TIDMJDW
RNS Number : 8959G
Wetherspoon (JD) PLC
20 March 2020
20 March 2020
J D WETHERSPOON PLC
PRELIMINARY RESULTS
(For the 26 weeks ended 26 January 2020)
FINANCIAL HIGHLIGHTS
Before exceptional items (pre-IFRS 16)
Revenue GBP933.0m (2019: GBP889.6m) +4.9%
Like-for-like sales +5.0%
Profit before tax GBP57.9m (2019: GBP50.3m) +15.2%
Operating profit GBP76.6m (2019: GBP63.5m) +20.6%
Earnings per share (including shares held in trust) 43.3p +15.8%
(2019: 37.4p)
Free cash flow per share 46.7p (2019: 67.9p) -31.2%
Interim dividend cancelled (2019: 4.0p)
Before exceptional items (post-IFRS 16)
IFRS 16 did not apply in the previous financial year,
so no comparison is included.
Profit before tax GBP51.6m.
PBT is lower because IFRS 16 assumes that the 'right
to occupy' leasehold property for the term of the lease
is an 'asset', which is approximately equivalent in value
to future rental payments due - in this case estimated
at GBP579m. It also assumed a liability in respect of
future rental payments ('lease liabilities') of GBP584m.
The depreciation charge has increased by GBP24m as a
result of the amortisation of the new 'asset' over the
remaining term of the leases. A notional interest charge
(which will never be paid and is an accounting fiction)
has also been assumed in respect of the liability of GBP584m
of future rental payments.
The IFRS 16 definition of PBT has not declined at the
same amount as the increased depreciation and interest
because the rent that was actually paid in the period
(with some adjustments) has not been charged to the income
statement. In other words, IFRS 16 has, broadly speaking,
substituted actual rental payments for a complex system
of notional payments or charges.
Operating profit GBP80.8m.
The Operating profit is GBP4.2m higher under IFRS 16
because the rental charge of about GBP28m (which represents
the actual rent paid) has been substituted for a depreciation
charge of GBP24m.
Earnings per share (including shares held in trust) 38.5p
After exceptional items (pre-IFRS 16)
Profit before tax GBP42.0m (2019: GBP48.6m) -13.7%
Operating profit GBP76.6m (2019: GBP63.5m) +20.6%
Earnings per share (including shares held in trust) 29.8p -17.2%
(2019: 36.0p)
After exceptional items (post-IFRS 16)
Profit before tax GBP35.7m
Operating profit GBP80.8m
Earnings per share (including shares held in trust) 25.0p
Exceptional items, which totalled GBP15.9m resulted in a cash
inflow of GBP2m.
Commenting on the results, Tim Martin, the Chairman of J D
Wetherspoon plc, said:
"As recently reported, in the six weeks to 8 March 2020,
like-for-like sales increased by 3.2% and total sales by 2.9%. In
the following week, to 15 March, sales declined by 4.5%. In the
early part of the current week, following the Prime Minister's
advice to avoid pubs, sales have declined at a significantly higher
rate.
"It is obviously very difficult to predict, in these
circumstances, how events will unfold in future weeks and months,
but we now anticipate profits being below market expectations, so
long as the current health scare continues. As a result of this
uncertainty, it is impossible to provide realistic guidance on our
performance in the remainder of the financial year.
"The company has decided to delay most capital projects and to
reduce expenditure, where possible, including the cancellation of
the interim dividend. As a result of these actions, combined with
the Government's proposals on business rates relief and credit
guarantee facilities, the company believes it has sufficient
liquidity to maintain operations at a substantially lower level of
sales.
"As many companies and commentators have noted, the current
health crisis places the hospitality industry, in particular, under
great pressure. Wetherspoon, like our peers, will be working
closely with all parties, including employees, banks, landlords and
suppliers, in order to emerge from the situation in the best
shape."
Enquiries:
John Hutson Chief Executive Officer 01923 477777
Ben Whitley Finance Director 01923 477777
Eddie Gershon Company spokesman 07956 392234
Photographs are available at: newscast.co.uk
Notes to editors
1. J D Wetherspoon owns and operates pubs throughout the UK and
Ireland. 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. 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 2019 has been
published on the Company's website on 13 September 2019.
5. The current financial year comprises 52 trading weeks to 26 July 2020.
6. The next trading update will be issued on 13 May 2020.
CHAIRMAN'S STATEMENT AND OPERATING REVIEW
In the 26 weeks ended 26 January 2020, like-for-like sales
increased by 5.0%,
with total sales increasing by 4.9% to GBP933.0m (2019:
GBP889.6m).
Like-for-like bar sales increased by 4.2% (2019: 5.9%), food by
5.6% (2019: 7.1%) and fruit/slot machines by 20.3% (2019: 5.7%).
Like-for-like hotel room sales decreased by 1.3% (2019: increased
by 0.3%). Bar sales were 60.0% of total sales, food 36.1%,
fruit/slot machines 2.8% and rooms 1.1%.
Pre-IFRS 16 operating profit increased by 20.6% to GBP76.6m
(2019: GBP63.5m). The operating margin was 8.2% (2019: 7.1%).
Profit before tax and exceptional items increased by 15.2% to
GBP57.9m (2019: GBP50.3m). Higher sales, higher gross profit and
lower property costs contributed to the increase, offsetting higher
wages, repairs and taxes.
Earnings per share, including shares held in trust by the
employee share scheme, and before exceptional items, increased by
15.8% to 43.3p (2019: 37.4p).
As illustrated in the table in the tax section below, the
company paid taxes of GBP402.8m in the period under review (2019:
GBP375.6m), which is 31.9% higher than five years ago.
Net interest was covered 4.1 times by profit before interest,
tax and exceptional items (2019: 4.0 times). Total capital
investment was GBP128.5m in the period (2019: GBP95.5m). GBP70.7m
was spent on freehold reversions of properties where Wetherspoon
was the tenant (2019: GBP55.7m), GBP34.1m on 'reinvestment' in
existing pubs (2019: GBP24.9m) and GBP23.7m on new pub openings and
pub extensions (2019: GBP14.8m).
Exceptional items totalled GBP15.9m (2019: GBP1.6m) and resulted
in a cash inflow of GBP2m. GBP6.4m has been charged in respect of
the disposal of 6 pubs in the period and in respect of a number of
future disposals and aborted transactions. Following a review, an
exceptional charge of GBP9.5m has been made, reflecting a revised
view of the future value of IT projects.
Free cash flow, after capital investment of GBP34.5m in existing
pubs (2019: GBP26.1m), GBP9.3m for share purchases for employees
(2019: GBP9.0m) and payments of tax and interest, was GBP49.0m
(2019: GBP71.7m). Free cash flow per share decreased by 31.2% to
46.7p (2019: 67.9p). The decrease was due mainly to the timing of
supplier payments, an earlier payment of corporation tax and
increased reinvestment.
Dividends
In view of current uncertainty, the board has decided to cancel
the interim dividend (2019: GBP4.2m).
Corporation tax
We expect the overall corporation tax charge for the financial
year, including current and deferred taxation, to be approximately
21.6%, on a pre-IFRS 16 basis, before exceptional items (2019:
21.4%).
As in previous years, the company's tax rate is higher than the
standard UK tax rate, owing mainly to depreciation which is not
eligible for tax relief.
Comment on IFRS 16
I believe the IFRS 16 is confusing and misleading. Common sense
suggests that rent should be regarded as a cost in the income
statement. Instead, a complex formula disregards actual rent paid
and substitutes a notional asset (the 'right to occupy'), which
attracts a depreciation charge, and a notional interest charge
based on the total rental liability for the lease term, even though
the great majority of the rental liability does not crystallise, in
almost all cases, for many years.
Part of the purpose may be to equate rent with debt. However,
for companies like Wetherspoon at least, rent bears almost no
resemblance to debt.
Debt is invariably for a fixed term and the full amount is
repayable at the end of the term. Debt therefore carries a
refinancing risk.
In contrast, Wetherspoon leases, for example, carry no
refinancing risk - there is just a liability to pay the rent when
it falls due.
Of course leases carry a great risk- as so many restaurant
companies and retailers have unfortunately demonstrated. However,
it does not make sense to treat future liabilities in this way -
why not treat future business rates or VAT liabilities in this way,
if it's appropriate for rent?
The most important criticism of IFRS 16 is that the complexity
it creates means that it will only be understood by experts - in
general, good for the experts, but bad for business efficiency,
shareholders and the public.
Share buybacks
During the half year, 419,741 shares (0.40% of the share
capital) were repurchased by the company for cancellation, at a
cost of GBP6.5m, an average cost per share of 1,523p (2019:
GBPNil).
Financing
As at 26 January 2020, the company's net debt, including bank
borrowings and finance leases, but excluding derivatives, was
GBP804.5m, an increase of GBP67.5m, compared with that of the
previous year end (2019: GBP737.0m).
The net-debt-to-EBITDA ratio was 3.54 times at the period end
(28 July 2019: 3.36 times).
On 20 August 2019, the company entered into a new seven-year
private placement agreement, which extends its total facilities,
excluding finance leases, from GBP895m to GBP993m.
As previously stated, it is intended that the company's
net-debt-to-EBITDA ratio will be around 3.5 times for the
foreseeable future. The ratio might rise for a temporary period, if
there were, for example, a sudden deterioration in trading, in
which instance the company would seek to reduce the level in a
timely manner. Insofar as it is possible to generalise, the board
believes that debt levels of between 0 and 2 times EBITDA are a
sensible long - term benchmark. A higher level of debt may be
justifiable - at times when interest rates are low and other
factors are favourable.
