Supreme Court judge Lord Sumption."
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 25 July 2021 or 26 July 2020. The financial information for
the period ended 26 July 2020 is derived from the statutory
accounts for that year which have been delivered to the Registrar
of Companies. The auditors reported on those accounts: their report
was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under s498(2) or (3) of
the Companies Act 2006. Statutory accounts for 2020 will be
delivered to the registrar of companies in due course. The auditors
have reported on those accounts: their report was unquali ed,
contained an emphasis of matter highlighting a materiality
uncertainly related to going concern and did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
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 2021 has been
published on the Company's website on 01 October 2021.
5. The current financial year comprises 53 trading weeks to 31 July 2022.
6. The next trading update will be issued on 10 November 2021.
CHAIRMAN'S STATEMENT
Financial performance
Summary accounts for the years ended July 1984-2021
Financial Total Total Profit/(loss) Profit/(loss) Earnings Earnings Free cash Free cash
year number of sales flow flow
Pubs
(Sites)
before tax before tax per share per share per share
and and before before
exceptional exceptional exceptional exceptional
items items items items
(Pre-IFRS16) (Post-IFRS16) (Pre-IFRS16) (Post-IFRS16)
GBP000 GBP000 GBP000 pence pence GBP000 pence
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
---------- --------- ---------- ------------- ------------- ------------ ------------- ---------- ----------
2005 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
---------- --------- ---------- ------------- ------------- ------------ ------------- ---------- ----------
2020 872 1,262,048 (34,095) (44,687) (27.6) (35.5) (58,852) (54.2)
---------- --------- ---------- ------------- ------------- ------------ ------------- ---------- ----------
2021 861 772,555 (154,676) (167,166) (110.3) (119.2) (83,284) (67.8)
---------- --------- ---------- ------------- ------------- ------------ ------------- ---------- ----------
Notes
Adjustments to statutory numbers
1. Where appropriate, the earnings per share (EPS), as disclosed
in the statutory accounts, have been recalculated to take account
of share splits, the issue of new shares and capitalisation
issues.
2. Free cash flow per share excludes dividends paid which were
included in the free cash flow calculations in the annual report
and accounts for the years 1995-2000.
3. The weighted average number of shares, EPS and free cash flow
per share include those shares held in trust for employee share
schemes.
4. Before 2005, the accounts were prepared under UKGAAP. All
accounts from 2005 to date have been prepared under IFRS.
5. Apart from the items in notes 1-4, all numbers are as
reported in each year's published accounts.
6. From financial year 2020 data is based on both pre-IFRS16
numbers and post-IFRS16 numbers following the transition from IAS17
to IFRS16.
7. Free cash flow is defined in note 8 and in the Company's
accounting policies. The calculation of free cash flow can be found
on the cash flow statement.
Financial outcome
It is very difficult to interpret, in a meaningful way,
financial results for the last year, since pubs were closed
nationally for a period of around 19 weeks. In addition, there were
regional lockdowns and a bewildering range of national and local
restrictions, which applied to different areas at different
times.
Comparisons are also problematical in respect of the previous
financial year, which was itself affected by lockdowns and
restrictions.
Bearing in mind these caveats, we have presented comparisons
between the two years, as we normally do.
Total sales in the financial year were GBP772.6m, a decrease of
38.8%. Like-for-like sales decreased by 38.4%. Bar sales decreased
by 42.2%, food sales by 37.4%, slot/fruit machine sales by 52.5%
and hotel room sales by 27.1%.
The unaudited pre-IFRS16 operating loss, before exceptional
items, was GBP105.1m (2020: GBP7.2m profit). The operating margin,
before exceptional items, was -13.6% (2020: 0.6%).
The unaudited pre-IFRS16 loss before tax and exceptional items
increased to -GBP154.7m (2020: -GBP34.1m), including property
losses of GBP2.3m (2020: GBP0.6m). Losses per share, including
shares held in trust by the employee share scheme, before
exceptional items, were -110.3p (2020: -27.6p).
Total capital investment was GBP62.7m (2020: GBP171.6m).
GBP24.1m was invested in new pubs and pub extensions (2020:
GBP41.0m), GBP20.0m in existing pubs and IT (2020: GBP32.1m) and
GBP16.9m in freehold reversions, where Wetherspoon was already a
tenant (2020: GBP98.5m).
Pre-tax exceptional items totalled GBP27.5m (2020: GBP60.7m).
There was a GBP1.7m loss on disposal, an impairment charge of
GBP4.1m, expenditure in relation to Covid-19 of GBP2.8m, head
office restructuring costs of GBP6.2m and GBP12.7m of interest
costs relating to ineffective interest rate swaps. The total cash
effect of exceptional items, which related to head office
restructuring and Covid-19 costs, was an outflow of GBP8.9m.
Free cash outflow, after capital payments of GBP22.3m for
existing pubs (2020: GBP44.3m), GBP7.7m for share purchases for
employees (2020: GBP11.1m) and payments of tax and interest,
increased by GBP1.6m to -GBP60.5m (2020: -GBP58.9m). Free cash
outflow per share was -67.8p (2020: -54.2p).
The effect of IFRS16 on a hypothetical leasehold pub
In order to illustrate the differences between old and new
accounting, the example below shows how a leasehold pub would be
affected. The following assumptions have been made:
n a 25-year lease, at a rent of GBP100k per annum, rising by
7.5% at each five-year rent review
n capital development costs of GBP1m funded by equity, without
debt
n GBP30k of capital reinvestment per annum from year 6 to year
25
n pub EBITDA profits of GBP160k per annum
n head office costs and tax excluded from calculations
Year 1 5 10 15 20 25 Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- ------- ------- ------- ------- ------- ------- -------
Pub EBITDAR 260 260 268 276 284 294 6,904
=================== ======= ======= ======= ======= ======= ======= =======
Accounting Profit
pre IFRS16
(before head
office costs
& corporation
tax) 100 100 100 100 100 100 2,500
=================== ======= ======= ======= ======= ======= ======= =======
Accounting Profit
post IFRS16
(before head
office costs
& corporation
tax) 60 65 81 101 125 154 2,500
===================
Cash earnings 160 160 130 130 130 130 3,400
As the table illustrates, "cash earnings" are the same in both
examples, however accounting earnings vary greatly.
Pre-IFRS16 treatment results in stable accounting profit of
GBP100k, reflecting stable cash earnings, whereas post-IFRS16
treatment gives rise to erratic accounting profits, which vary from
GBP60k to GBP154k, over the term of the lease.
As a result, it will be difficult for investors to understand
the performance of the business, using IFRS16 accounting standards,
at any given point in the lease, from an examination of the profit
and loss account.
In appendix 1, below, we have provided profit and loss, balance
sheet and cash flow statements, using pre-IRFS 16 accounting
methodology, for those who find the new accounting too complex or
unhelpful.
Dividends and return of capital
No interim dividend was paid in March 2021. The board is not
proposing a final dividend payment for the year. There were no
share buybacks in the financial year.
Financing
As at 25 July 2021, the company's total net debt, excluding
derivatives, was GBP845.5m (2020: GBP817.0m), an increase of
GBP28.5m. Year-end net-debt-to-EBITDA ratio was -27.32 times (2020:
9.48 times).
The company has an agreement with its lenders which waives its
debt covenants until October 2022 and replaces it with a minimum
liquidity requirement of GBP75m. At the year end liquidity was
GBP240.4m.
There has been an increase in total finance facilities to
GBP1,083.0m (2020: GBP993.0m), as a result of government-backed
"CLBILS" loans, which are due for repayment by August 2023.
As previously reported, the company has fixed its LIBOR interest
rates in respect of GBP770m until March 2029. The weighted average
cost of the swaps was 2.42% for FY21, reducing to 1.61% in the
current financial year. The annual cost of the swaps is illustrated
in the table below:
Swap Value Start Date End Date Weighted Average %
------------ ------------ ----------- -------------------
GBP770m 02-Jul-18 29-Jul-21 2.42%
GBP770m 30-Jul-21 30-Jul-23 1.61%
GBP770m 31-Jul-23 30-Jul-26 1.10%
GBP770m 31-Jul-26 30-Jun-28 1.33%
GBP770m 01-Jul-28 29-Mar-29 1.32%
In April 2021, the company conducted a non-pre-emptive placing
of 6.95% of the company's issued ordinary share capital to raise
GBP94m, which was supported by a number of institutional investors.
The proceeds were used to strengthen the company's balance sheet,
working capital and liquidity.
Property
The company opened five pubs during the year and sold or closed
16, resulting in a trading estate of 861 pubs at the financial year
end.
The average development cost for a new pub (excluding the cost
of freeholds) was GBP2.1m, compared with GBP2.3m a year ago. The
full-year depreciation charge, excluding depreciation for
"right-of-use" assets (a new charge to the profit and loss account,
post-IFRS16) was GBP76.4m (2020: GBP79.3m).
10 years ago, the company's freehold/leasehold split was
43.4%/56.6%. As at 25 July 2021, as a result of investment in
freehold reversions (relating to pubs where the company was
previously a tenant) and freehold pub openings, the split was
66.3%/33.7%. As at 25 July 2021, the net book value of the
property, plant and equipment of the company was GBP1.4 billion,
including GBP1.1 billion of freehold and long-leasehold property.
The properties have not been revalued since 1999.
Taxation
The current corporation tax credit for the year is GBP0.4m
(2020: a GBP2.6m credit). The rate of corporation tax recovered on
current year losses is 0.2%. The 'accounting' tax credit, which
appears in the income statement, is GBP20.7m (2020: GBP6.2m).
The accounting tax credit comprises two parts: the actual
current tax credit (the 'cash' tax) and the deferred tax credit
(the 'accounting' tax). The tax losses arising in the financial
year will be carried forward for use against profits in future
years, meaning that the cash tax benefit will be received in future
years. Therefore, a 'deferred tax' benefit is created which will
reverse in future years when the cash tax benefit of the losses is
realised.
The company is seeking a refund of excise duty from HMRC,
totalling GBP524k, 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.
Owing to a paperwork error, in the early days of our business in
the Republic, which the company has sought to rectify, it has been
unable to reclaim this duty, even though it is transparently clear
that the duty has been paid. We believe this is a draconian and
unfair outcome, and that companies trying to set up businesses
abroad, already a difficult process, should receive a greater level
of cooperation.