Property
During the period, we opened one new pub and disposed of six,
bringing the number open at the period end to 874. The company is
also redeveloping a number of successful pubs, usually adding extra
interior customer space, a garden, staff rooms and, in some cases,
hotel rooms. Recent examples include the Prior John in Bridlington,
the Sirhowy in Blackwood and the Blue Bell in Scunthorpe.
Following a review of our estate, we placed around 130 pubs on
the market in the last few years, most of which have now been
sold.
10 years ago our freehold/leasehold split was 41.3/58.7%. As a
result of investment in the course of the last few years in
'freehold reversions', the split was 63.6/36.4% at the period
end.
UK taxes and regulation
Pubs and restaurants pay proportionally far higher levels of UK
tax than do supermarkets. The main disparity relates to VAT (value
added tax), since supermarkets pay no VAT in respect of their food
sales, whereas pubs pay 20%, enabling supermarkets to subsidise
their alcoholic drinks prices. Pubs also pay approximately 18p per
pint in respect of business rates, while supermarkets pay less than
2p per pint.
In addition, the government has, in recent years, introduced
both a 'late-night levy' and additional fruit/slot machine taxes,
further reducing the competitive position of pubs in relation to
supermarkets.
The tax disparity with supermarkets is unfair. Pubs create
significantly more jobs and more taxes per pint or per meal than do
supermarkets and it does not make social or economic sense for the
UK tax régime to favour supermarkets. We acknowledge the need for
companies to pay a reasonable level of tax, but hope that
legislators will make prompt progress in creating a level playing
field for all businesses which sell similar products.
The taxes paid by Wetherspoon in the period under review were as
follows:
First half 2020 2019
(estimate - UK only) GBPm GBPm
VAT 182.5 175.5
Alcohol duty 89.4 86.1
PAYE and NIC 62.2 59.0
Business rates 29.0 28.7
Corporation tax 21.5 8.5
Fruit/slot machine
duty 6.5 5.5
Climate change levy 5.1 5.1
Stamp duty 3.6 2.6
Sugar tax 1.4 1.5
Fuel duty 1.1 1.1
Premises licences and
TV licences 0.4 0.4
Carbon tax - 0.4
TOTAL TAX 402.7 375.6
Tax per pub (GBP000) 462.0 427.3
Tax as % of sales 43.2% 42.2%
Pre-exceptional profit
after tax 45.4 39.5
Profit after tax as
% of sales 4.9% 4.4%
Further progress
As previously highlighted, the company's philosophy is to try
continuously to upgrade as many areas of the business as
possible.
The Food Standards Agency, in association with local
authorities, regularly inspects licensed and other food businesses
in the UK and awards marks from zero to five, according to the
standards it finds.
Currently, 97.1% of our pubs have obtained the maximum five
rating (2019: 97.6%), under the FSA scheme, with 99.1% of pubs
receiving a rating of four or above (2019: 99.5%). This record
reflects extremely hard work by our central catering, audit and
operations team, as well as by the excellent teams in our pubs.
We have again been recognised, for the 17th year in a row, as a
'Top Employer UK' by the Top Employers Institute, in association
with the Guardian newspaper.
A pub company is only as good as its employees - and Wetherspoon
recognises this through its bonus and training schemes. We paid
GBP23m in respect of bonuses and free shares to employees in the
period (2019: GBP21m), of which 98% was paid to staff below board
level and 88% was paid to staff working in our pubs.
In addition, the company runs a government-approved
apprenticeship scheme and participates in a professional management
diploma and degree course, in conjunction with Leeds Beckett
University.
Corporate governance
In our trading update of 22 January, I commented on corporate
governance as follows:
"In an important high court case involving Wetherspoon, the
judge said that he would assume written statements by witnesses
were true, unless contradicted by barristers in
cross-examination.
"This sensible principle of justice is also implicit in the
'comply or explain' provisions of corporate governance guidelines
(the 'code').
"Comply or explain must mean that the code envisaged flexibility
and did not advocate a 'one-type-suits-all' approach.
"If shareholders say nothing in response to company
explanations, which have been made in order to comply with the
code, it is reasonable to assume their assent.
"However, in reality, detailed explanations are ignored by many
fund managers and their corporate governance advisers - comply or
explain has been corrupted to mean 'comply or be humiliated in
public and voted off the board' - a risk which most NEDs are
understandably reluctant to take.
"A likely reason for ignoring explanations, in defiance of the
code, is that it's simpler and cheaper to apply arbitrary standards
such as the 'nine-year rule'- rather than engaging with companies
and considering their explanations.
"Corporate governance adviser PIRC, for example, advertises for
temporary staff for the company results' "season", and it appears
to demand a blanket nine-year rule, almost irrespective of
explanations.
"In effect, PIRC purports to impose its own version of the code
on companies, with no qualifications, or remit, for that
approach.
"In a further illustration of how the code operates in practise,
Wetherspoon's largest shareholder, Columbia Threadneedle (CT),
withdrew support for two of our long-serving NEDs for
non-compliance with the 'nine-year rule', with no advance warning
or discussion, shortly before our 2018 AGM.
"CT unilaterally took this action, in spite of detailed
explanations in the preceding years in our annual reports.
"CT and fellow shareholder Blackrock's OWN boards however, very
sensibly, do not observe the nine-year rule - both laud
'independent' NEDs with longer tenure than nine years.
"In other words, one rule for CT and Blackrock - and another for
UK PLC.
"These issues were reviewed in some detail in our November 2019
trading statement (appendix 1). It would be beneficial if all
shareholders could read this appendix. It is not boilerplate and
the future of companies like Wetherspoon, and many others, is
seriously undermined by the operation of the current code.
"As in previous years, there has been no objection or critique
whatsoever, in writing or in person, from any shareholder,
individual or organisation, of the points raised in our November
review.
"It is an unfortunate reflection on complacency in the City and
among unaccountable 'rule-makers' that institutions like Columbia
Threadneedle, Blackrock - and corporate governance adviser PIRC -
have not felt the need to issue a proper or detailed response to
the serious issues raised by Wetherspoon.
"The main consequence of the current governance system is
short-termist and inexperienced boards, which have minimal
representation from executives and the workforce - the people who
are best placed to understand and run the business.
"These factors are obviously damaging for customers, employees
and the economy - as well as for shareholders.
"The UK, of course, needs a sensible system of corporate
governance. However, the current system is remote,
counterproductive and inflexible, which are also the
characteristics of many major shareholding institutions and their
advisers."
Current trading and outlook
As recently reported, in the six weeks to 8 March 2020,
like-for-like sales increased by 3.2% and total sales by 2.9%. In
the following week, to 15 March, sales declined by 4.5%. In the
early part of the current week, following the Prime Minister's
advice to avoid pubs, sales have declined at a significantly higher
rate.
It is obviously very difficult to predict, in these
circumstances, how events will unfold in future weeks and months,
but we now anticipate profits being below market expectations, so
long as the current health scare continues. As a result of this
uncertainty, it is impossible to provide realistic guidance on our
performance in the remainder of the financial year.
The company has decided to delay most capital projects and to
reduce expenditure, where possible, including the cancellation of
the interim dividend. As a result of these actions, combined with
the Government's proposals on business rates relief and credit
guarantee facilities, the company believes it has sufficient
liquidity to maintain operations at a substantially lower level of
sales.
As many companies and commentators have noted, the current
health crisis places the hospitality industry, in particular, under
great pressure. Wetherspoon, like our peers, will be working
closely with all parties, including employees, banks, landlords and
suppliers, in order to emerge from the situation in the best
shape.
Tim Martin
Chairman
19 March 2020
Appendix 1 - Corporate Governance (and guaranteed eventual
destruction), Extract from JD Wetherspoon Q1 trading update, 13
November 2019
Commenting on corporate governance issues, the Chairman of
Wetherspoon, Tim Martin, said:
"While acknowledging the need for a sensible system of corporate
governance (CG), I have, for many years, expressed the urgent need
for modification of the CG code, summarised in our 2019 annual
report.
"There can be little doubt that the current system has directly
led to the failure or chronic underperformance of many businesses,
including banks, supermarkets, and pubs.
"It has also led to the creation of long and almost unreadable
annual reports, full of jargon, clichés and platitudes - which
confuse more than they enlighten.
"I believe by vesting so much power in non-executive directors
(NEDs), the system is also disenfranchising executives and the
workforce - the people who have real expertise and are the
cornerstone of business success.
"Another tectonic fault is that the institutions and advisers
which oversee the code, as described below, do not themselves
adhere to the rules they impose on others.
"The vast gap between the technocrats who make the rules and
commercial reality is illustrated by the 2016 CG code, which refers
to shareholders 64 times, employees three times and customers not
at all.
"In contrast, commercial reality, which should be reflected in
the code, is encapsulated in Sam Walton's Walmart mantra - "Who's
number one? THE CUSTOMER!"
"A core problem is that CG institutionalises short-termism,
inexperience and navel-gazing.
"'Independent' non-executive directors (NEDS), who work part
time, are limited by the code to nine years' service and stay, on
average, for just over four years.
"It is also common practise for there to be only two executive
directors, the most senior of whom, the CEO, averages only about
five years' - managements and workers are thus absurdly
underrepresented.
"A cursory glance at the board compositions of major UK PLCs
underlines the issues.
"Tesco, for example, which has 450,000 employees and is the UK's
largest supermarket group, has only two executive directors, with
total service of about nine years and 11 NEDs with total service of
38 years. The overall average, including NEDs and executives, is
only 3.7 years.
"This sort of corporate structure is mirrored in banks,
retailers and pubs - where long-term performance, over recent
decades, has usually veered between poor and catastrophic.
"Adherence to a tick-box culture means, for example, that there
are no NEDS on the boards of major UK banks
(HSBC/RBS/Barclays/Lloyds) who have any personal experience of the
last banking crisis at their company - when it is clear that
inexperienced boards were a major factor in that crisis.