Scotland Business Rates
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 tenants trade- has been undermined
Omni Centre, Edinburgh
Occupier Name Rateable Value (RV) Customer Area (ft(2)) Rates per square foot
-------------------- ---------------------- ----------------------
Playfair (JDW) GBP218,750 2,756 GBP79.37
-------------------- ---------------------- ----------------------
Unit 9 (vacant) GBP48,900 1,053 GBP46.44
-------------------- ---------------------- ----------------------
Unit 7 (vacant) GBP81,800 2,283 GBP35.83
-------------------- ---------------------- ----------------------
Frankie & Benny's GBP119,500 2,731 GBP43.76
-------------------- ---------------------- ----------------------
Nando's GBP122,750 2,804 GBP43.78
-------------------- ---------------------- ----------------------
Slug & Lettuce GBP108,750 3,197 GBP34.02
-------------------- ---------------------- ----------------------
The Filling Station GBP147,750 3,375 GBP43.78
-------------------- ---------------------- ----------------------
Tony Macaroni GBP125,000 3,427 GBP36.48
-------------------- ---------------------- ----------------------
Unit 6 (vacant) GBP141,750 3,956 GBP35.83
-------------------- ---------------------- ----------------------
Cosmo GBP200,000 7,395 GBP27.05
-------------------- ---------------------- ----------------------
Average (exc JDW) GBP121,800 3,358 GBP38.55
-------------------- ---------------------- ----------------------
The Centre, Livingston
Pub Name Rateable Value (RV) Customer Area (ft(2)) Rates per square foot
-------------------- ---------------------- ----------------------
The Newyearfield (JDW) GBP165,750 4,090 GBP40.53
-------------------- ---------------------- ----------------------
Paraffin Lamp GBP52,200 2,077 GBP25.13
-------------------- ---------------------- ----------------------
Wagamama GBP67,600 2,096 GBP32.25
-------------------- ---------------------- ----------------------
Nando's GBP80,700 2,196 GBP36.75
-------------------- ---------------------- ----------------------
Chiquito GBP68,500 2,221 GBP30.84
-------------------- ---------------------- ----------------------
Ask Italian GBP69,600 2,254 GBP30.88
-------------------- ---------------------- ----------------------
Pizza Express GBP68,100 2,325 GBP29.29
-------------------- ---------------------- ----------------------
Prezzo GBP70,600 2,413 GBP29.26
-------------------- ---------------------- ----------------------
Harvester GBP98,600 3,171 GBP31.09
-------------------- ---------------------- ----------------------
Pizza Hut GBP111,000 3,796 GBP29.24
-------------------- ---------------------- ----------------------
Hot Flame GBP136,500 4,661 GBP29.29
-------------------- ---------------------- ----------------------
Average (exc JDW) GBP82,340 2,721 GBP30.40
-------------------- ---------------------- ----------------------
Similar issues are evident in Galashiels, Arbroath, Wick,
Anniesland - and indeed 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.
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 in applying taxes to different businesses.
In July 2020, the chancellor, Rishi Sunak, announced a temporary
reduction in VAT to 5% in respect of food and non-alcoholic drinks
sales. As a result, the company lowered its pricing on a wide range
of products, including food, soft drinks and real ale. If the
chancellor decides to make these VAT reductions permanent, the
company intends to retain lower prices indefinitely.
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. Wetherspoon
generated total taxes in FY19, before the pandemic, of GBP763.6m.
This equated to one pound in every thousand of UK government
revenue.
In FY21, mainly as a result of the lockdown, total taxes paid to
the government declined from the 2019 level of GBP763.6m to
GBP37.0m, net of furlough payments - yet the company made a
positive contribution to the Treasury, even in these dire
circumstances.
The table below shows the tax revenue generated by the company,
its staff and customers in the last 10 years. Each pub, on average,
generated GBP6.3m in tax during that period:
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 TOTAL
2012
to 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
VAT 93.8 244.3 357.9 332.8 323.4 311.7 294.4 275.1 253.0 241.2 2,727.6
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Alcohol
duty 70.6 124.2 174.4 175.9 167.2 164.4 161.4 157.0 144.4 136.8 1,476.3
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
PAYE and
NIC 101.5 106.6 121.4 109.2 96.2 95.1 84.8 78.4 70.2 67.1 930.5
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Business
rates 1.5 39.5 57.3 55.6 53.0 50.2 48.7 44.9 46.4 43.9 441.0
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Corporation
tax - 21.5 19.9 26.1 20.7 19.9 15.3 18.4 18.4 18.2 178.4
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Corporation
tax credit
(historic
capital
allowances) - - - - - - -2.0 - - - -2.0
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Fruit/slot
Machine
duty 4.3 9.0 11.6 10.5 10.5 11 11.2 11.3 7.2 3.3 89.9
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Climate
change levies 7.9 10.0 9.6 9.2 9.7 8.7 6.4 6.3 4.3 1.9 74.0
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Stamp duty 1.8 4.9 3.7 1.2 5.1 2.6 1.8 2.1 1.0 0.8 25.0
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Sugar tax 1.3 2.0 2.9 0.8 - - - - - - 7.0
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Fuel duty 1.1 1.7 2.2 2.1 2.1 2.1 2.9 2.1 2.0 1.9 20.2
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Carbon tax - - 1.9 3.0 3.4 3.6 3.7 2.7 2.6 2.4 23.3
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Premise
licence
and TV licences 0.5 1.1 0.8 0.7 0.8 0.8 1.6 0.7 0.7 0.5 8.2
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Landfill
tax - - - 1.7 2.5 2.2 2.2 1.5 1.3 1.3 12.7
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Furlough
Tax
Rebate -213.0 -124.1 - - - - - - - - -337.1
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Eat out
to help
out -23.2 - - - - - - - - - -23.2
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Local Government
Grants -11.1 - - - - - - - - - -11.1
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
TOTAL TAX 37.0 440.7 763.6 728.8 694.6 672.3 632.4 600.5 551.5 519.3 5.6bn
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
TAX PER
PUB (GBP000) 43 533 871 825 768 705 673 662 632 617 6.3m
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
TAX AS %
OF NET SALES 4.8% 34.9% 42.0% 43.0% 41.8% 42.1% 41.8% 42.6% 43.1% 43.4% 39.7%
------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ---------
Note - this table is prepared on a cash basis.
Worker Directors
Almost all thoughtful investors and commentators understand that
it is important to retain the architecture and culture of
successful businesses, characteristics which have usually been
developed over many years - and are often referred to as the "DNA"
of a company.
Unfortunately, the UK corporate governance system, in practice,
has little regard for DNA, which is often diluted, or even
destroyed, by frequent changes of directors, and by
under-representation of executives and workers.
As Wetherspoon has previously argued, the pattern of a low level
of executive representation and non-executives who stay, on
average, for short tenures, is bound to have a deleterious effect
on DNA.
In the pub industry, in recent decades, companies like Fuller's
and Young's, which have generally had "non-compliant" boards, have
fared far better than their larger PLC brethren- many of which have
disappeared- with their ever-changing rota of directors.
This issue becomes particularly acute as long-serving directors,
in any company, approach or pass retirement age.
If the nine-year maximum tenure rule, the basis of corporate
governance lore, were to be strictly applied at Wetherspoon, the
chairman and two of four non-executives, would be immediately
replaced by "independents", destabilising the company and
jeopardising DNA.
Wetherspoon has sought to counteract the negative effects of
corporate governance by encouraging long-serving directors, and is
planning the promotion of a number of "worker directors", who are
experienced pub or area managers, to board positions.
It is hoped that the creation of more experience of the 'front
line' at board level will help to protect the DNA of the business
for future generations.
For a number of years, the Wetherspoon annual report has
included a critique of corporate governance rules which, as
indicated above, the company feels are often irrational and
counter-productive. This critique, summarised in the 2019 annual
report, has been reproduced in appendix 2.
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 GBP22.8m in respect of bonuses and free shares
to employees in the year, of which 99.6% was paid to staff below
board level and 89.8% was paid to staff working in our pubs.
As previously reported, the company was recognised as a Top
Employer UK, in 2020, by The Top Employers Institute, for the 17th
consecutive year.
Wetherspoon has been the biggest corporate sponsor of 'Young
Lives vs Cancer' (previously CLIC Sargent), having raised a total
of GBP18.8m since 2002. During the pandemic, our contributions have
been reduced, but great efforts are being made to increase our
level of support in the current financial year.
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 (Loss)/Profit after tax(1) Bonus and free shares as % of profits
GBPm GBPm
---------------- ---------------------- --------------------------- --------------------------------------
2006 17 40 41%
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 (30) -
2021 23 (136) -
Total 454 641 49.3%(2)
---------------- ---------------------- --------------------------- --------------------------------------
(1) (Loss)/Profit is Pre-IFRS16 and before exceptional items
(2) Excludes 2020 and 2021
Length of Service
The attraction and retention of talented pub and kitchen
managers is important for any hospitality business. As the table
below demonstrates, the retention of managers has improved, even
during the pandemic.
Average pub Average kitchen
Financial manager length manager length
year of service of service
(Years) (Years)
----------- ---------------- ----------------
2012 9.0 5.1
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
Food Hygiene Ratings
Wetherspoon has always emphasised the importance of hygiene
standards.
We now have 787 pubs rated on the Food Standards Agency's
website (see table below). The average score is 4.97, with 98.4% 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 61 pubs have passed.
Pubs with
highest
Financial Total Average Rating
Year Pubs Scored Rating %
----------- ------------- -------- ----------
2012 647 4.72 -
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
ESG matters
It is in the company's interest to run an ethical and
sustainable business. Initiatives that have been undertaken
include:
n the replacement of plastic straws with 100% biodegradable and
100% recyclable paper straws and wrappers.
n the availability of complimentary water fountains in all pubs,
as part of the nationwide 'Refill' scheme.
n the conversion of used cooking oil to biodiesel for
agricultural use.
n the cessation of single-use portion pots in the kitchens.
n the cessation of the use of cling film in pubs.
n the segregation of waste into seven recycling streams
including glass, tin/cans, cooking oil, paper/cardboard, plastic,
lightbulbs and general waste. Any remaining non-recyclable waste is
sent to waste-to-energy power plants which reduce CO2 and the use
of fossil fuels. No waste is sent to landfill.
n the inclusion of calories on menus. For many years,
Wetherspoon has included the number of calories for each item on
its menu. In recent years, the number of units of alcohol has also
been included . In these cases, Wetherspoon may have been the first
substantial company to take the initiative, before any legislative
requirement.
n the introduction of customer allergen screens in most pubs and
detailed allergen information on the company's website.
n the introduction of 'Good Food Talks', so that visually
impaired customers can listen to the menu through a fully
accessible website and iOS mobile app.
n the introduction of guaranteed-hours contracts, which apply to
96% of hourly paid staff - a small percentage of employees prefer
flexible contracts, with no minimum hours, and they are entitled to
receive exactly the same benefits as those on a guaranteed-hours
contract.
n the establishment of three network groups to support employees
at all levels:
-- Women
-- LGBTQIA+
-- Race and ethnic diversity
n the establishment of an apprenticeship programme which offers
10 different qualifications.
n a complementary meal and a drink for employees working a shift
of four hours or longer.
n a staff discount for all employees, which may be used on and
off duty, in our pubs and hotels.
n a reduction of 47% in greenhouse gas emissions, adjusted for
sales, between 2014 and 2019, confirmed by energy consultants ISTA.
Initiatives include the installation of Cheetah energy management
systems, which reduce energy consumption in kitchen ventilation,
LED lighting and other measures.
n from October 2022, all electricity supplied to Wetherspoon
pubs in the UK being generated from 100% renewable sources.
n membership of Zero Carbon Forum, a non-profit making
organisation, which is helping the hospitality industry in
compliance matters and in implementing a plan to achieve net zero
carbon emissions.
n investment in the restoration of old buildings- an area in
which the company has won many design awards. There have been
awards in recent years for The Caley Picture House in Edinburgh,
The Royal Victoria Pavilion in Ramsgate, The Iron Duke in
Wellington (Somerset), The Greenwood Hotel in Northolt, The Velvet
Coaster in Blackpool and The Old Swanne Inne in Evesham. Apart from
these examples, there have been a large number of design awards in
earlier years.
Property litigation
As previously reported, Wetherspoon agreed on an out-of-court
settlement with developer Anthony Lyons, formerly of property
leisure agent Davis Coffer Lyons, in 2013 and received
approximately GBP1.25m from Mr Lyons.
The payment relates to litigation in which Wetherspoon claimed
that Mr Lyons had been an accessory to frauds committed by
Wetherspoon's former retained agent Van de Berg and its directors
Christian Braun, George Aldridge and Richard Harvey. Mr Lyons
denied the claim - and the litigation was contested.
The claim related to properties in Portsmouth, Leytonstone and
Newbury. The Portsmouth property was involved in the 2008/9 Van de
Berg case itself.
In that case, Mr Justice Peter Smith found that Van de Berg, but
not Mr Lyons (who was not a party to the case), fraudulently
diverted the freehold from Wetherspoon to Moorstown Properties
Limited, a company owned by Simon Conway. Moorstown leased the
premises to Wetherspoon. Wetherspoon is still a leaseholder of this
property - a pub called The Isambard Kingdom Brunel.
The properties in Leytonstone and Newbury (the other properties
in the case against Mr Lyons) were not pleaded in the 2008/9 Van de
Berg case. Leytonstone was leased to Wetherspoon and trades today
as The Walnut Tree public house. Newbury was leased to Pelican plc
and became Café Rouge.
As we have also reported, the company agreed to settle its final
claim in this series of cases and accepted GBP400,000 from property
investor Jason Harris, formerly of First London and now of First
Urban Group. Wetherspoon alleged that Harris was an accessory to
frauds committed by Van de Berg. Harris contested the claim and has
not admitted liability.
Before the conclusion of the above cases, Wetherspoon also
agreed on a settlement with Paul Ferrari of London estate agent
Ferrari Dewe & Co, in respect of properties referred to as the
'Ferrari Five' by Mr Justice Peter Smith.
Press corrections
Wetherspoon has been the subject of a number of inaccurate media
stories on a variety of different subjects. After complaining to
the organisations concerned, the company obtained corrections
and/or apologies from a number of publications, including:
Daily Express The Daily Telegraph
Daily Mail The Guardian
Daily Mirror The Independent
Daily Star The Times
Sky News Forbes
The company has published a special edition of Wetherspoon News
which includes details of the apologies and corrections which can
be found on the Company's website (
https://www.jdwetherspoon.com//media/files/pdf-documents/wetherspoon-news/does-truth-matter_.pdf
).
Current trading and outlook
Like-for-like sales in the first nine weeks of the current
financial year were 8.7% lower than the same weeks in August and
September 2019, before the pandemic started. In the last four weeks
of the period, like-for-like sales were minus 6.4%.
Excluding airport pubs, where like-for-like sales declined by
47.3%, like-for-like sales declined by 7.1% in the first nine
weeks, and by 4.9% in the last four.
Total employee numbers averaged 39,025 in the financial year,
which increased to 42,003 for the week ending 20 September
2021.
On average, Wetherspoon has received a reasonable number of
applications for vacancies, as indicated by the increase in
employee numbers, but some areas of the country, especially
"staycation" areas in the West Country and elsewhere, have found it
hard to attract staff.
During the pandemic, the pressure on pub managers and staff has
been particularly acute, with a number of nationwide and regional
pub closures and reopenings, often with very little warning, each
of which resulted in different regulations.
In the last year, the country moved, in succession, from
lockdown, to 'Eat Out to Help Out', to curfews, to firebreaks, to
pints with a substantial meal only, to different tier systems and
to further lockdowns.
Pub management teams, and indeed the entire hospitality
industry, had an almost impossible burden in trying to communicate
often conflicting and arbitrary rules to customers.
One of the most surprising statistics has been the apparent low
level of transmission of the virus in pubs.
For example, in more than 50 million customer visits, recorded
in the second half of 2020, before the introduction of vaccines,
Wetherspoon had zero outbreaks of the virus, as defined by the
health authorities, among customers.
Yet there has clearly been a high level of transmission in some
other environments, including private parties, weddings, production
facilities, university halls of residence and homes.
Pubs have been at the forefront of business closures during the
pandemic, at great cost to the industry - but at even greater cost
to the Treasury.
In spite of these obstacles, Wetherspoon is cautiously
optimistic about the outcome for the financial year, on the basis
that there is no further resort to lockdowns or onerous
restrictions.
The biggest threat to the pub industry, and also, inter alia, to
restaurants, theatres, cinemas, airlines and travel companies,
relates to the precedent set by the government for the use of
lockdowns and draconian restrictions, imposed under emergency
powers. This threat, which is also a threat to civil society and
democracy, has been regularly articulated by many commentators,
including the former Supreme Court judge Lord Sumption (please see
appendix 3 below).
Appendix 1 - Unaudited primary financial statements (pre-IFRS16 accounting)
The following unaudited financial statements are included to aid
understanding.
Pre-IFRS16 income statement (before exceptional items):
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
------------------------- ---------- ------------
Revenue 772,555 1,262,048
Operating costs (877,645) (1,254,896)
------------------------- ---------- ------------
Operating (loss)/profit (105,090) 7,152
Property (losses)/gains (2,323) (641)
Finance income 188 161
Finance costs (47,451) (40,767)
------------------------- ---------- ------------
Loss before tax (154,676) (34,095)
Income tax credit 19,149 4,158
------------------------- ---------- ------------
Loss for the period (135,527) (29,937)
Pre-IFRS16 income statement reconciliation (before exceptional
items):
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
---------------------------- ---------- ---------
Loss for the period
before IFRS16 (135,527) (29,937)
Operating costs 49,582 58,503
Amortisation and
Depreciation
* ROU Assets (44,936) (49,059)
* Lease Premiums 86 368
Disposal of leases 2,200 1,125
Finance income 407 451
Finance costs (19,829) (21,980)
Income tax credit 1,546 2,012
---------------------------- ---------- ---------
Loss for the period (146,471) (38,517)
---------------------------- ---------- ---------
Pre-IFRS16 cash flow statement:
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
--------------------- ---------- ----------
Net cash flows
from operating
activities (52,854) (2,108)
Net cash flow
from investing
activites (57,726) (188,361)
Net cash flow
from financing
activities (18,463) 321,970
Net change in
cash and cash
equivalents (129,043) 131,501
Opening cash and
cash equivalents 174,451 42,950
Closing cash and
cash equivalents 45,408 174,451
Free cash flow (83,284) (58,852)
Free cash flow
per ordinary share
(p) (67.8) (54.2)
Pre-IFRS16 balance sheet:
As at As at
25 July 26 July
2021 2020
GBP000 GBP000
-------------------------- ------------ ------------
Non-current assets
Property, plant
and equipment 1,420,515 1,439,467
Intangible assets 5,358 8,895
Investment property 10,533 11,527
Other non-current
assets 7,434 7,520
Deferred tax assets - -
-------------------------- ------------ ------------
Total non-current
assets 1,443,840 1,467,409
-------------------------- ------------ ------------
Current assets
Inventories 26,853 23,095
Receivables 34,477 36,387
Current income
tax receivables - 7,672
Cash and cash
equivalents 45,408 174,451
-------------------------- ------------ ------------
Total current
assets 106,738 241,605
-------------------------- ------------ ------------
Total assets 1,550,578 1,709,014
-------------------------- ------------ ------------
Current liabilities
Borrowings (7,610) (7,610)
Trade and other
payables (287,758) (267,677)
Current income (1,454) -
tax liabilities
Provisions (4,725) (4,759)
-------------------------- ------------ ------------
Total current
liabilities (301,547) (280,046)
-------------------------- ------------ ------------
Non-current liabilities
Borrowings (883,272) (983,828)
Derivative financial
instruments (37,643) (82,194)
Deferred tax liabilities (16,546) (26,521)
Provisions (1,488) (1,488)
Other liabilities (9,738) (9,738)
-------------------------- ------------ ------------
Total non-current
liabilities (948,687) (1,103,769)
-------------------------- ------------ ------------
Total liabilities (1,250,244) (1,383,815)
-------------------------- ------------ ------------
Net assets 300,344 325,199
-------------------------- ------------ ------------
Shareholders'
equity
Share capital 2,575 2,408
Share premium
account 143,294 143,294
Capital redemption
reserve 2,337 2,337
Other reserve 234,579 141,002
Hedging reserve (15,403) (66,577)
Currency translation
reserve 1,851 7,089
Retained earnings (68,889) 95,646
-------------------------- ------------ ------------
Total shareholders'
equity 300,344 325,199
-------------------------- ------------ ------------
Appendix 2 - Corporate Governance, Extract from J D Wetherspoon Annual Report 2019
The underlying ethos of corporate governance is to comply with
the guidelines or to explain why you do not.
The original creators of the rules must have realised that
business success takes many forms, so a rigid structure, applicable
to all companies cannot be devised - hence the requirement to
explain non-compliance.
Wetherspoon has always explained its approach. For example, in
2016, our approach to corporate governance was summed up in the
annual report as follows:
"..I have said that many aspects of current corporate governance
advice, as laid out in the Combined Code, are deeply flawed..."
I then went on to say:
"I believe that the following propositions represent the views
of sensible shareholders:
The Code itself is faulty, since it places excessive emphasis on
meetings between directors and shareholders and places almost no
emphasis on directors taking account of the views of customers and
employees which are far more important, in practice, to the future
well-being of any company. For example, in the UK Corporate
Governance Code (September 2014), there are 64 references to
shareholders, but only three to employees and none to customers -
this emphasis is clearly mistaken.
n The average institutional shareholder turns over his portfolio
twice annually, so it is advisable for directors to be wary of the
often perverse views of 'Mr Market' (in the words of Benjamin
Graham), certainly in respect of very short-term shareholders.
n A major indictment of the governance industry is that modern
annual reports are far too long and often
unreadable. They are full of semiliterate business jargon,
including accounting jargon and are cluttered with badly written
and incomprehensible governance reports.
n It would be very helpful for companies, shareholders and the
public, if the limitations of corporate governance systems were
explicitly recognised. Common sense, management skills and business
savvy are more important to commercial success than board
structures. All of the major banks and many supermarket and pub
companies have suffered colossal business and financial problems,
in spite of, or perhaps because of, their adherence to inadvisable
governance guidelines.
n There should be an approximately equal balance between
executives and non-executives. A majority of executives is not
necessarily harmful, provided that non-executives are able to make
their voices heard.
n It is often better if a chairman has previously been the chief
executive of the company. This encourages chief executives, who may
wish to become a chairman in future, to take a long-term view,
avoiding problems of profit-maximisation policies in the years
running up to the departure of a chief executive.
n A maximum tenure of nine years for non-executive directors is
not advisable, since inexperienced boards, unfamiliar with the
effects of the 'last recession' on their companies, are likely to
reduce financial stability.
n An excessive focus on achieving financial or other targets for
executives can be counter-productive. There's no evidence that the
type of targets preferred by corporate governance guidelines
actually works and there is considerable evidence that attempting
to reach ambitious financial targets is harmful.
n As indicated above, it is far more important for directors to
take account of the views of employees
and customers than of the views of institutional shareholders.
Shareholders should be listened to with respect, but caution should
be exercised in implementing the views of short-term shareholders.
It should also be understood that modern institutional shareholders
may have a serious conflict of interest, as they are often
concerned with
their own quarterly portfolio performance, whereas corporate
health often requires objectives which liefive, 10 or 20 years in
the future. "
I also quoted Sam Walton of Walmart in the 2014 annual report.
He said:
"What's really worried me over the years is not our stock price,
but that we might someday fail to take care of our customers or
that our managers might fail to motivate and take care of our
(employees)....Those challenges are more real than somebody's
theory that we're heading down the wrong path....As business
leaders, we absolutely cannot afford to get all caught up in trying
to meet the goals that some ... institution ... sets for us. If we
do that, we take our eye off the ball.... If we fail to live up to
somebody's hypothetical projection for what we
should be doing, I don't care. We couldn't care less about what
is forecast or what the market says we ought to do. "
It is, therefore, very disappointing that one large
institutional shareholder does not appear, by its actions, to
support the central tenet of our stance on the issue of governance,
which is that experience is extremely important and that the
so-called 'nine-year rule' is perverse and counterproductive.