"In contrast, non-compliant companies like Wetherspoon (average
tenure 15 years), Fullers' (10 years), Dart Group (12 years) and
Berkshire Hathaway (19 years) have often fared far better, with
experienced boards, long-term shareholders and a long-term
view.
"Compliance with CG guidelines increases the risk of failure -
companies like Northern Rock, HBOS, Carillion, Thomas Cook and
Mothercare were compliant with the code, but had shockingly low
levels of experience (around 4 years per director) and executive
representation.
"Stefano Bonini and others (Harvard Law School Forum, June 2017)
highlighted this problem and correctly said that "long-tenured
directors ... decrease the likelihood of corporate scandals ...
(and) ... accumulate information and knowledge."
"A Noddy-in-Toyland aspect of the current farce, as indicated
above, is that the 'comply or explain' principle, which underlies
the code, is not observed, in practise, by many 'enforcers' - ie
institutions or their corporate advisers.
"'Comply or explain' means that advisers and investors have an
obligation to weigh up explanations for non-observance of the
guidelines.
"However, in reality, many never do - including, it seems,
governance advisers such as PIRC.
"For example, Wetherspoon's largest institutional shareholder,
Columbia Threadneedle (CT), without any advance notice to the
Company, did not support the re-election of two of our long-serving
directors at last year's AGM - in spite of our repeated
explanations in annual reports.
"As a result, three of our four NEDs felt compelled to offer
their resignations - inevitably destabilising the company in the
process.
"Yet CT's owner is Ameriprise (a US company), two of whose
independent NEDs have themselves exceeded the nine-year rule.
"The Ameriprise chairman also breaches the nine-year rule - and
combines the roles of chairman and CEO, a further breach of UK
guidelines.
"In this context, the fact that CT is a US company is
irrelevant. It has decided that one rule applies to itself, but
that another should apply to Wetherspoon.
"In addition, US shareholder, Blackrock did not support
Wetherspoon's long serving NEDs last year, but they also have
directors who exceed the 9-year rule on their board.
"Not all institutions behave like CT and Blackrock. Two of our
largest shareholders strongly support Wetherspoon's approach as
illustrated in letters written to the company. Common sense does
exist, in small pockets, in the City.
"Indeed, in thousands of meetings with shareholders in the last
27 years, I and my colleagues have almost never been asked about
corporate governance - although the guidelines are clearly the
predominating factors in PLC board composition - and at AGMs.
"The tick-box malaise, to which only strong-willed contrarians -
and those with no financial interest in the perpetuation of the
current system - are immune, is particularly rife at CG
advisers.
"For example, the CG adviser PIRC recommends its clients to vote
against my own re-election as chairman of Wetherspoon on the basis,
inter alia, that I have been chairman for more than nine years (a
milestone I hit in 1992).
"Amazingly, while advising Wetherspoon that it should have four
or five 'independent' NEDS, the hypocritical PIRC has, itself, just
one on its own board - someone whose only apparent employment
experience has been at a local authority.
"However, PIRC's own website misleadingly says that it adopted,
in 1988, "a private company structure with...executive directors
and a board of non-executives drawn from the founding pension funds
and public figures" - a structure that clearly no longer applies
today.
"Furthermore, the founder of PIRC, Alan MacDougall who still
sits on his own board after 33 years (but seems to believe I
shouldn't be on mine), has no relevant PLC experience having,
according to his LinkedIn profile, a "BA Sociaology (sic) 2:2 -
Social policy and Soviet Studies" and work experience at the
National Union of Mineworkers and the Greater London Council.
"MacDougall has questionable personable judgement, referring to
himself on his Twitter account as a "governance expert" and an
"ex-Eurocommunist". In my opinion, many people equate communism
with fascism, since millions of Europeans perished or were
imprisoned under its yoke.
"It is perhaps a concern that PIRC has a low rating of 2.6 on
the employment website Glassdoor, and appears to rely on
inexperienced and temporary workers to analyse complex company
reports for corporate governance purposes.
"In summary, my view is the UK CG system is up the spout - and
is itself a threat to listed companies - and therefore to the UK
economy.
"By institutionalising inexperience, the code guarantees the
eventual destruction of the culture or 'DNA' of successful
companies - and culture has 'strategy' (with which the code is
obsessed) for breakfast, as respected management philosopher Peter
Drucker has said.
"Board structures should probably more closely resemble the
successful Fullers - a chairman with 41 years' experience at the
company, combined with directors with extensive executive
experience and long-term loyalty.
"In addition, genuine observance of 'comply or explain', rather
than current lip service, should be mandatory. One-size-fits-all
does not work in the real world.
"Board composition à la Fullers can't guarantee future corporate
success - but rigid compliance with current CG guidelines will
almost certainly guarantee eventual mediocrity or failure.
"City regulators and lawmakers should make haste. Even
Wetherspoon, a medium-sized company, has 42,000 employees, 13,000
of whom are shareholders, and it contributes about one pound in
every thousand of UK taxes (GBP764 million in 2019) - it's not in
anyone's interest to kill a golden goose.
"But, perhaps above all, no sensible business, looking to the
long term and genuinely apprised of the reality of the CG system,
would float on the London stock market today - who wants to
guarantee eventual destruction, after all?"
PRE-IFRS 16 INCOME STATEMENT for the 26 weeks ended 26 January
2020
J D Wetherspoon plc, company
number: 1709784
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
26 January 26 January 27 January 27 January 28 July 28 July
2020 2020 2019 2019 2019 2019
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
Revenue 1 933,021 933,021 889,606 889,606 1,818,793 1,818,793
Operating costs (856,461) (856,461) (826,135) (826,135) (1,686,876) (1,686,876)
-------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 2 76,560 76,560 63,471 63,471 131,917 131,917
Property
(losses)/gains 3 (172) (172) 3,772 3,772 5,599 5,599
Property (losses)
- exceptional 3 (15,948) (1,651) (7,040)
-------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
interest
and tax 76,388 60,440 67,243 65,592 137,516 130,476
Finance income 6 41 41 26 26 41 41
Finance costs 6 (18,508) (18,508) (16,993) (16,993) (35,098) (35,098)
-------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before tax 57,921 41,973 50,276 48,625 102,459 95,419
Income tax expense 7 (12,487) (12,487) (10,776) (10,776) (22,830) (22,830)
Income tax expense
- exceptional 7 1,801 99 188
-------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before IFRS 16 45,434 31,287 39,500 37,948 79,629 72,777
---------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Earnings per ordinary
share (p)
- Basic[1] 8 44.3 30.5 38.3 36.8 77.2 70.6
- Diluted[2] 8 43.3 29.8 37.4 36.0 75.5 69.0
-------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
RECONCILIATION TO THE STATUTORY PROFIT for the 26 weeks ended 26
January 2020
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
26 January 26 January 27 January 27 January 28 July 28 July
2020 2020 2019 2019 2019 2019
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before IFRS 16 45,434 31,287 39,500 37,948 79,629 72,777
Operating costs 28,443 28,443 - - - -
Amortisation of
right-of-use assets 25 (24,425) (24,425) - - - -
Lease premium
amortisation 192 192 - - - -
Disposal of leases 3 347 347 - - - -
Finance costs 6 (11,078) (11,078) - - - -
Finance income 6 225 225 - - - -
Income tax expense 7 1,189 1,189 - - - -
---------------------- ------ ------------ ------------ ------------ ------------ ------------ ------------
Profit for the period 40,327 26,180 39,500 37,948 79,629 72,777
------------------------------ ------------ ------------ ------------ ------------ ------------ ------------
[1] Calculated excluding shares held in trust.
[2] Calculated using issued share capital which includes shares
held in trust.
PRE-IFRS 16 CASH FLOW STATEMENT for the 26 weeks ended 26
January 2020
J D Wetherspoon plc, company
number: 1709784
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
cash free cash free cash free
flow cash flow cash flow cash
Flow[1] Flow[1] Flow[1]
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
26 January 26 January 27 January 27 January 28 July 28 July
2020 2020 2019 2019 2019 2019
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Cash flows from operating
activities
Cash generated from operations 9 131,546 131,546 133,232 133,232 227,176 227,176
Interest received 40 40 20 20 33 33
Interest paid (17,027) (17,027) (17,556) (17,556) (33,957) (33,957)
Corporation tax paid (21,480) (21,480) (8,539) (8,539) (19,661) (19,661)
----------- ----------- ---------- ---------
Net cash flow from operating
activities 93,079 93,079 107,157 107,157 173,591 173,591
--------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Cash flows from investing
activities
Purchase of property, plant
and equipment (32,764) (32,764) (22,672) (22,672) (47,398) (47,398)
Purchase of intangible
assets (1,768) (1,768) (3,413) (3,413) (6,923) (6,923)
Investment in new pubs
and pub extensions (34,773) (15,214) (26,778)
Freehold reversions and investment
properties (70,633) (51,902) (77,207)
Lease premiums paid - (93) (451)
Proceeds of sale of property,
plant and equipment 4,160 5,818 9,319
----------- ----------- ---------- ---------
Net cash flow from investing
activities (135,778) (34,532) (87,476) (26,085) (149,438) (54,321)
--------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Cash flows from financing
activities
Equity dividends paid 11 (8,371) (8,435) (12,652)
Purchase of own shares
for cancellation 28 (6,455) - (5,399)
Purchase of own shares for
share-based payments (9,260) (9,260) (8,960) (8,960) (16,004) (16,004)
Loan issue cost 10 (321) (321) (462) (462) (6,268) (6,268)
Advances under private
placement 10 98,000 - -
Repayment of bank loans 10 (25,000) (38,863) (13,865)
Advances under finance
lease 10 - 12,000 12,000
Finance lease principal
payments 10 (1,431) (698) (2,106)
--------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Net cash flow from financing
activities 47,162 (9,581) (45,418) (9,422) (44,294) (22,272)
--------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Net change in cash and
cash equivalents 10 4,463 (25,737) (20,141)
--------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Opening cash and cash
equivalents 19 42,950 63,091 63,091
Closing cash and cash
equivalents 19 47,413 37,354 42,950
--------------------------------- ------ -----------
Free cash flow 8 48,966 71,650 96,998
--------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Free cash flow per ordinary
share 8 46.7p 67.9p 92.0p
[1] Free cash flow is a measure not required by accounting
standards; a definition is provided in our accounting policies.