This shareholder failed to support the re-election of two of our
non-executive directors at last year's AGM. I arranged a meeting
for all of our main institutional shareholders in April 2019, to
further explain our position, which the shareholder in question
failed to attend. I then arranged a further meeting with the
shareholder at their offices
in May 2019.
Following the meeting there was no confirmation that the
shareholder would support the re-election of our long-serving
non-executive directors. As a result, three of our four
non-executives, in the best interests of the Company, offered to
leave, on a rotational basis.
The Company contacted all of its main shareholders to inform
them of this proposal. The shareholder in question agreed. However,
a number of other shareholders expressed their discontent with the
proposed resignations.
The executive board and I strongly feel that these sorts of
board changes disrupt and weaken the Company. I wrote to the
shareholder on
9 September 2019 to ask them to reconsider their position, but
have not received a reply.
Wetherspoon has had harmonious relationships with almost all of
its shareholders over many years and has complied with the
corporate governance requirement for explanation. Judging from the
absence of any adverse comment, our approach has generally been
accepted by investors.
Appendix 3 - Tyranny of the Covid experts: finger-wagging SAGE
scientist Jeremy Farrar penned a book about how he's the only
person Boris Johnson should ever have listened to, Jonathan
Sumption, The Mail on Sunday, 31 July 2021
Professor Sir Jeremy Farrar is a distinguished epidemiologist, a
member of the Sage scientific committee, the director of the
Wellcome Trust health research charity and an influential
government adviser. He is also the most hawkish of lockdown hawks,
and he has written a book with journalist Anjana Ahuja, called
Spike. It is a revealing read.
Spike is basically about Farrar himself: how he saw it all
coming, how he personally forced the Chinese government to release
the genetic sequence of the Covid-19 virus that allowed scientists
to develop a vaccine, how he warned the world of imminent doom, how
the Government could have saved lives by treasuring his words more,
and how he risked assassination by the Chinese ('If anything
happens to me, this is what you need to know', he told
friends).
The talk is all of wars, battle plans, and people heading for
precipices. All this is a bit melodramatic and self-obsessed for my
taste. but Farrar is a distinguished scientist who means well. He
is terrifyingly sincere and really does have the interest of
mankind at heart. Therein lies the problem.
There are few more obsessive fanatics than the technocrat who is
convinced that he is reordering an imperfect world for its own
good.
If Spike is largely about its author, it also tells us much
about those who have been in charge of our lives through
Covid-19.
Farrar represents most of what has gone wrong. His main target
is the British Government. But he actually agrees with nearly
everything they have done.
Farrar's complaint is that they did not do it quickly or
brutally enough when he suggested it, and stopped doing it before
he gave them the all-clear.
His views about how governments should deal with public health
crises are broadly the same as those of Dominic Cummings. Both men
are frustrated autocrats who believed that from Day One we needed
'a command-and-control structure'. He speaks well of Chinese
methods of disease control.
'Panic was called for,' in March 2020, he says at one point. At
another, he tells us that at a time when governments were panicking
all over Europe, there was not enough panic in Britain.
This is all very odd. It does not seem to have occurred to
Farrar that the jerky, ill-considered and inconsistent
improvisations that passed for policy-making in the Johnson
Government, and which he rightly criticises, were the direct result
of the panic that he recommends.
The great object is of course to ensure that 'the science' is
applied. No ifs, no buts and no delay. In Farrar's world, this is
easy as there is only one science, namely his own.
He is convinced he's right and the Government should listen to
no one else. Challenge from other scientists is normally regarded
as fundamental to scientific advance. But for Farrar disagreement
is a 'hurdle'. It just gets in his way.
So, serious scientists such as Professors Carl Heneghan, Karol
Sikora and Sunetra Gupta, who have had the temerity to offer
opinions differing from his own, are dismissed as being
'responsible for a number of unnecessary deaths', although Farrar
has had a great deal of influence on Government policy and they
have had almost none.
This kind of attitude to colleagues is, frankly, unworthy of a
scientist of Sir Jeremy's eminence.
Anders Tegnell, the Swedish state epidemiologist, is dismissed
in a brief footnote, although Sweden is a standing repudiation of
much that Farrar stands for. Sweden has avoided a lockdown, yet has
done much better than the UK.
Like many technocrats, Farrar believes in coercion. Otherwise,
people might not do what he wants. 'You cannot tell people to stay
at home only if they feel like it,' he says.
This is an obtuse misunderstanding of the argument against
coercion. The point is that people differ widely in their
vulnerability to Covid-19. It causes serious illness among the old
and those with severe underlying conditions, but the symptoms are
mild for nearly everyone else.
We therefore have to be able to make our own risk assessments.
It is simply untrue that the vulnerable would ignore advice 'if
they felt like it'. People have a basic sense of
self-preservation.
This was Sage's consistent advice right up to the first
lockdown. Farrar denies it, but the record speaks for itself.
On March 10 and 13, the minutes record that Sage advised
guidance on isolation, selectively directed to the old and
vulnerable.
On March 13, they said that the public should be treated as
'rational actors, capable of taking decisions for themselves and
managing personal risk.' Farrar participated in both meetings.
Of course, selective coercion would be impractical, as he points
out. But universal coercion is pointless, inefficient and
wasteful.
It treats people as if all were vulnerable, when only some are.
Instead of spending several times the cost of the NHS on paying
young, healthy people who were at negligible risk not to work, we
should have been pouring resources into protecting the
vulnerable.
Interestingly, Farrar accepts that lockdowns only push
infections and associated deaths into a future period after they
are lifted.
He also appears to accept it would have been intolerable to lock
down the whole population until a vaccine was developed and
everyone had received it, which would have taken at least 18 months
and possibly never happen.
His preferred course seems to be a series of lockdowns starting
each time that we look like approaching the intensive care capacity
of the NHS. In other words, very much what we have had. However,
Farrar has wagged his finger every time that restriction has been
lifted.
In theory, we can switch lockdown on and off like a
malfunctioning internet router, but in practice it seems that the
time is never ripe. We only have to look around us to see that
lockdowns have failed to halt the virus, either here or anywhere
else in the world. The problem is in the concept, not the
application.
This brings me to the most remarkable feature of this book,
which is Farrar's brushing aside of the appalling collateral
consequences of lockdowns: other illnesses which go untreated such
as cancer or accelerate like dementia, impacts on education,
equality and public debt, not to speak of the worst recession in
300 years.
Farrar regards all this as a regrettable but unavoidable result
of desirable measures, and not as reasons for questioning whether
they were ever desirable in the first place.
In keeping with this blinkered approach, he refers to the
collateral disasters as consequences of Covid-19. They are not.
They are manmade consequences of the policy responses he has been
advocating.
I shall resist the temptation to apply to him the criticism he
gratuitously and unfairly applied to Messrs Sikora, Heneghan and
Gupta.
Entirely missing from Farrar's worldview is any conception of
the complexity of the moral judgments involved. Of course public
health matters, but it is not all that matters.
Interaction with other human beings is a fundamental human need.
Criminalising it is a sustained assault on our humanity. Doing so
without assessing the wider consequences is irresponsible
folly.
Sir Jeremy Farrar adopts the current habit of using
'libertarian' as a word of abuse.
But I am proud to be a libertarian. Personal autonomy is a basic
condition of human happiness and creativity. I am a libertarian
because the opposite of liberty is despotism.
INCOME STATEMENT for the 52 weeks ended 25 July 2021
J D Wetherspoon plc, company number:
1709784
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
25 July 25 July 25 July 26 July 26 July 26 July
2021 2021 2021 2020 2020 2020
Before Exceptional After Before Exceptional After
exceptional items exceptional exceptional items exceptional
items (note items items (note items
4) 4)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Revenue 1 772,555 - 772,555 1,262,048 - 1,262,048
Other operating income - 15,541 15,541 - 15,890 15,890
Operating costs (872,913) (24,482) (897,395) (1,245,084) (29,091) (1,274,175)
------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating (loss)/profit 2 (100,358) (8,941) (109,299) 16,964 (13,201) 3,763
Property (losses)/gains 3 (123) (5,839) (5,962) 484 (47,476) (46,992)
Finance income 6 595 - 595 612 - 612
Finance costs 6 (67,280) (12,690) (79,970) (62,747) - (62,747)
------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Loss before tax (167,166) (27,470) (194,636) (44,687) (60,677) (105,364)
Income tax credit 7 20,695 (7,114) 13,581 6,170 1,633 7,803
------------ ------------ ------------ ------------ ------------ ------------
Loss for the period (146,471) (34,584) (181,055) (38,517) (59,044) (97,561)
------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Loss per ordinary
share (p)
- Basic 8 (119.2) (28.2) (147.4) (35.5) (54.4) (89.9)
- Diluted 8 (119.2) (28.2) (147.4) (35.5) (54.4) (89.9)
------------------------ ------------ ------------ ------------ ------------ ------------ ------------
STATEMENT OF COMPREHENSIVE INCOME for the 52 weeks ended 25 July
2021
Notes 52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
---------------------------------------------------- ------ ---------- ----------
Items which will be reclassified subsequently
to profit or loss:
Interest-rate swaps: gain/(loss) taken to
other comprehensive income 44,551 (33,122)
Interest-rate swaps: gain/(loss) reclassification 11,707 -
to the income statement
Tax on items taken directly to other comprehensive
income 7 (5,084) 7,275
Currency translation differences (3,510) 1,293
---------------------------------------------------- ------ ---------- ----------
Net (loss)/gain recognised directly in other
comprehensive income 47,664 (24,554)
Loss for the period (181,055) (97,561)
---------------------------------------------------- ------ ---------- ----------
Total comprehensive loss for the period (133,391) (122,115)
---------------------------------------------------- ------ ---------- ----------
CASH FLOW STATEMENT for the 52 weeks ended 25 July 2021
J D Wetherspoon plc, company
number: 1709784
Notes Free cash Free cash
flow flow
52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended
25 July 25 July 26 July 26 July
2021 2021 2020 2020
GBP000 GBP000 GBP000 GBP000
----------------------------------- ------ ---------- ---------- ---------- ----------
Cash flows from operating
activities
Cash generated from operations 9 25,208 25,208 75,665 75,665
Interest received 187 187 59 59
Interest paid (48,428) (48,428) (29,914) (29,914)
Corporation tax paid 7,673 7,673 (10,971) (10,971)
Lease interest (19,942) (19,942) (18,080) (18,080)
---------- ----------
Net cash flow from operating
activities (35,302) (35,302) 16,759 16,759
----------------------------------- ------ ---------- ---------- ---------- ----------
Cash flows from investing
activities
Reinvestment in pubs (19,692) (19,692) (43,370) (43,370)
Reinvestment in business
and IT projects (2,620) (2,620) (926) (926)
Investment in new pubs and
pub extensions (21,131) - (50,408) -
Freehold reversions and
investment properties (16,858) - (98,467) -
Proceeds of sale of property,
plant and equipment 2,575 - 4,810 -
---------- ----------
Net cash flow from investing
activities (57,726) (22,312) (188,361) (44,296)
----------------------------------- ------ ---------- ---------- ---------- ----------
Cash flows from financing
activities
Equity dividends paid 11 - - (8,371) -
Purchase of own shares for - - (6,456) -
cancellation
Purchase of own shares for
share-based payments (7,684) (7,684) (11,125) (11,125)
Loan issue cost 10 (434) (434) (1,323) (1,323)
Advances under private placement 10 - - 98,000 -
(Repayment)/advances under
bank loans 10 (195,000) - 100,000 -
Advances under CLBILS 10 100,033 - - -
Advances under asset-financing 10 - - 16,152 -
Lease principal payments (17,552) (17,552) (18,867) (18,867)
Issue of share capital 91,523 - 137,995 -
Asset-financing principal
payments 10 (6,901) - (2,902) -
----------------------------------- ------ ---------- ---------- ---------- ----------
Net cash flow from financing
activities (36,015) (25,670) 303,103 (31,315)
----------------------------------- ------ ---------- ---------- ---------- ----------
Net change in cash and cash
equivalents 10 (129,043) 131,501
----------------------------------- ------ ---------- ---------- ---------- ----------
Opening cash and cash equivalents 174,451 42,950
Closing cash and cash equivalents 45,408 174,451
----------------------------------- ------ ----------
Free cash flow 8 (83,284) (58,852)
----------------------------------- ------ ---------- ---------- ---------- ----------
Free cash flow per ordinary
share 8 (67.8)p (54.2)p
Free cash flow is a measure not required by accounting
standards; a definition is provided in the accounting policies.