PRE-IFRS 16 BALANCE SHEET as at 26 January 2020
J D Wetherspoon plc, company number:
1709784
Notes Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
-------------------------------------- ------ ----------- ----------- ----------
Non-current assets
Property, plant and equipment 13 1,458,531 1,356,259 1,384,971
Intangible assets 12 12,378 23,313 23,070
Investment property 14 11,572 7,467 5,531
Other non-current assets 7,696 7,849 7,888
Derivative financial instruments 23 - 11,420 321
Deferred tax assets 7 9,706 4,088 8,342
-------------------------------------- ------
Total non-current assets 1,499,883 1,410,396 1,430,123
-------------------------------------- ------ ----------- ----------- ----------
Current assets
Assets held for sale 18 350 3,383 3,146
Inventories 16 23,453 22,769 23,717
Receivables 27,544 24,335 21,903
Cash and cash equivalents 19 47,413 37,354 42,950
Total current assets 98,760 87,841 91,716
----------- ----------
Total assets 1,598,643 1,498,237 1,521,839
-------------------------------------- ------ ----------- ----------- ----------
Current liabilities
Borrowings 21 (3,286) (3,207) (3,287)
Trade and other payables (314,831) (320,501) (308,326)
Current income tax liabilities (1,275) (11,164) (10,986)
Provisions (3,116) (5,499) (4,072)
Total current liabilities (322,508) (340,371) (326,671)
-------------------------------------- ------ ----------- ----------- ----------
Non-current liabilities
Borrowings 21 (848,654) (758,112) (776,683)
Derivative financial instruments 23 (57,096) (35,465) (49,393)
Deferred tax liabilities 7 (38,212) (38,506) (39,416)
Provisions (1,659) (2,453) (1,934)
Other liabilities (10,607) (11,235) (10,930)
Total non-current liabilities (956,228) (845,771) (878,356)
-------------------------------------- ------ ----------- ----------- ----------
Net assets 319,907 312,095 316,812
-------------------------------------- ------ ----------- ----------- ----------
Shareholders' equity
Share capital 28 2,094 2,110 2,102
Share premium account 143,294 143,294 143,294
Capital redemption reserve 2,337 2,321 2,329
Hedging reserve (47,390) (19,957) (40,730)
Currency translation reserve 1,603 3,697 5,370
Retained earnings 217,969 180,630 204,447
-------------------------------------- ------ -----------
Total shareholders' equity 319,907 312,095 316,812
-------------------------------------- ------ ----------- ----------- ----------
INCOME STATEMENT for the 26 weeks ended 26 January 2020
J D Wetherspoon plc, company number: 1709784
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
26 January 26 January 27 January 27 January 28 July 28 July
2020 2020 2019 2019 2019 2019
Before After Before After Before After
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Revenue 1 933,021 933,021 889,606 889,606 1,818,793 1,818,793
Operating costs (852,251) (852,251) (826,135) (826,135) (1,686,876) (1,686,876)
----------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Operating profit 2 80,770 80,770 63,471 63,471 131,917 131,917
Property gains 3 175 175 3,772 3,772 5,599 5,599
Property losses - exceptional 3 (15,948) (1,651) (7,040)
----------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Profit before interest and
tax 80,945 64,997 67,243 65,592 137,516 130,476
Finance income 6 266 266 26 26 41 41
Finance costs 6 (29,586) (29,586) (16,993) (16,993) (35,098) (35,098)
----------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Profit before tax 51,625 35,677 50,276 48,625 102,459 95,419
Income tax expense 7 (11,298) (11,298) (10,776) (10,776) (22,830) (22,830)
Income tax expense -
exceptional 7 1,801 99 188
----------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Profit for the period 40,327 26,180 39,500 37,948 79,629 72,777
----------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
Earnings per ordinary share (p)
- Basic[1] 8 39.3 25.5 38.3 36.8 77.2 70.6
- Diluted[2] 8 38.5 25.0 37.4 36.0 75.5 69.0
----------------------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
STATEMENT OF COMPREHENSIVE INCOME for the 26 weeks ended 26
January 2020
Notes Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------------------------------------------------------------- ----- ---------- ---------- --------
Items which will be reclassified subsequently to profit or loss:
Interest-rate swaps: gain taken to other comprehensive income 23 (8,024) 64 (24,963)
Tax on items taken directly to other comprehensive income 7 1,364 (11) 4,243
Currency translation differences (3,109) (1,122) 181
----------------------------------------------------------------- ----- ---------- ---------- --------
Net gain recognised directly in other comprehensive income (9,769) (1,069) (20,539)
Profit for the period 26,180 37,948 72,777
----------------------------------------------------------------- ----- ---------- ---------- --------
Total comprehensive income for the period 16,411 36,879 52,238
----------------------------------------------------------------- ----- ---------- ---------- --------
[1] Calculated excluding shares held in trust.
[2] Calculated using issued share capital which includes shares
held in trust.
CASHFLOW STATEMENT for the 26 weeks ended 26 January 2020
J D Wetherspoon plc, company
number: 1709784
Notes Unaudited Unaudited Unaudited Unaudited Audited Audited
cash free cash free cash free
flow cash flow cash flow cash
flow[1] flow[1] flow[1]
26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks
ended ended ended ended ended ended
26 January 26 January 27 January 27 January 28 July 28 July
2020 2020 2019 2019 2019 2019
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Cash flows from operating
activities
Cash generated from operations 9 160,036 160,036 133,232 133,232 227,176 227,176
Interest received 40 40 20 20 33 33
Interest paid (17,027) (17,027) (17,556) (17,556) (33,957) (33,957)
Corporation tax paid (21,480) (21,480) (8,539) (8,539) (19,661) (19,661)
Lease interest (9,134) (9,134) - - - -
----------- ----------- ---------- ---------
Net cash flow from operating
activities 112,435 112,435 107,157 107,157 173,591 173,591
-------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Cash flows from investing
activities
Purchase of property,
plant and equipment (32,764) (32,764) (22,672) (22,672) (47,398) (47,398)
Purchase of intangible
assets(2) (1,768) (1,768) (3,413) (3,413) (6,923) (6,923)
Investment in new pubs
and pub extensions (34,773) (15,214) (26,778)
Freehold reversions and investment
properties (70,633) (51,902) (77,207)
Lease premiums paid - (93) (451)
Proceeds of sale of property,
plant and equipment 4,160 5,818 9,319
----------- ----------- ---------- ---------
Net cash flow from investing
activities (135,778) (34,532) (87,476) (26,085) (149,438) (54,321)
-------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Cash flows from financing
activities
Equity dividends paid 11 (8,371) (8,435) (12,652)
Purchase of own shares
for cancellation 28 (6,455) - (5,399)
Purchase of own shares for
share-based payments (9,260) (9,260) (8,960) (8,960) (16,004) (16,004)
Loan issue cost 10 (321) (321) (462) (462) (6,268) (6,268)
Advances under private
placement 10 98,000 - -
Repayment of bank loans 10 (25,000) (38,863) (13,865)
Advances under finance
lease 10 - 12,000 12,000
Lease principal payments 25 (19,912) (19,912) - - - -
Lease principal receipts 25 556 556 - - - -
Finance lease principal
payments 10 (1,431) (698) (2,106)
-------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Net cash flow from financing
activities 27,806 (28,937) (45,418) (9,422) (44,294) (22,272)
-------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Net change in cash and
cash equivalents 10 4,463 (25,737) (20,141)
-------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Opening cash and cash
equivalents 19 42,950 63,091 63,091
Closing cash and cash
equivalents 19 47,413 37,354 42,950
-------------------------------- ------ -----------
Free cash flow 8 48,966 71,650 96,998
-------------------------------- ------ ----------- ----------- ----------- ----------- ---------- ---------
Free cash flow per ordinary
share 8 46.7p 67.9p 92.0p
[1] Free cash flow is a measure not required by accounting
standards; a definition is provided in our accounting policies.
[2] Within reinvestment in business and IT projects, GBP733,000
were intangible assets (2019: GBP1,952,000), with the remaining
balance being related equipment.