BALANCE SHEET as at 25 July 2021
J D Wetherspoon plc, company number:
1709784
Notes 25 July 26 July
2021 2020
Restated
GBP000 GBP000
-------------------------------------- ------ ------------ ------------
Assets
Non-current assets
Property, plant and equipment 13 1,423,826 1,442,778
Intangible assets 12 5,358 8,895
Investment property 14 10,533 11,527
Right-of-use assets 468,538 532,584
Deferred tax assets 7 - -
Lease assets 9,890 11,115
-------------------------------------- ------
Total non-current assets 1,918,145 2,006,899
-------------------------------------- ------ ------------ ------------
Current assets
Lease assets 1,638 1,736
Inventories 26,853 23,095
Receivables 16,427 32,176
Current income tax receivables 1,187 10,313
Cash and cash equivalents 45,408 174,451
Total current assets 91,513 241,771
------------
Total assets 2,009,658 2,248,670
-------------------------------------- ------ ------------ ------------
Current liabilities
Borrowings (7,610) (7,610)
Trade and other payables (259,791) (255,085)
Provisions (3,004) (3,038)
Lease liabilities (65,219) (65,343)
Total current liabilities (335,624) (331,076)
-------------------------------------- ------ ------------ ------------
Non-current liabilities
Borrowings (883,272) (983,828)
Derivative financial instruments (37,643) (82,194)
Deferred tax liabilities 7 (16,546) (26,521)
Lease liabilities (458,596) (507,803)
Total non-current liabilities (1,396,057) (1,600,346)
-------------------------------------- ------ ------------ ------------
Total liabilities (1,731,681) (1,931,422)
-------------------------------------- ------ ------------
Net assets 277,977 317,248
-------------------------------------- ------ ------------ ------------
Shareholders' equity
Share capital 2,575 2,408
Share premium account 143,294 143,294
Capital redemption reserve 2,337 2,337
Other reserves 234,579 141,002
Hedging reserve (15,403) (66,577)
Currency translation reserve 1,851 7,089
Retained earnings (91,256) 87,695
-------------------------------------- ------ ------------
Total shareholders' equity 277,977 317,248
-------------------------------------- ------ ------------ ------------
STATEMENT OF CHANGES IN EQUITY
J D Wetherspoon plc, company number:
1709784
Notes Share Share Capital Other Hedging Currency Retained Total
premium
capital account redemption Reserves reserve translation earnings
reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
At 28 July 2019 2,102 143,294 2,329 - (40,730) 5,370 204,447 316,812
Total
comprehensive
income - - - - (25,847) 1,719 (97,987) (122,115)
Loss for the
period - - - - - - (97,561) (97,561)
Interest-rate
swaps:
cash flow hedges - - - - (33,122) - - (33,122)
Tax on items taken
directly to
comprehensive
income 7 - - - - 7,275 - - 7,275
Currency
translation
differences - - - - - 1,719 (426) 1,293
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
Issued share
capital
restated 314 137,681 - - - - - 137,995
Purchase of own
shares
for cancellation (8) - 8 - - - (6,456) (6,456)
Share-based
payment
charges - - - - - - 10,705 10,705
Tax on share-based
payment 7 - - - - - - (197) (197)
Purchase of own
shares
for share-based
payments - - - - - - (11,125) (11,125)
Dividends 11 - - - - - - (8,371) (8,371)
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
As at 26 July 2020
as previously
reported 2,408 280,975 2,337 - (66,577) 7,089 91,016 317,248
Effect of
restatements - (137,681) - 141,002 - - (3,321) -
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
At 26 July 2020
restated 2,408 143,294 2,337 141,002 (66,577) 7,089 87,695 317,248
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
Total
comprehensive
income - - - - 51,174 (5,238) (179,327) (133,391)
----------
Loss for the
period - - - - - - (181,055) (181,055)
Interest-rate
swaps:
cash flow hedges - - - - 44,551 - - 44,551
Interest-rate
swaps:
Interest-rate
swaps:
amount
reclassified
to the income
statement - - - - 11,707 - - 11,707
Tax on items taken
directly to
comprehensive
income 7 - - - - (5,084) - - (5,084)
Currency
translation
differences - - - - - (5,238) 1,728 (3,510)
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
Issued share
capital
(net of expenses) 167 - - 93,577 - - (2,221) 91,523
Share-based
payment
charges - - - - - - 10,267 10,267
Tax on share-based
payment - - - - - - 16 16
Purchase of own
shares
for share-based
payments - - - - - - (7,684) (7,684)
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
At 25 July 2021 2,575 143,294 2,337 234,579 (15,403) 1,851 (91,256) 277,977
------------------- ------ -------- ---------- ----------- --------- --------- ------------ ---------- ----------
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 25 July 2021, the company had distributable reserves of
GBP129.8m.
On 20 January 2021 the company raised gross proceeds of GBP93.7m
via a share placement. The placing shares were issued for non-cash
consideration by way of a 'cash box' structure, involving a newly
incorporated Jersey subsidiary of the company ('JerseyCo'). This
structure involved the issue of ordinary and preference shares by
JerseyCo to the investment bank advising the company in respect of
the placement. These preference and ordinary shares were
subsequently acquired by the company and the preference shares
redeemed by JerseyCo. The acquisition by the company of the
ordinary shares in JerseyCo held by the investment bank resulted in
the company securing over 90% of the equity share capital of
JerseyCo. The company was able therefore, to rely on section 612 of
the Companies Act 2006, this provides relief from the requirements
under Section 610 of the Companies Act 2006 to create a share
premium account. Therefore, no share premium was recorded in
relation to the placing shares. The premium over the nominal value
of the placing shares was credited to an 'other reserve'. This
other reserve is determined to be distributable for the purposes of
the Companies Act 2006.
Within the period the company reclassified the net proceeds from
the share placement completed on 30 April 2020 which had been
structured in exactly the same way as the more recent placement.
This reclassification was to move these net proceeds from the share
premium to other reserves. The financial statements for last
financial year have been restated as a result.
NOTES TO THE FINANCIAL STATEMENTS
1. Revenue
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
---------------------------- --------- ----------
Bar 440,119 761,065
Food 283,192 452,150
Eat out to help out scheme 23,248 -
Slot/fruit machines 17,059 35,931
Hotel 8,592 11,780
Other 345 1,122
---------------------------- --------- ----------
772,555 1,262,048
---------------------------- --------- ----------
2. Operating (loss)/profit - analysis of costs by nature
This is stated after charging/(crediting): 52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
----------------------------------------------- ---------- ---------------------
Variable concession rental payments 2,801 4,609
Short term leases 784 204
Cancelled principal payments (10,933) (6,127)
Repairs and maintenance 64,020 75,861
Net rent receivable (1,873) (1,484)
Share-based payments (note 5) 10,267 10,705
Depreciation of property, plant and equipment
(note 13) 73,193 75,386
Amortisation of intangible assets (note
12) 3,151 3,806
Depreciation of investment properties (note
14) 44 79
Depreciation of right-of-use assets 44,532 49,059
----------------------------------------------- ---------- ---------------------
Included in cost of sales is GBP292.7m (2020: GBP449.2m)
relating to cost of inventory recognised as expense.
Analysis of continuing operations 52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
----------------------------------------------- ---------- ---------------------
Revenue 772,555 1,262,048
Cost of sales (844,574) (1,217,521)
----------------------------------------------- ---------- ---------------------
Gross profit (72,019) 44,527
Administration costs (37,280) (40,764)
----------------------------------------------- ----------
Operating (loss)/profit after exceptional
items (109,299) 3,763
----------------------------------------------- ---------- ---------------------
Auditor's remuneration 52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
----------------------------------------------- ---------- ---------------------
Fees payable for the audit of the financial
statements
- Standard audit fees 303 171
- Additional audit work (for previous year 100 -
audit)
Fees payable for other services:
- Audit related services 33 27
Total auditor's fees 436 198
----------------------------------------------- ---------- ---------------------
3. Property gains and losses
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
25 July 25 July 25 July 26 July 26 July 26 July
2021 2021 2021 2020 2020 2020
Before Exceptional After Before Exceptional After
exceptional items exceptional exceptional items exceptional
items (note items items (note items
4) 4)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Disposals
Fixed assets 1,548 1,592 3,140 1,002 2,769 3,771
Leases (2,200) - (2,200) (1,125) - (1,125)
Additional costs of
disposal 775 115 890 258 684 942
------------------------------ ------------ ------------ ------------ ------------
123 1,707 1,830 135 3,453 3,588
Impairments
Property, plant and
equipment (note 13) - 1,999 1,999 - 28,602 28,602
Intangible assets (note
12) - - - - 10,699 10,699
Right-of-use assets - 2,133 2,133 - 4,722 4,722
------------------------------ ------------ ------------ ------------
- 4,132 4,132 - 44,023 44,023
Other
Other property gains - - - (619) - (619)
------------------------------ ------------ ------------ ------------ ------------
- - - (619) - (619)
Total property losses/(gains) 123 5,839 5,962 (484) 47,476 46,992
------------------------------ ------------ ------------ ------------ ------------
Non-exceptional property losses, excluding disposal of lease
assets, were GBP2,323,000 in the period (2020: GBP1,260,000).
4. Exceptional items
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
--------------------------------------------- --------- ---------
Exceptional operating items
Gaming machine settlement - (15,890)
Local government support grants (11,123) -
Duty drawback (4,418) -
Exceptional operating income (15,541) (15,890)
---------------------------------------------- --------- ---------
Equipment 3,753 6,167
Stock losses 4,158 5,862
Staff costs 15,692 17,062
Other 879 -
Exceptional operating costs 24,482 29,091
---------------------------------------------- --------- ---------
Total exceptional operating loss 8,941 13,201
---------------------------------------------- --------- ---------
Exceptional property losses
Disposal programme
Loss on disposal of pubs 1,707 3,453
Impairment of property plant and equipment - 4,698
---------------------------------------------- --------- ---------
1,707 8,151
Other property losses
Impairment of property, plant and equipment 1,999 23,904
Impairment of intangible assets - 10,699
Impairment of right-of-use assets 2,133 4,722
---------------------------------------------- --------- ---------
4,132 39,325
Total exceptional property losses 5,839 47,476
---------------------------------------------- --------- ---------
Other exceptional items
Exceptional finance costs 12,690 -
--------------------------------------------- --------- ---------
12,690 -
Exceptional tax
Exceptional tax Items 10,385 4,252
Tax effect on exceptional items (3,271) (5,885)
----------------------------------------------
7,114 (1,633)
Total exceptional items 34,584 59,044
---------------------------------------------- --------- ---------
Stock and duty drawback
A provision of GBP4,158,000 (2020: GBP5,862,000) was made for
perished stock, as a result of the closure during the financial
period 2020/21. A credit of GBP4,418,000 for duty drawback were
received for perished stock during the closure periods.
Exceptional equipment
The company has recognised GBP3,753,000 (2020: GBP6,167,000) for
personal protective equipment and hygiene products relating to the
Covid-19 pandemic.
Local government support grants
The company has recognised GBP11,123,000 income of local
government support grants in the UK and the Republic of Ireland
relating to the Covid-19 pandemic. These are recognised on
receipt.
4. Exceptional items (continued)
Staff costs
The company has recognised an exceptional charge of
GBP15,692,000, which included GBP9,513,000 of payments made by the
company to staff over and above the furlough grants received and
associated taxes, and GBP6,179,000 of redundancy and restructuring
payments.
Disposal programme
The company has offered several of its sites for sale. At the
end of the period, one further site (2020: eight) sites had been
sold.
In the table on the previous page, the costs classified under
the 'exceptional property losses - disposal programme' relate to
the loss on disposal of this sold site.
Other property losses
Property impairment relates to pubs that are unlikely to
generate sufficient cash flows in the future to support their
carrying value. In the year, a total impairment charge of
GBP4,132,000 (2020: GBP39,325,000) was incurred in respect of the
impairment of assets as required under IAS 36. There was GBPNil
reversal of impairments recognised in the year (2020: GBPNil).
Exceptional finance costs
The company has recognised an exceptional charge of
GBP12,690,000, GBP11,707,000 of which relates to a reclassification
due to hedge accounting. The remaining GBP983,000 is related to
covenant-waiver fees.
Taxation
The exceptional tax charge of GBP7,114,000 relates to the
creation of a deferred tax asset in respect of tax losses
arising
from exceptional expenditure (GBP2,546,000 credit), a previous
year adjustment to current and deferred tax in relation to items
recognised as exceptional in a prior period (GBP725,000 credit) and
the impact of the change in UK tax rate on the deferred tax balance
(GBP10,385,000 charge).
5. Employee benefits expenses
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
------------------------------------------ ---------- ----------
Wages and salaries 520,339 565,032
Employee support grants (208,986) (131,539)
Social security costs 23,380 31,710
Other pension costs 7,877 8,308
Share-based payments 10,267 10,705
Redundancy and restructuring costs (note 6,179 -
4)
359,056 484,216
------------------------------------------ ---------- ----------
Directors' emoluments 2021 2020
GBP000 GBP000
------------------------------------------------- ------- -------
Aggregate emoluments 1,709 1,547
Aggregate amount receivable under long-term
incentive schemes 181 173
Company contributions to money purchase pension
scheme 178 165
2,068 1,885
------------------------------------------------- ------- -------
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.
5. Employee benefits expenses (continued)
2021 2020
Number Number
--------------------------- ------- -------
Full-time equivalents
Managerial/administration 4,586 4,696
Hourly paid staff 18,736 20,952
---------------------------
23,322 25,648
--------------------------- ------- -------
2021 2020
Number Number
--------------------------- ------- -------
Total employees
Managerial/administration 4,703 4,792
Hourly paid staff 34,322 38,427
---------------------------
39,025 43,219
--------------------------- ------- -------
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 52 weeks
ended ended
25 July 26 July
2021 2020
---------------------------------------------- --------- ---------
Shares awarded during the year (shares) 852,261 568,821
Average price of shares awarded (pence) 957 1,542
Market value of shares vested during the
year (GBP000) 9,169 14,097
Total obligation of the share based payments
scheme (GBP000) 14,608 14,999
---------------------------------------------- --------- ---------
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 GBPNil 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 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
----------------------------------------------- --------- ---------
Finance costs
Interest payable on bank loans and overdrafts 21,903 21,292
Amortisation of bank loan issue costs (note
10) 1,746 1,541
Interest payable on swaps 18,228 14,522
Interest payable on asset-financing 664 503
Interest payable on private placement 4,907 2,909
Finance costs excluding lease interest 47,448 40,767
Interest payable on leases 19,832 21,980
Total finance costs 67,280 62,747
Bank interest receivable (188) (161)
Lease interest receivable (407) (451)
Total finance income (595) (612)
Net finance costs before exceptional items 66,685 62,135
----------------------------------------------- --------- ---------
Exceptional finance costs (note 4) 12,690 -
Net finance costs after exceptional items 79,375 62,135
----------------------------------------------- --------- ---------
7. Income tax expense
(a) Tax on loss on ordinary activities
The standard rate of corporation tax in the UK is 19.0%. The
company's profits for the accounting period are taxed
at a rate of 19.0% (2020: 19.0%).
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
25 July 25 July 25 July 26 July 26 July 26 July
2021 2021 2021 2020 2020 2020
Before Exceptional After Before Exceptional After
exceptional items exceptional exceptional items exceptional
items (note items items (note items
4) 4)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Taken through income
statement
Current income tax:
Current income tax charge (380) - (380) (2,827) (7,502) (10,329)
Previous period adjustment - 1,836 1,836 227 - 227
------------------------------ ------------ ------------ ------------
Total current income tax (380) 1,836 1,456 (2,600) (7,502) (10,102)
Deferred tax:
Origination and reversal
of temporary differences (19,158) (2,546) (21,704) (3,660) 1,617 (2,403)
Prior year deferred tax
(credit)/charge (1,157) (2,561) (3,718) 90 - 90
Impact of change in UK
tax rate - 10,385 10,385 - 4,252 4,252
------------ ------------ ------------
Total deferred tax (20,315) 5,278 (15,037) (3,570) 5,869 2,299
Tax charge/(credit) (20,695) 7,114 (13,581) (6,170) (1,633) (7,803)
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended Ended
25 July 25 July 25 July 26 July 26 July 26 July
2021 2021 2021 2020 2020 2020
Before Exceptional After Before Exceptional After
exceptional items exceptional exceptional items Exceptional
items (note items items (note Items
4) 4)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Taken through equity
Current tax 6 - 6 (226) - (226)
Deferred tax (22) - (22) 423 - 423
------------------------------ ------------
Tax (credit)/charge (16) - (16) 197 - 197
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
52 weeks 52 weeks 52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
25 July 25 July 25 July 26 July 26 July 26 July
2021 2021 2021 2020 2020 2020
Before Exceptional After Before Exceptional After
exceptional items exceptional exceptional items exceptional
items (note items items (note items
4) 4)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
Taken through comprehensive
income
Deferred tax charge on
swaps 6,241 - 6,241 (5,720) - (5,720)
Impact of change in UK
tax rate (1,157) - (1,157) (1,555) - (1,555)
------------
Tax charge/(credit) 5,084 - 5,084 (7,275) - (7,275)
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
7. Income tax expense (continued)
(b) Reconciliation of the total tax charge
The taxation charge for the 52 weeks ended 25 July 2021 is based
on the pre-exceptional loss before tax of GBP167.2m and the
estimated effective tax rate before exceptional items for the 52
weeks ended 25 July 2021 of 12.4% (2020: 13.8%).
This comprises a pre-exceptional current tax rate of 0.2% (2020:
5.8%) and a pre-exceptional deferred tax charge of 12.2%
(2020: 8.0% charge).
The UK standard weighted average tax rate for the period is
19.0% (2020: 19.0%). The current tax rate is lower than the UK
standard weighted average tax rate, owing to tax losses in the
period.
52 weeks 52 weeks 52 weeks 52 weeks
ended ended ended ended
25 July 25 July 26 July 26 July
2021 2021 2020 2020
Before After Before After
exceptional exceptional exceptional exceptional
items items items items
GBP000 GBP000 GBP000 GBP000
------------------------------------------ ------------ ------------ ------------ ------------
(Loss) before income tax (167,166) (194,636) (44,687) (105,364)
Loss multiplied by the UK standard
rate of (31,762) (36,981) (8,491) (20,019)
corporation tax of 19.0% (2020:
19.0%)
Abortive acquisition costs and disposals - - 6 6
Expenditure not allowable 1,791 4,680 86 216
Other allowable deductions (18) (18) (35) (35)
Non-qualifying depreciation 7,029 7,029 83 5,122
Capital gains - effect of reliefs 728 728 603 603
Share options and SIPs 955 955 622 622
Deferred tax on balance-sheet-only
items - - (67) (67)
Effect of different tax rates and
unrecognised losses in overseas
companies 1,740 1,524 706 1,180
Adjust current year deferred tax
movement to average of 19% to 25% - 10,385 - 4,252
Previous year adjustment - current
tax - 1,836 227 227
Previous year adjustment - deferred
tax (1,158) (3,719) 90 90
------------------------------------------ ------------ ------------ ------------ ------------
Total tax expense reported in the
income statement (20,695) (13,581) (6,170) (7,803)
------------------------------------------ ------------ ------------ ------------ ------------
7. Income tax expense (continued)
(c) Deferred tax
The deferred tax in the balance sheet is as follows:
The main rate of corporation tax is currently 19% but this will
increase to 25% from 1 April 2023. The rate increase has been
substantively enacted and therefore the deferred tax balances have
been recognised at the rate they are expected to reverse.
Deferred tax liabilities
Accelerated Other temporary Total
tax depreciation differences
GBP000 GBP000 GBP000
---------------------------------- ------------------ ---------------- --------
At 26 July 2020 36,217 6,739 42,956
Previous year movement posted
to the income statement (1,177) (2,542) (3,719)
Movement during year posted
to the income statement 3,411 11 3,422
Impact of tax rate change posted
to the income statement 12,142 1,328 13,470
At 25 July 2021 50,593 5,536 56,129
------------------------------------- ------------------ ---------------- --------
Deferred tax assets
Share Tax losses Interest-rate Total
based and interest swaps
payments capacity
carried
forward
GBP000 GBP000 GBP000 GBP000
--------------------------------- ---------- -------------- -------------- --------
At 26 July 2020 818 - 15,617 16,435
Previous year movement posted
to the income statement - - - -
Movement during year posted
to the income statement (33) 27,383 (2,224) 25,126
Movement during year posted
to comprehensive income - - (6,241) (6,241)
Movement during year posted
to equity 22 - - 22
Impact of change in tax rate
posted to income statement - 1,982 1,103 3,085
Impact of change in tax rate
posted to comprehensive income - - 1,157 1,157
At 25 July 2021 807 29,365 9,412 39,584
------------------------------------ ---------- -------------- -------------- --------
The company has recognised deferred tax assets of GBP39.6m
(2020: GBP16.4m), which are expected to offset against future
profits. This includes a deferred tax asset of GBP29.4m (2020:
GBPNil) in respect of UK tax losses and current-year interest
restrictions capable of reactivation in future periods. This is on
the basis that it is probable that profits will arise in the
foreseeable future, enabling the assets to be utilised.