BALANCE SHEET as at 26 January 2020
J D Wetherspoon plc, company number:
1709784
Notes Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
-------------------------------------- ------ ------------ ----------- ----------
Non-current assets
Property, plant and equipment 13 1,458,531 1,356,259 1,384,971
Intangible assets 12 12,378 23,313 23,070
Investment property 14 11,572 7,467 5,531
Other non-current assets 15 - 7,849 7,888
Right-of-use assets 25 579,175 - -
Derivative financial instruments 23 - 11,420 321
Deferred tax assets 7 9,706 4,088 8,342
Lease assets 25 11,319 - -
-------------------------------------- ------
Total non-current assets 2,082,681 1,410,396 1,430,123
-------------------------------------- ------ ------------ ----------- ----------
Current assets
Lease assets 25 1,561 - -
Assets held for sale 18 350 3,383 3,146
Inventories 16 23,453 22,769 23,717
Receivables 17 22,391 24,335 21,903
Cash and cash equivalents 19 47,413 37,354 42,950
Total current assets 95,168 87,841 91,716
----------- ----------
Total assets 2,177,849 1,498,237 1,521,839
-------------------------------------- ------ ------------ ----------- ----------
Current liabilities
Borrowings 21 (3,286) (3,207) (3,287)
Trade and other payables 20 (315,773) (320,501) (308,326)
Current income tax liabilities (86) (11,164) (10,986)
Provisions 22 (3,116) (5,499) (4,072)
Lease liabilities 25 (59,328) - -
Total current liabilities (381,589) (340,371) (326,671)
-------------------------------------- ------ ------------ ----------- ----------
Non-current liabilities
Borrowings 21 (848,654) (758,112) (776,683)
Derivative financial instruments 23 (57,096) (35,465) (49,393)
Deferred tax liabilities 7 (38,212) (38,506) (39,416)
Provisions 22 - (2,453) (1,934)
Other liabilities 24 - (11,235) (10,930)
Lease liabilities 25 (537,498) - -
Total non-current liabilities (1,481,460) (845,771) (878,356)
-------------------------------------- ------ ------------ ----------- ----------
Net assets 314,800 312,095 316,812
-------------------------------------- ------ ------------ ----------- ----------
Shareholders' equity
Share capital 28 2,094 2,110 2,102
Share premium account 143,294 143,294 143,294
Capital redemption reserve 2,337 2,321 2,329
Hedging reserve (47,390) (19,957) (40,730)
Currency translation reserve 1,603 3,697 5,370
Retained earnings 212,862 180,630 204,447
-------------------------------------- ------ ------------
Total shareholders' equity 314,800 312,095 316,812
-------------------------------------- ------ ------------ ----------- ----------
The financial statements, on pages 11 to 30, approved by the
board of directors and authorised for issue on 19 March 2020, are
signed on its behalf by:
John Hutson Ben Whitley
Director Director
STATEMENT OF CHANGES IN EQUITY
J D Wetherspoon plc,
company
number: 1709784
Notes Share Share Capital Hedging Currency Retained Total
capital premium redemption reserve translation earnings
account reserve reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
At 29 July 2018 2,110 143,294 2,321 (20,010) 4,767 154,080 286,562
Total comprehensive
income 53 (1,070) 37,896 36,879
---------
Profit for the period 37,948 37,948
Interest-rate swaps:
cash
flow hedges 23 64 64
Tax on items taken
directly
to comprehensive income 7 (11) (11)
Currency translation
differences (1,070) (52) (1,122)
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
Share-based payment
charges 5,651 5,651
Tax on share-based
payment 7 398 398
Purchase of own shares
for
share-based payments (8,960) (8,960)
Dividends 11 (8,435) (8,435)
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
At 27 January 2019 2,110 143,294 2,321 (19,957) 3,697 180,630 312,095
Total comprehensive
income (20,773) 1,673 34,459 15,359
---------
Profit for the period 34,829 34,829
Interest-rate swaps:
cash
flow hedges 23 (25,027) (25,027)
Tax on items taken
directly
to comprehensive income 7 4,254 4,254
Currency translation
differences 1,673 (370) 1,303
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
Purchase of own shares
for
cancellation (8) 8 (5,399) (5,399)
Share-based payment
charges 5,907 5,907
Tax on share-based
payment 7 111 111
Purchase of own shares
for
share-based payments (7,044) (7,044)
Dividends 11 (4,217) (4,217)
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
At 28 July 2019 2,102 143,294 2,329 (40,730) 5,370 204,447 316,812
Total comprehensive
income (6,660) (3,767) 26,838 16,411
Profit for the period 26,180 26,180
Interest-rate swaps:
cash
flow hedges 23 (8,024) (8,024)
Tax on items taken
directly
to comprehensive income 7 1,364 1,364
Currency translation
differences (3,767) 658 (3,109)
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
Purchase of own shares
for
cancellation (8) 8 (6,455) (6,455)
Share-based payment
charges 5,543 5,543
Tax on share-based
payment 7 120 120
Purchase of own shares
for
share-based payments (9,260) (9,260)
Dividends 11 (8,371) (8,371)
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
At 26 January 2020 2,094 143,294 2,337 (47,390) 1,603 212,862 314,800
------------------------- ------ -------- -------- ----------- --------- ------------ --------- ---------
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 restatement of the
opening reserves in the overseas branch at the current period end's
currency exchange rate.
As at 26 January 2020, the company had distributable reserves of
GBP167.1m.
NOTES TO THE FINANCIAL STATEMENTS
1. Revenue
Revenue disclosed in the income statement Unaudited Unaudited Audited
is analysed as follows:
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
------------------------------------------- ----------- ----------- ----------
Bar 559,426 538,082 1,094,001
Food 337,241 319,015 656,955
Slot/fruit machines 26,080 21,981 46,404
Hotel 9,468 9,596 19,699
Other 806 932 1,734
------------------------------------------- ----------- ----------- ----------
933,021 889,606 1,818,793
------------------------------------------- ----------- ----------- ----------
2. Operating profit - analysis of costs by nature
This is stated after charging/(crediting): Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------------------------------------------- ----------- ----------- ------------
Concession rental payments - 14,737 32,086
Minimum operating lease payments - 20,271 38,241
Variable concession rental payments 4,293 - -
Short leases 108 - -
Repairs and maintenance 46,112 35,937 76,879
Net rent receivable (841) (678) (1,545)
Share-based payments (note 5) 5,543 5,651 11,558
Depreciation of property, plant and equipment
(note 13) 37,718 36,825 73,779
Amortisation of intangible assets (note
12) 1,925 3,847 7,634
Depreciation of investment properties
(note 14) 34 27 55
Amortisation of right-of-use assets (note 24,425 - -
25)
Amortisation of other non-current assets
(note 15) - 169 343
----------------------------------------------- ----------- ----------- ------------
Analysis of continuing operations Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------------------------------------------- ----------- ----------- ------------
Revenue 933,021 889,606 1,818,793
Cost of sales (828,189) (802,911) (1,639,378)
----------------------------------------------- ----------- ----------- ------------
Gross profit 104,832 86,695 179,415
Administration costs (24,062) (23,224) (47,498)
----------------------------------------------- -----------
Operating profit after exceptional items 80,770 63,471 131,917
----------------------------------------------- ----------- ----------- ------------
Included within cost of sales is GBP325.9m (2019: GBP315.3m)
relating to cost of inventory recognised as expense.
3. Property gains and losses
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
--------------------------------------------- ----------- ----------- ---------
Non-exceptional property (gains)/losses
Disposal of fixed assets (90) (3,634) (4,650)
Additional costs of disposal 217 196 230
Disposal of leases (347) - -
Other property gains 45 (334) (1,179)
----------- ---------
(175) (3,772) (5,599)
Exceptional property losses (note 4)
Disposal of fixed assets 3,003 16 1,015
Additional costs of disposal 619 306 568
Impairment of property, plant and equipment 2,786 806 3,550
Impairment of intangible assets 9,540 - -
Impairment of other non-current assets - - 145
Onerous lease provision - 523 1,762
----------- ---------
15,948 1,651 7,040
Total property losses 15,773 (2,121) 1,441
--------------------------------------------- ----------- ----------- ---------
The gain of GBP347,000 relates to the purchase of the freeholds
of former leasehold sites. As a result, the right-of-use asset and
lease liability are derecognised. Under IFRS 16, the purchasing of
freehold results in a gain, as the income statement is charged in
advance of the cash payments. Without this gain, a non-exceptional
loss of GBP172,000 would have been reported.
4. Exceptional items
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------------------------------- ----------- ----------- ---------
Exceptional property losses
Disposal programme
Loss on disposal of pubs 3,622 322 1,583
Impairment of property plant and
equipment 1,496 806 1,298
Impairment of other non-current
assets - - 93
Onerous lease provision - 158 1,134
------------------------------------ ----------- ----------- ---------
5,118 1,286 4,108
Other property losses
Impairment of property, plant and
equipment 1,290 - 2,252
Impairment of intangible assets 9,540 - -
Impairment of other non-current
assets - - 52
Onerous lease provision - 365 628
------------------------------------ ----------- ----------- ---------
10,830 365 2,932
Total exceptional property losses 15,948 1,651 7,040
------------------------------------ ----------- ----------- ---------
Exceptional tax
Tax effect on exceptional items
(note 7) (1,801) (99) (188)
------------------------------------
(1,801) (99) (188)
Total exceptional items 14,147 1,552 6,852
------------------------------------ ----------- ----------- ---------
Disposal programme
The company has offered several of its sites for sale. During
the half year, a further six (2019: two) sites had been disposed of
and one (2019: two) was classified as held for sale. In the table
above, the costs classified as loss on disposal are the losses on
sold sites and associated costs to sale.
Other property losses
The company has reviewed its approach to capitalising costs in
the early stages of a pub's development. In future, some initial
costs will be expensed to the income statement. The property
impairment charge of GBP1,290,000 relates to similar costs held on
the balance sheet at the start of the year.
During the period, the company reviewed its accounting for the
development and implementation of information systems. As a result
of this review, it is the company's assessment that it will not
achieve the future economic benefit from some of these assets which
it had previously anticipated. The impairment charge of
GBP9,540,000 reduces the useful economic life of these assets to
reflect the company's view of future economic benefits which will
be achieved.
The exceptional items listed above have generated a net cash
inflow of GBP2,041,000 (2019: outflow of GBP694,000).
5. Employee benefits expenses
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------------------- ----------- ----------- ---------
Wages and salaries 299,199 275,829 568,758
Social Security costs 18,077 17,280 35,783
Other pension costs 4,324 3,001 6,912
Share-based payments 5,543 5,651 11,558
-----------------------
327,143 301,761 623,011
----------------------- ----------- ----------- ---------
The totals below relate to the monthly average number of
employees during the period, not the total number of employees
at the end of the year (including directors on a service
contract).
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
Number Number Number
-------------------------- ---------- ---------- -------
Full-time equivalents
Managerial/administration 4,594 4,419 4,442
Hourly paid staff 21,647 20,825 21,035
--------------------------
26,241 25,244 25,477
-------------------------- ---------- ---------- -------
26 January 27 January 28 July
2020 2019 2019
Number Number Number
-------------------------- ---------- ---------- -------
Total employees
Managerial/administration 4,687 4,518 4,541
Hourly paid staff 38,517 36,863 37,358
--------------------------
43,204 41,381 41,899
-------------------------- ---------- ---------- -------
The shares awarded as part of the share 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.
Share-based payments Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
-------------------------------------------- ---------- ---------- ---------
Shares awarded during the year (shares) 568,821 802,069 1,390,290
Average price of shares awarded (pence) 1,542 1,303 1,313
Market value of shares vested during the
year (GBP000) 9,774 14,199 17,173
Total liability of the share-based payments
scheme (GBP000) 14,999 14,570 16,259
-------------------------------------------- ---------- ---------- ---------
6. Finance income and costs
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------------------------------------------- ----------- ----------- ---------
Finance costs
Interest payable on bank loans and overdrafts 9,738 10,504 21,089
Amortisation of bank loan issue costs
(note 10) 722 58 925
Interest payable on swaps 6,561 6,287 12,705
Interest payable on obligations under
finance leases 207 144 379
Interest payable on private placement 1,280 - -
Finance costs excluding lease interest 18,508 16,993 35,098
Interest payable on leases 11,078 - -
Total finance costs 29,586 16,993 35,098
Bank interest receivable (41) (26) (41)
Lease interest receivable (225) - -
Total finance income (266) (26) (41)
The finance costs in the income statement were covered 2.8 times
by earnings before interest, tax and exceptional items.
On a pre-IFRS 16 basis, the finance costs in the income
statement were covered 4.1 times (2019: 4.0 times) by earnings
before interest, tax and exceptional items.
7. Income tax expense
(a) Tax on profit on ordinary activities
At the balance sheet date, the standard rate of corporation tax
in the UK was scheduled to change from 19.0% to 17.0%,
with effect from 1 April 2020. Accordingly, the company's
profits for this accounting period are taxed at the weighted
average rate of 18.33% (2019: 19.00%).
On 11 March 2020, the chancellor presented the UK budget
announcement and confirmed that the rate of corporation tax would
remain at 19% from 1 April 2020. This is expected to be
substantively enacted by the year-end balance sheet date.
As a result of this post balance sheet announcement, the
prevailing tax rate used to calculate the income and deferred tax
liabilities for the year ended 26 July 2020 will be 19%, instead of
18.33% used in the half-year results. Furthermore, the deferred tax
balances will be recalculated at the year end to 19%; it is
anticipated that this will result in a rate-change adjustment of
approximately GBP3.4m.
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
-------------------------------------------- ----------- ----------- ---------
Income tax before exceptional items
Current income tax:
Current income tax charge 13,556 11,802 23,406
Current income tax - impact of IFRS 16 (1,189) - -
Previous period adjustment (18) (415) (922)
-----------
Total current income tax 12,349 11,387 22,484
Deferred tax:
Temporary differences (1,051) (452) 2,174
Previous period adjustment - (159) (1,828)
-------------------------------------------- -----------
Total deferred tax (1,051) (611) 346
Total tax expense before exceptional items 11,298 10,776 22,830
-------------------------------------------- ----------- ----------- ---------
Exceptional income tax
Current income tax:
Current income tax charge (1,509) (99) (273)
-----------
Total current income tax (1,509) (99) (273)
Deferred tax:
Temporary differences (292) - 85
-------------------------------------------- ----------- -----------
Total deferred tax (292) - 85
Total exceptional income tax (1,801) (99) (188)
-------------------------------------------- ----------- ----------- ---------
Tax charge in the income statement 9,497 10,677 22,642
-------------------------------------------- ----------- ----------- ---------
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
Taken through equity GBP000 GBP000 GBP000
-------------------------------------------- ----------- ----------- ---------
Current tax on share-based payment (259) (536) (514)
Deferred tax on share-based payment 139 138 5
-------------------------------------------- -----------
Tax credit (120) (398) (509)
-------------------------------------------- ----------- ----------- ---------
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
Taken through comprehensive income GBP000 GBP000 GBP000
-------------------------------------------- ----------- ----------- ---------
Deferred tax on swaps (1,364) 11 (4,243)
-------------------------------------------- ----------- ----------- ---------
The impact on the tax charge of the introduction of IFRS 16 is
shown in the table above. There was no impact on deferred tax,
as all amounts resulting for the adoption of IFRS charged to the
income statement were fully allowable.
7. Income tax expense (continued)
(b) Reconciliation of the total tax charge
The taxation charge for the 26 weeks ended 26 January 2020 is
based on the pre-exceptional profit before tax of GBP51.6m and the
estimated effective tax rate before exceptional items for the 26
weeks ended 26 January 2020 of 21.9% (2019: 21.4%).
This comprises a pre-exceptional current tax rate of 23.9%
(2019: 22.6%) and a pre-exceptional deferred tax credit of 2.0%
(2019: 1.2%).
The UK standard weighted average tax rate for the period is
18.33% (2019: 19.00%). The current tax rate is higher than
the UK standard weighted average tax rate owing mainly to
depreciation which is not eligible for tax relief.
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
------------------------------------------- ----------- ----------- ---------
Profit before income tax 51,625 50,276 102,459
Profit multiplied by the UK standard
rate of 9,463 9,552 19,467
corporation tax of 18.33% (2019: 19.00%)
Abortive acquisition costs and disposals 95 77 85
Other disallowables (357) 167 384
Other allowable deductions (33) (24) (111)
Capital gains - effects of reliefs 150 695 (380)
Non-qualifying depreciation 1,442 731 2,487
Deduction for shares and SIPs 41 43 (449)
Remeasurement of other balance sheet
items (23) (47) (71)
Unrecognised losses in overseas companies 539 155 557
Unrecognised losses capital losses - - 3,611
Previous year adjustment - current tax (19) (414) (922)
Previous year adjustment - deferred tax - (159) (1,828)
------------------------------------------- ----------- ---------
Total tax expense before exceptional
items 11,298 10,776 22,830
------------------------------------------- ----------- ----------- ---------
Exceptional profit before income tax (15,948) (1,651) (7,040)
Profit multiplied by the UK standard
rate of (2,923) (314) (1,337)
corporation tax of 18.33% (2019: 19.00%)
Other disallowables 555 61 183
Capital gains - effects of reliefs - - 85
Non-qualifying depreciation 567 154 881
------------------------------------------- ----------- ----------- ---------
Total tax expense on exceptional items (1,801) (99) (188)
------------------------------------------- ----------- ----------- ---------
Total tax expense reported in the income
statement 9,497 10,677 22,642
------------------------------------------- ----------- ----------- ---------
7. Income tax expense (continued)
(c) Deferred tax
The deferred tax in the balance sheet is as follows:
Deferred tax liabilities Accelerated Other Total
tax
depreciation temporary
differences
GBP000 GBP000 GBP000
------------------------------------- ------------- -------------- --------
At 28 July 2019 36,799 4,255 41,054
Previous year movement posted - - -
to the income statement
Movement during year posted
to the income statement (1,778) (3) (1,781)
Impact of tax rate change posted to - - -
the income statement
At 26 January 2020 35,021 4,252 39,273
---------------------------------------- ------------- -------------- --------
Deferred tax assets Share Interest-rate Total
based swaps
payments
GBP000 GBP000 GBP000
------------------------------------- ------------- -------------- --------
At 28 July 2019 1,638 8,342 9,980
Previous year movement posted - - -
to the income statement
Movement during year posted
to the income statement (438) - (438)
Movement during year posted to
comprehensive income - 1,364 1,364
Movement during year posted
to equity (139) - (139)
At 26 January 2020 1,061 9,706 10,767
---------------------------------------- ------------- -------------- --------
Deferred tax assets and liabilities have been offset as
follows:
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
---------------------------------------- ---------- ---------- --------
Deferred tax liabilities 39,273 43,246 41,054
Offset against deferred tax assets (1,061) (4,740) (1,638)
-----------------------------------------
Deferred tax liabilities 38,212 38,506 39,416
------------------------------------------- ---------- ---------- --------
Deferred tax assets 10,767 8,828 9,980
Offset against deferred tax liabilities (1,061) (4,740) (1,638)
-----------------------------------------
Deferred tax asset 9,706 4,088 8,342
------------------------------------------- ---------- ---------- --------
As at 26 January 2020, the company had a potential deferred tax
asset of GBP3.9m relating to capital losses.
A deferred tax asset has not been recognised, as there is not
sufficient certainty of recovery.
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 104,810,288 (2019: 105,501,035), 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.
Weighted average number of shares Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
----------------------------------- ------------ ------------ ------------
Shares in issue (used for diluted
EPS) 104,810,288 105,501,035 105,439,345
Shares held in trust (2,143,674) (2,248,342) (2,313,464)
Shares in issue less shares held
in trust (used for basic EPS) 102,666,614 103,252,693 103,125,881
----------------------------------- ------------ ------------ ------------
The weighted average number of shares held in trust for employee
share schemes has been adjusted to exclude those shares which have
vested, yet remain in trust.