Deferred tax assets and liabilities have been offset as
follows:
2021 Restated
2020
GBP000 GBP000
----------------------------------------- --------- ---------
Deferred tax liabilities 56,129 42,956
Offset against deferred tax assets (30,172) (818)
Offset against deferred tax assets
(restated) (9,412) (15,617)
------------------------------------------
Deferred tax liabilities 16,546 26,521
-------------------------------------------- --------- ---------
Deferred tax assets 39,584 16,435
Offset against deferred tax liabilities (30,172) (818)
Offset against deferred tax liabilities
(restated) (9,412) (15,617)
------------------------------------------
Deferred tax asset - -
-------------------------------------------- --------- ---------
As at 25 July 2021, the company had a potential deferred tax
asset of GBP9.1m (2020: GBP4.9m) relating to capital losses and tax
losses in the Republic of Ireland. A deferred tax asset has not
been recognised, as there is insufficient certainty of
recovery.
On 3 March 2021, the chancellor confirmed that the UK rate of
corporation tax will increase to 25% from 1 April 2023. Deferred
tax has been calculated at the rate of taxation for the peiod that
the deferred tax items are expected reverse.
In accordance with IAS 12, the deferred tax asset and liability
must be offset where there is a right of offset, this has been
applied in the period and the prior year balance restated. This
results in a reduction in the prior year deferred tax asset of
GBP15,617,000 and the corresponding reduction in the deferred tax
liability.
8. Earnings and free cash flow per share
(a) Weighted average number of shares
Earnings per share are based on the weighted average number of
shares in issue of 124,668,915 (2020: 108,550,647), including those
held in trust in respect of employee share schemes. Earnings per
share, calculated on this basis, are usually referred to as
'diluted', since all of the shares in issue are included.
Accounting standards refer to 'basic earnings' per share - these
exclude those shares held in trust in respect of
employee share schemes.
During a period where a company makes a loss, accounting
standards require that 'dilutive' shares (for the company,
those
held in trust in respect of employee share schemes) not be
included in the earning per share calculation, because they
will
reduce the reported loss per share; consequently, all per-share
measures in the current period are based on the number of
shares in issue less shares held in trust of 122,827,248 (2020:
106,554,289).
From financial year 2021, the weighted average number of shares
held in trust for employee share schemes has been adjusted to
exclude those shares which are expected to vest, yet remain in
trust.
Weighted average number of shares
Weighted average number of shares 52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
------------------------------------------- ------------ ------------
Shares in issue (used for diluted EPS) 124,668,915 108,550,647
Shares held in trust (1,841,667) (1,996,358)
Shares in issue less shares held in trust
(used for basic EPS) 122,827,248 106,554,289
------------------------------------------- ------------ ------------
(b) Earnings per share
52 weeks ended 25 July 2021 Loss Basic EPS Diluted
EPS
GBP000 pence pence
------------------------------------------- ---------- ---------- --------
Earnings (loss after tax) (181,055) (147.4) (147.4)
Exclude effect of exceptional items
after tax 34,584 28.2 28.2
------------------------------------------- ----------
Earnings before exceptional items (146,471) (119.2) (119.2)
Exclude effect of property gains/(losses) 123 0.1 0.1
Underlying earnings before exceptional
items (146,348) (119.1) (119.1)
------------------------------------------- ---------- ---------- --------
52 weeks ended 25 July 2021 - pre-IFRS16 Loss Basic EPS Diluted
unaudited EPS
GBP000 pence pence
------------------------------------------- ---------- ---------- --------
Earnings (loss after tax) (170,111) (138.5) (138.5)
Exclude effect of exceptional items
after tax 34,584 28.2 28.2
------------------------------------------- ----------
Earnings before exceptional items (135,527) (110.3) (110.3)
Exclude effect of property gains/(losses) 2,323 1.9 1.9
Underlying earnings before exceptional
items (133,204) (108.4) (108.4)
------------------------------------------- ---------- ---------- --------
52 weeks ended 26 July 2020 Loss Basic EPS Diluted
EPS
GBP000 pence pence
------------------------------------------- --------- ---------- --------
Earnings (loss after tax) (97,561) (89.9) (89.9)
Exclude effect of exceptional items
after tax 59,044 54.4 54.4
------------------------------------------- ---------
Earnings before exceptional items (38,517) (35.5) (35.5)
Exclude effect of property (losses)/gains (484) (0.4) (0.4)
Underlying earnings before exceptional
items (39,001) (35.9) (35.9)
------------------------------------------- --------- ---------- --------
8. Earnings and free cash flow per share (continued)
(c) Free cash flow per share
The calculation of free cash flow per share is based on the net
cash generated by business activities and available for investment
in new pub developments and extensions to current pubs, after
funding interest, corporation tax, lease principal payments, loan
issues costs, all other reinvestment in pubs open at the start of
the period and the purchase of own shares under the employee Share
Incentive Plan ('free cash flow'). It is calculated before taking
account of proceeds from property disposals, inflows and outflows
of financing from outside sources and dividend payments and is
based on the weighted average number of shares in issue, including
those held in trust in respect of the employee share scheme.
Free Basic free Diluted
cash free
flow cash flow cash flow
per share per share
GBP000 pence pence
----------------------------- --------- ----------- ----------
52 weeks ended 25 July 2021 (83,284) (67.8) (67.8)
52 weeks ended 26 July 2020 (58,852) (54.2) (54.2)
----------------------------- --------- ----------- ----------
(d) Owners' earnings per share
Owners' earnings measures' those earnings attributable to
shareholders from current activities adjusted for significant
non-cash items and one-off items. Owners' earnings are calculated
as pre-IFRS16 profit before tax, exceptional items, depreciation
and
amortisation and property gains and losses less reinvestment in
current properties and cash tax. Cash tax is defined as the current
year's current tax charge. The weighted average number of shares in
issue used in this metric is disclosed above (see note 8a).
52 weeks ended 25 July 2021 - unaudited Owners' Basic Diluted
Earnings Owners' EPS Owners'
EPS
GBP000 pence pence
----------------------------------------- ---------- ------------ --------
Loss before tax and exceptional
items (Pre-IFRS16 income statement) (154,676) (125.9) (125.9)
Exclude depreciation and amortisation 76,388 62.2 62.2
Less reinvestment in current properties (19,962) (16.3) (16.3)
Exclude property gains and losses 2,323 1.9 1.9
Less cash tax (note 7a) 380 0.3 0.3
Owners' earnings (95,547) (77.8) (77.8)
----------------------------------------- ---------- ------------ --------
52 weeks ended 26 July 2020 - unaudited Owners' Basic Diluted
earnings owners' EPS owners'
EPS
GBP000 pence pence
----------------------------------------- ---------- ------------ ----------
Loss before tax and exceptional
items (Pre-IFRS16 income statement) (34,095) (32.0) (31.4)
Exclude depreciation and amortisation 79,271 74.4 73.0
Less reinvestment in existing pubs (32,062) (29.5) (30.1)
Exclude property gains and losses 641 0.6 0.6
Less cash tax 2,827 2.7 2.7
Owners' earnings 16,582 16.1 14.8
----------------------------------------- ---------- ------------ ----------
8. Earnings and free cash flow per share (continued)
Analysis of additions by type 52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
----------------------------------------------- --------- ---------
Reinvestment in existing pubs 19,962 32,062
Investment in new pubs and pub extensions 24,051 41,047
Lease premium 1,800 -
Freehold reversions and investment properties 16,858 98,463
62,671 171,572
----------------------------------------------- --------- ---------
Analysis of additions by category 52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
----------------------------------------------- --------- ---------
Property, plant and equipment (note
13) 58,139 164,450
Intangible assets (note 12) 4 1,047
Investment properties (note 14) 4,528 6,075
62,671 171,572
----------------------------------------------- --------- ---------
These additions tables have been inserted to reconcile the total
fixed asset additions during the period to the reinvestment in
existing pubs metric used in the owners' earnings calculation.
9. Cash used in/generated from operations
Unaudited* 52 weeks 52 weeks
52 weeks
ended ended ended
25 July 25 July 26 July
2021 2021 2020
GBP000 GBP000 GBP000
----------------------------------------------- ----------- ---------- ---------
Loss for the period (170,111) (181,055) (97,561)
Adjusted for:
Tax (note 7) (12,035) (13,581) (7,803)
Share-based charges (note 2) 10,267 10,267 10,705
Loss on disposal of property, plant and
equipment (note 3) 3,140 3,140 3,771
Disposal of capitalised leases (note 3) - (2,200) (1,125)
Net impairment charge (note 3) 2,000 4,132 44,023
Interest receivable (note 6) (188) (188) (161)
Interest payable (note 6) 45,702 45,702 39,226
Lease interest receivable (note 6) - (407) (451)
Lease interest payable (note 6) - 19,832 21,980
Exceptional finance costs (note 6) 12,690 12,690 -
Amortisation of bank loan issue costs
(note 6) 1,746 1,746 1,541
Depreciation of property, plant and equipment
(note 13) 73,193 73,193 75,386
Amortisation of intangible assets (note
12) 3,151 3,151 3,806
Depreciation on investment properties
(note 14) 44 44 79
Aborted properties costs 628 628 33
Cancelled principal payments - (10,993) (6,127)
Amortisation of right-of-use assets - 44,532 49,059
----------------------------------------------- ----------- ---------- ---------
(29,773) 10,633 136,381
Change in inventories (3,758) (3,758) 622
Change in receivables 1,910 15,748 (17,052)
Change in payables 20,081 2,585 (44,286)
Cash flow from operating activities (11,540) 25,208 75,665
----------------------------------------------- ----------- ---------- ---------
*This column shows the cash generated from operations as it
would have been reported, before the introduction of IFRS16.
10. Analysis of change in net debt
26 July Cash Other 25 July
2020 flows changes 2021
Restated
GBP000 GBP000 GBP000 GBP000
--------------------------------- ------------ ---------- --------- ------------
Borrowings
Cash and cash equivalents 174,451 (129,043) - 45,408
Asset-financing obligations
- due before one year (7,610) - - (7,610)
---------------------------------- ------------ ---------- --------- ------------
Current net borrowings 166,841 (129,043) - 37,798
Bank loans - due after one year (870,572) 95,401 (1,700) (776,871)
Asset-financing obligations
- due after one year (15,534) 6,901 - (8,633)
Private placement - due after
one year (97,722) - (46) (97,768)
---------------------------------- ------------ ---------- --------- ------------
Non-current net borrowings (983,828) 102,302 (1,746) (883,272)
Net debt (816,987) (26,741) (1,746) (845,474)
---------------------------------- ------------ ---------- --------- ------------
Derivatives
Interest-rate swaps liability
- due after one year (82,194) - 44,551 (37,643)
------------
Total derivatives (82,194) - 44,551 (37,643)
---------------------------------- ------------ ---------- --------- ------------
Net debt after derivatives (899,181) (26,741) 42,805 (883,117)
---------------------------------- ------------ ---------- --------- ------------
Leases
Lease assets - due before one
year 1,736 (1,323) 1,225 1,638
Lease assets - due after one
year 11,115 - (1,225) 9,890
Lease obligations - due before
one year (65,343) 18,875 (18,751) (65,219)
Lease obligations - due after
one year (507,803) - 49,207 (458,596)
Net lease liabilities (560,295) 17,552 30,456 (512,287)
---------------------------------- ------------ ---------- --------- ------------
Net debt after derivatives and
lease liabilities (1,459,476) (9,189) 73,261 (1,395,404)
---------------------------------- ------------ ---------- --------- ------------
The cash movement on bank loans is the addition of four loans
under the Coronavirus Large Business Interruption Scheme (CLBILS)
which total GBP100,033,332; this is offset by a loan repayment of
the revolving facility of GBP195,000,000. Both of these cash
movements are disclosed in the cash flow statement as advances
under CLBILS and (repayment)/advances under bank loans,
respectively. This cash movement on bank loans is also made up of a
cash payment of loan issue costs of GBP434,000, which is also
disclosed in the cash flow statement.
Management considered whether to account for the CLBILS loans as
government grants, as the rate of interest is lower than that
achieved on other facilities. However, in the absence of a reliable
estimate of a market rate of borrowing at the time, these have been
accounted for within borrowings.
The cash movement on asset-financing of GBP6,901,000 is
disclosed in the cash flow statement as asset-financing principal
payments.
Lease obligations represent long term payables and lease assets
represent long term receivables, and are therefore both 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 GBP1,746,000 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.
The non-cash movement in lease liabilities is analysed in the
table below.
10. Analysis of change in net debt (continued)
Non-cash movement in net lease liabilities 25 July
2021
GBP000
---------------------------------------------- ---------
Recognition of new leases (12,162)
Remeasurements of existing lease liabilities 15,602
Remeasurements of existing lease assets -
Disposal of leases 15,790
Cancelled principal payments 10,993
Exchange differences 233
Non-cash movement in net lease liabilities 30,456
---------------------------------------------- ---------
52 weeks ended 26 July 2020
28 July IFRS16 Cash Other 26 July
2019 2020
migration flows changes Restated
GBP000 GBP000 GBP000 GBP000 GBP000
Borrowings
Cash and cash equivalents 42,950 - 131,501 - 174,451
Asset-financing creditor - due before one year (3,287) - (13,250) 8,927 (7,610)
Current net borrowings 39,663 - 118,251 8,927 166,841
Bank loans - due after one year (770,076) - (98,998) (1,498) (870,572)
Asset-financing creditor - due after one year (6,607) - - (8,927) (15,534)
Private placement - due after one year - - (97,679) (43) (97,722)
Non-current net borrowings (776,683) - (196,677) (10,468) (983,828)
Net debt (737,020) - (78,426) (1,541) (816,987)
Derivatives
Interest-rate swaps asset - due after one year 321 - - (321) -
Interest-rate swaps liability - due after one year (49,393) - - (32,801) (82,194)
Total derivatives (49,072) - - (33,122) (82,194)
Net debt after derivatives (786,092) - (78,426) (34,663) (899,181)
Leases
Lease assets - due before one year - 1,583 (1,056) 1,209 1,736
Lease assets - due after one year - 11,853 - (738) 11,115
Lease obligations - due before one year - (61,252) 19,923 (24,014) (65,343)
Lease obligations - due after one year - (570,052) - 62,249 (507,803)
Net lease liabilities - (617,868) 18,867 38,706 (560,295)
Net debt after derivatives and lease liabilities (786,092) (617,868) (59,559) 4,043 (1,459,476)
10. Analysis of change in net debt (continued)
52 weeks ended 26 July 2020
26 July
Non-cash movement in net lease liabilities 2020
Restated
GBP000
Recognition of new leases (45,776)
Remeasurements of existing leases liabilities (7,207)
Remeasurements of existing leases assets 471
Disposal of lease 85,115
Cancelled principal payments 6,127
Exchange differences (24)
Non-cash movement in net lease liabilities 38,706
The table below calculates a ratio between net debt, being
borrowing less cash and cash equivalents, and earnings before
interest, tax, and depreciation (EBITDA). The numbers in this table
are all before the effect of IFRS16.
Unaudited
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
Loss before tax (income statement) (154,676) (34,095)
Interest 47,260 40,606
Depreciation and amortisation 76,474 79,639
Earnings before interest, tax and depreciation
(EBITDA) (30,942) 86,150
Net debt / EBITDA -27.32 9.48
11. Dividends paid and proposed
52 weeks 52 weeks
ended ended
25 July 26 July
2021 2020
GBP000 GBP000
Declared and during the year:
Dividends on ordinary shares:
- final for 2018/19: 8.0p (2017/18: 8.0p) - 8,371
- interim for 2019/20: 0.0p (2018/19: 4.0p) - -
- final for 2019/20: 0.0p (2018/19: 8.0p) - -
- 8,371
Proposed for approval by shareholders at the AGM:
- final for 2020/21: 0.0p (2019/20: 0.0p) - -
- -
Dividend per share - 8p
Dividend cover - -
Dividend cover is calculated as profit after tax and exceptional
items over dividend paid. Dividend cover has not been shown for
previous year and current year, as the company reported a loss in
both periods.
12. Intangible assets
Computer Assets Total
software under
and
development construction
GBP000 GBP000 GBP000
Cost:
At 28 July 2019 70,217 4,429 74,646
Additions 466 581 1,047
Transfers 4,206 (4,206) -
Disposals (41,472) - (41,472)
At 26 July 2020 33,417 804 34,221
Additions - 4 4
Transfers 804 (804) -
Disposals (1,474) - (1,474)
At 25 July 2021 32,747 4 32,751
Accumulated amortisation and
impairment:
At 28 July 2019 (51,576) - (51,576)
Provided during
the period (3,806) - (3,806)
Impairment loss (10,699) - (10,699)
Disposals 40,755 - 40,755
At 26 July 2020 (25,326) - (25,326)
Provided during
the period (3,151) - (3,151)
Exchange differences (1) - (1)
Disposals 1,085 - 1,085
At 25 July 2021 (27,393) - (27,393)
Net book amount at 25
July 2021 5,354 4 5,358
Net book amount
at 26 July 2020 8,091 804 8,895
Net book amount
at 28 July 2019 18,641 4,429 23,070
The majority of intangible assets relates to computer software
and software development. Examples include the development costs of
the SAP accounting and property-maintenance systems and bespoke J D
Wetherspoon apps.
13. Property, plant and equipment
Freehold Short- Equipment, Assets Total
and
long-leasehold leasehold fixtures under
property property and fittings construction
GBP000 GBP000 GBP000 GBP000 GBP000
Cost:
At 28 July 2019 1,229,172 327,159 656,261 69,051 2,281,643
Additions 97,419 2,464 24,608 39,959 164,450
Transfers 11,804 1,675 9,412 (22,891) -
Exchange differences 685 39 120 505 1,349
Disposals (6,012) (6,290) (5,669) - (17,971)
Reclassification 30,038 (30,038) - - -
At 26 July 2020 1,363,106 295,009 684,732 86,624 2,429,471
Additions 14,783 132 11,251 31,973 58,139
Transfers from investment
property 5,768 - - - 5,768
Transfers 41,023 4,164 8,385 (53,572) -
Exchange differences (1,357) (144) (426) (1,157) (3,084)
Disposals (2,623) (4,385) (3,631) - (10,639)
Reclassification 7,842 (7,842) - - -
At 25 July 2021 1,428,542 286,934 700,311 63,868 2,479,655
Accumulated depreciation and
impairment:
At 28 July 2019 (253,825) (176,452) (466,395) - (896,672)
Provided during the
period (19,675) (10,826) (44,885) - (75,386)
Exchange differences (47) (77) (162) - (286)
Impairment loss (17,631) (4,122) (6,849) - (28,602)
Disposals 2,051 6,298 5,904 - 14,253
Reclassification (18,170) 18,170 - - -
At 26 July 2020 (307,297) (167,009) (512,387) - (986,693)
Provided during the
period (20,281) (10,499) (42,413) - (73,193)
Transfers from investment
property (290) - - - (290)
Exchange differences 282 23 249 - 554
Impairment loss (1,631) (368) - - (1,999)
Disposals 874 2,405 2,513 - 5,792
Reclassification (4,090) 4,090 - - -
At 25 July 2021 (332,433) (171,358) (552,038) - (1,055,829)
Net book amount at
25 July 2021 1,096,109 115,576 148,273 63,868 1,423,826
Net book amount
at 26 July 2020 1,055,809 128,000 172,345 86,624 1,442,778
Net book amount
at 28 July 2019 975,347 150,707 189,866 69,051 1,384,971
Impairment of property, plant and equipment
In assessing whether a pub has been impaired, the book value of
the pub is compared with its anticipated future cash flows and fair
value. Assumptions are used about sales, costs and profit, using a
pre-tax discount rate for future years of 8.7% (2020: 8%).
If the value, based on the higher of future anticipated cash
flows and fair value, is lower than the book value, the
difference
is written off as property impairment.
As a result of this exercise, a net impairment loss of
GBP1,999,000 (2020: GBP28,602,000) was charged to property losses
in the income statement, as described in note 4. The assets
impaired in the year had a recoverable value of GBP4,974,000 at
year end.
14. Investment property
The company owns three (2020: three) freehold properties with
existing tenants - and these assets have been classified
as investment properties. During the year, the company developed
one of its investment properties into a pub.
The property has been transferred to property, plant and
equipment. During this year, the company has purchased an
additional investment property.
GBP000
Cost:
At 28 July 2019 5,767
Additions 6,075
At 26 July 2020 11,842
Additions 4,528
Transfer to property,
plant and equipment (5,768)
At 25 July 2021 10,602
Accumulated amortisation:
At 28 July 2019 (236)
Provided during
the period (79)
At 26 July 2020 (315)
Provided during
the period (44)
Transfer to property,
plant and equipment 290
At 25 July 2021 (69)
Net book amount at 25
July 2021 10,533
Net book amount
at 26 July 2020 11,527
Net book amount
at 28 July 2019 5,531
Rental income received in the period from investment properties
was GBP397,000 (2020: GBP 641,000 ).
Operating costs, excluding depreciation, incurred in relation to
these properties amounted to GBP12 ,000 (2020: GBP 38,000 ).
At the year end, two investment properties were independently
valued at GBP5,400,000. The third investment property was purchased
during the period and, the value at purchase price paid of
GBP4,528,000 is deemed a reasonable fair value of this property.
The total fair value of all of our investment properties at the
year end is GBP9,928,000.
15. 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.
The Company has modelled a range of scenarios, with the base
forecast being one in which, over the next 12 months, sales broadly
recover to pre-Covid levels. More cautious scenarios have been
analysed, including ones with significant reductions to revenue,
these have been prepared with reference to the actual cash outflows
in the previous lockdown periods.
The directors are satisfied that the Company has sufficient
liquidity to withstand adjustments to the base forecast, as well as
the downside scenarios. The length of the liquidity period, in
relation to each outcome, depends on those actions which the
Company chooses to take (eg the extent to which cash expenditure is
reduced) and also on the level of government financial support (eg
reduced business rates) which the Company might receive.
Material uncertainty, which may cast significant doubt over the
Company's ability to continue as a going concern, has resulted from
the impact of the Covid-19 virus on the economy and the hospitality
industry and it is also not clear when public confidence and
self-imposed social distancing measures will allow trading to
return to 'normal' pre Covid levels.
The Company has agreed with its lenders to replace existing
financial covenant tests with a minimum liquidity covenant for the
period up to and including July 2022. There is material
uncertainty, which may cast significant doubt over the Company's
ability to continue as a going concern, beyond this date about
whether financial covenant tests will be satisfied or whether
further waivers will be agreed on by lenders. The Company will
remain in regular dialogue with its lenders throughout the
period.
In addition, the directors have noted the range of possible
additional liquidity options available to the Company, should they
be required.
As a result, 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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END
FR EADNEDLKFEAA
(END) Dow Jones Newswires
October 01, 2021 02:00 ET (06:00 GMT)
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