(b) Earnings per share
26 weeks ended 26 January 2020 Profit Basic EPS Diluted
unaudited EPS
GBP000 pence pence
------------------------------------------- -------- ---------- --------
Earnings before IFRS 16 31,287 30.5 29.8
Impact of IFRS 16 (5,107) (5.0) (4.8)
------------------------------------------- -------- ---------- --------
Earnings (profit after tax) 26,180 25.5 25.0
Exclude effect of exceptional items
after tax 14,147 13.8 13.5
------------------------------------------- -------- ---------- --------
Earnings before exceptional items 40,327 39.3 38.5
Impact of IFRS 16 5,107 5.0 4.8
------------------------------------------- -------- ---------- --------
Earnings before exceptional items
and IFRS 16 45,434 44.3 43.3
Exclude effect of property gains/(losses) 172 0.1 0.2
--------
Underlying earnings before exceptional
items 45,606 44.4 43.5
------------------------------------------- -------- ---------- --------
26 weeks ended 27 January 2019 unaudited Profit Basic EPS Diluted EPS
GBP000 pence pence
---------------------------------------------- ------- --------- -----------
Earnings (profit after tax) 37,948 36.8 36.0
Exclude effect of exceptional items after tax 1,552 1.5 1.4
---------------------------------------------- -------
Earnings before exceptional items 39,500 38.3 37.4
Exclude effect of property gains/(losses) (3,772) (3.7) (3.5)
Underlying earnings before exceptional items 35,728 34.6 33.9
---------------------------------------------- ------- --------- -----------
52 weeks ended 28 July 2019 audited Profit Basic EPS Diluted EPS
GBP000 pence pence
---------------------------------------------- ------- --------- -----------
Earnings (profit after tax) 72,777 70.6 69.0
Exclude effect of exceptional items after tax 6,852 6.6 6.5
---------------------------------------------- -------
Earnings before exceptional items 79,629 77.2 75.5
Exclude effect of property gains/(losses) (5,599) (5.4) (5.3)
Underlying earnings before exceptional items 74,030 71.8 70.2
---------------------------------------------- ------- --------- -----------
8. Earnings and free cash flow per share
(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, 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 schemes.
Free Basic free Diluted
cash free
flow cash flow cash flow
per share per share
GBP000 pence pence
-------------------------------- ------- ----------- ----------
26 weeks ended 26 January 2020 48,966 47.7 46.7
26 weeks ended 27 January 2019 71,650 69.4 67.9
52 weeks ended 28 July 2019 96,998 94.1 92.0
-------------------------------- ------- ----------- ----------
(d) Owners' earnings per share
Owners' earnings measure the earnings attributable to
shareholders from current activities, adjusted for significant
non-cash items and one-off items. Owners' earnings are calculated
as profit before tax, exceptional items, depreciation and
amortisation, lease interest and property gains and losses less
reinvestment in current properties, payment of operating leases and
cash tax. Cash tax is defined as the current year's current tax
charge.
26 weeks ended 26 January 2020 Owners' Basic Diluted
unaudited
Earnings Owners' EPS Owners'
EPS
GBP000 pence pence
--------------------------------------- --------- ------------ --------
Profit before tax and exceptional
items (income statement) 51,625 50.3 49.3
Exclude depreciation and amortisation
(note 2) 64,102 62.4 61.2
Exclude lease interest (note 6) 10,853 10.6 10.4
Less cash reinvestment in current
properties (29,350) (28.6) (28.0)
Exclude property gains and losses
(note 3) (175) (0.2) (0.2)
Less lease interest (9,134) (8.9) (8.7)
Less lease principal payment (19,356) (18.9) (18.6)
Less cash tax (note 7) (12,367) (12.0) (11.8)
Owners' earnings 56,198 54.7 53.6
--------------------------------------- --------- ------------ --------
26 weeks ended 27 January 2019 Owners' Basic Diluted
unaudited
Earnings Owners' EPS Owners'
EPS
GBP000 pence pence
--------------------------------------- --------- ------------ --------
Profit before tax and exceptional
items (income statement) 50,276 48.7 47.7
Exclude depreciation and amortisation
(note 2) 40,868 39.6 38.7
Less cash reinvestment in current
properties (24,919) (24.1) (23.6)
Exclude property gains and losses
(note 3) (3,772) (3.7) (3.5)
Less cash tax (note 7) (11,802) (11.4) (11.3)
Owners' earnings 50,651 49.1 48.0
--------------------------------------- --------- ------------ --------
52 weeks ended 28 July 2019 audited Owners' Basic Diluted
Earnings Owners' EPS Owners'
EPS
GBP000 pence pence
--------------------------------------- --------- ------------ --------
Profit before tax and exceptional
items (income statement) 102,459 99.4 97.2
Exclude depreciation and amortisation
(note 2) 81,811 79.3 77.6
Less cash reinvestment in current
properties (55,239) (53.6) (52.4)
Exclude property gains and losses
(note 3) (5,599) (5.4) (5.3)
Less cash tax (note 7) (23,406) (22.7) (22.2)
Owners' earnings 100,026 97.0 94.9
--------------------------------------- --------- ------------ --------
8. Earnings and free cash flow per share (continued)
Analysis of additions by type Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
------------------------------------------- ----------- ----------- ---------
Reinvestment in existing pubs 34,124 24,919 55,239
Investment in new pubs and pub extensions 23,679 14,934 35,172
Freehold reversions and investment
properties 70,732 55,653 77,207
128,535 95,506 167,618
------------------------------------------- ----------- ----------- ---------
Analysis of additions by category Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
------------------------------------------- ----------- ----------- ---------
Property, plant and equipment (note
13) 121,687 93,032 161,242
Intangible assets (note 12) 773 2,381 5,925
Investment properties (note 14) 6,075 - -
Other non-current assets (note 15) - 93 451
128,535 95,506 167,618
------------------------------------------- ----------- ----------- ---------
(e) Operating profit per share
Operating Basic operating Diluted
operating
profit profit per profit
share per share
GBP000 pence pence
-------------------------------- ---------- ---------------- -----------
26 weeks ended 26 January 2020 76,560 74.6 73.0
26 weeks ended 27 January 2019 63,471 61.5 60.2
52 weeks ended 28 July 2019 131,917 127.9 125.1
-------------------------------- ---------- ---------------- -----------
Operating profit in the table above excludes the impact of IFRS
16.
9. Cash generated from operations
Unaudited* Unaudited Unaudited Audited
26 weeks 26 weeks 26 weeks 52 weeks
ended ended ended ended
26 January 26 January 27 January 28 July
2020 2020 2019 2019
GBP000 GBP000 GBP000 GBP000
--------------------------------------- ----------- ----------- ----------- ---------
Profit for the period 31,287 26,180 37,948 72,777
Adjusted for:
Tax (note 7) 10,686 9,497 10,677 22,642
Share-based charges (note 2) 5,543 5,543 5,651 11,558
Loss on disposal of property, plant
and equipment (note 3) 2,913 2,913 (3,618) (3,635)
Disposal of capitalised leases (note - (347) - -
3)
Net onerous lease provision (note
3) - - 523 1,762
Net impairment charge (note 3) 12,326 12,326 806 3,695
Interest receivable (note 6) (41) (41) (26) (41)
Interest payable (note 6) 17,786 17,786 16,935 34,173
Lease interest receivable (note - (225) - -
6)
Lease interest payable (note 6) - 11,078 - -
Amortisation of bank loan issue
costs (note 6) 722 722 58 925
Depreciation of property, plant
and equipment (note 13) 37,718 37,718 36,825 73,779
Amortisation of intangible assets
(note 12) 1,925 1,925 3,847 7,634
Depreciation on investment properties
(note 14) 34 34 27 55
Amortisation of other non-current
assets (note 15) 192 - 169 343
Aborted properties costs 33 33 407 430
Amortisation of right-of-use assets - 24,425 - -
(note 25)
--------------------------------------- ----------- ----------- ----------- ---------
121,124 149,567 110,229 226,097
Change in inventories 264 264 531 (417)
Change in receivables (5,801) (6,341) (1,206) 1,228
Change in payables 15,959 16,546 23,678 268
Cash flow from operating activities 131,546 160,036 133,232 227,176
--------------------------------------- ----------- ----------- ----------- ---------
*This column shows the cash generated from operations as it
would have been reported, before the introduction for IFRS 16.
The amount of GBP131,546,000 shown is presented at the start of
the pre-IFRS 16 cash flow presented within the
primary statements.
The difference of GBP28,490,000 between the cash flow from
operating activities of GBP160,036,000 and the pre-IFRS 16
number
of GBP131,546,000 is formed from the net payments on leases
accounted for under IFRS 16, as disclosed in note 25 of payments
made of GBP29,232,000, less payments received of GBP742,000. These
payments are deducted on the cash flow statement, resulting in a
change in cash and cash equivalents and free cash flow being the
same before and after the introduction of IFRS 16.
10. Analysis of change in net debt
28 July IFRS Cash Non-cash 26 January
2019 migration flows movement 2020
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ---------- ---------- --------- --------- -----------
Borrowings
Cash in hand 42,950 - 4,463 - 47,413
Finance lease creditor -
due before one year (3,287) - 1,431 (1,430) (3,286)
Current net borrowings 39,663 - 5,894 (1,430) 44,127
Bank loans - due after one
year (770,076) - 25,000 (702) (745,778)
Finance lease creditor -
due after one year (6,607) - - 1,430 (5,177)
Private placement - due
after one year - - (97,679) (20) (97,699)
Non-current net borrowings (776,683) - (72,679) 708 (848,654)
Net debt (737,020) - (66,785) (722) (804,527)
Derivatives
Interest-rate swaps asset
- due after one year 321 - - (321) -
Interest-rate swaps liability
- due after one year (49,393) - - (7,703) (57,096)
Total derivatives (49,072) - - (8,024) (57,096)
Net debt after derivatives (786,092) - (66,785) (8,746) (861,623)
Operating leases
Operating lease assets -
due before one year - 1,583 (556) 534 1,561
Operating lease assets -
due after one year - 11,853 - (534) 11,319
Operating lease obligations
- due before one year - (61,252) 19,912 (17,988) (59,328)
Operating lease obligations
- due after one year - (570,052) - 32,554 (537,498)
Net lease liabilities - (617,868) 19,356 14,566 (583,946)
Net debt after derivatives
and lease liabilities (786,092) (617,868) (47,429) 5,820 (1,445,569)
The cash movement on the private placement is disclosed in the
cash flow statement as an advance under private placement
of GBP98,000,000 and a cash payment of loan issue costs of
GBP321,000.
Non-cash movements
The non-cash movement in bank loans and the private placement
relate to the amortisation of loan issue costs.
The amortised charge for the year of GBP722,000 is disclosed in
note 6. These are upfront payments made to obtain new borrowings.
These costs are charged to the income statement over the expected
life of the loan.
The movement in interest-rate swaps relates to the change in the
'mark to market' valuations for the year.
The migration movement of GBP617,868,000 is the recognition of
the lease liability of GBP631,304,000 and the lease asset of
GBP13,436,000 on adoption of IFRS 16. These amounts are disclosed
in note 25. The non-cash movement in lease liabilities is analysed
in the table below.
Non-cash movement in net lease liabilities Unaudited
26 January
2020
GBP000
Recognition of new leases (note 25) (27,361)
Remeasurements of existing leases (note 25) 77
Disposals of lease (note 25) 41,656
Exchange differences (note 25) 194
Non-cash movement in net lease liabilities 14,566
10. Net debt (continued)
The table below calculated a ratio between net debt, being
borrowings less cash and cash equivalents, and earnings before
interest, tax and deprecation (EBITDA). The numbers in this table
are all before the effect of IFRS 16.
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Profit before tax (income
statement) 57,921 50,276 102,459
Interest (note 6) 18,467 16,967 35,057
Depreciation and amortisation
(note 2) 39,869 40,868 81,811
Earnings before interest, tax and depreciation
(EBITDA) 116,257 108,111 219,327
Rolling EBITDA
Last full year 219,327 214,496 -
Last half year (108,111) (114,100) -
Rolling earnings before interest, tax
and depreciation (EBITDA) 227,473 208,507 219,327
Net debt/EBITDA 3.54 3.47 3.36
11. Dividends paid and proposed
Unaudited Unaudited Audited
26 weeks 26 weeks 52 weeks
ended ended ended
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Paid in the period
2018 final dividend - 8,435 8,435
2019 interim dividend - - 4,217
2019 final dividend 8,371 - -
8,371 8,435 12,652
Dividends in respect of the period
Interim dividend - 4,217 4,217
Final dividend - - 8,371
- 4,217 12,614
Dividend per share - 4p 12p
Dividend cover 3.1 4.5 5.8
Dividend cover is calculated as profit after tax and exceptional
items over dividend paid.
12. Intangible assets
Computer Assets Total
software under
and
development construction
GBP000 GBP000 GBP000
Cost:
At 29 July 2018 66,944 1,799 68,743
Additions 658 1,723 2,381
Transfers 165 (165) -
At 27 January 2019 67,767 3,357 71,124
Additions 1,075 2,469 3,544
Transfers 1,397 (1,397) -
Disposals (22) - (22)
At 28 July 2019 70,217 4,429 74,646
Additions 7 766 773
Transfers 3,857 (3,857) -
At 26 January 2020 74,081 1,338 75,419
Accumulated amortisation and impairment:
At 29 July 2018 (43,964) - (43,964)
Provided during the
period (3,847) - (3,847)
At 27 January 2019 (47,811) - (47,811)
Provided during the
period (3,787) - (3,787)
Disposals 22 - 22
At 28 July 2019 (51,576) - (51,576)
Provided during the
period (1,925) - (1,925)
Impairment loss (note
4) (9,540) - (9,540)
At 26 January 2020 (63,041) - (63,041)
Net book amount at
26 January 2020 11,040 1,338 12,378
Net book amount at
28 July 2019 18,641 4,429 23,070
Net book amount at
27 January 2019 19,956 3,357 23,313
Net book amount at
29 July 2018 22,980 1,799 24,779
The majority of intangible assets relates to computer software
and software development. Examples include the development
costs of our SAP accounting system, our Wisdom
property-maintenance system and the Wetherspoon app.
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 29 July 2018 1,110,875 356,160 617,800 54,202 2,139,037
Additions 40,278 1,602 14,438 36,714 93,032
Transfers 18,461 1,034 5,107 (24,602) -
Exchange differences (367) (68) (137) (595) (1,167)
Transfer to held for
sale (5,450) - (600) - (6,050)
Disposals (2,122) (1,975) (1,754) - (5,851)
Reclassification 17,641 (17,641) - - -
At 27 January 2019 1,179,316 339,112 634,854 65,719 2,219,001
Additions 35,269 827 23,776 8,338 68,210
Transfer from investment
properties 1,984 - - - 1,984
Transfers 5,228 458 209 (5,895) -
Exchange differences 593 90 227 889 1,799
Transfer to held for
sale 374 - (210) - 164
Disposals (5,483) (1,437) (2,595) - (9,515)
Reclassification 11,891 (11,891) - - -
At 28 July 2019 1,229,172 327,159 656,261 69,051 2,281,643
Additions 64,215 480 15,650 41,342 121,687
Transfers 18,826 636 5,963 (25,425) -
Exchange differences (1,426) (148) (424) (1,608) (3,606)
Transfer to held for
sale (1,335) - (458) - (1,793)
Disposals (4,677) (3,828) (4,492) - (12,997)
Reclassification 24,914 (24,914) - - -
At 26 January 2020 1,329,689 299,385 672,500 83,360 2,384,934
Accumulated depreciation and impairment:
At 29 July 2018 (222,037) (184,575) (426,352) - (832,964)
Provided during the
period (9,058) (6,019) (21,748) - (36,825)
Exchange differences 39 - 41 - 80
Impairment loss - (545) (261) - (806)
Transfer to held for
sale 2,067 - 600 - 2,667
Disposals 1,459 2,000 1,647 - 5,106
Reclassification (10,308) 10,308 - - -
At 27 January 2019 (237,838) (178,831) (446,073) - (862,742)
Provided during the
period (9,213) (5,714) (22,027) - (36,954)
Transfer from investment
properties (76) - - - (76)
Exchange differences (84) (18) (158) - (260)
Impairment loss (1,326) (859) (559) - (2,744)
Transfer to held for
sale (4) - 77 - 73
Disposals 2,189 1,497 2,345 - 6,031
Reclassification (7,473) 7,473 - - -
At 28 July 2019 (253,825) (176,452) (466,395) - (896,672)
Provided during the
period (9,697) (5,501) (22,520) - (37,718)
Exchange differences 122 (40) 178 - 260
Impairment loss (495) (682) (1,609) - (2,786)
Transfer to held for
sale 1,028 - 415 - 1,443
Disposals 1,030 3,841 4,199 - 9,070
Reclassification (14,860) 14,860 - - -
At 26 January 2020 (276,697) (163,974) (485,732) - (926,403)
Net book amount at
26 January 2020 1,052,992 135,411 186,768 83,360 1,458,531
Net book amount at
28 July 2019 975,347 150,707 189,866 69,051 1,384,971
Net book amount at
27 January 2019 941,478 160,281 188,781 65,719 1,356,259
Net book amount at
29 July 2018 888,838 171,585 191,448 54,202 1,306,073
14. Investment property
The company owns three (2019: two) freehold property with
existing tenants - and these assets have been classified
as investment properties. Last year, the company started
developing one of its investment properties into a pub.
The property was transferred to property, plant and equipment.
During this year, the company has purchased a further
two investment properties.
GBP000
Cost:
At 29 July 2018 7,751
At 27 January 2019 7,751
Transfer to property, plant and
equipment (1,984)
At 28 July 2019 5,767
Additions 6,075
At 26 January 2020 11,842
Accumulated depreciation and impairment:
At 29 July 2018 (257)
Provided during the
period (27)
At 27 January 2019 (284)
Provided during the
period (28)
Transfer to property, plant and
equipment 76
At 28 July 2019 (236)
Provided during the
period (34)
At 26 January 2020 (270)
Net book amount at
26 January 2020 11,572
Net book amount at
28 July 2019 5,531
Net book amount at
27 January 2019 7,467
Net book amount at
29 July 2018 7,494
Rental income received in the period from the current investment
properties was GBP 326,000 (2019: GBP 157,000 ).
Operating costs, excluding depreciation, incurred in relation to
these properties amounted to GBP2 ,000 (2019: GBP 4,000 ).
In the opinion of the directors, the fair value of the
investment properties is approximately GBP18,000,000.
15. Other non-current assets
GBP000
Cost:
At 29 July 2018 12,727
Additions 93
At 27 January 2019 12,820
Additions 358
Disposals (75)
At 28 July 2019 13,103
Transferred to right-of-use
assets (13,103)
At 26 January 2020 -
Accumulated amortisation and impairment:
At 29 July 2018 (4,802)
Provided during the
period (169)
At 27 January 2019 (4,971)
Provided during the
period (174)
Impairment loss (145)
Disposals 75
At 28 July 2019 (5,215)
Transferred to right-of-use
assets 5,215
At 26 January 2020 -
Net book amount at -
26 January 2020
Net book amount at
28 July 2019 7,888
Net book amount at
27 January 2019 7,849
Net book amount at
29 July 2018 7,925
Other non-current assets are leases premiums, paid on leasehold
properties. Please see note 25 for all
IFRS 16 migration adjustments.
16. Inventories
Bar, food and non-consumable stock held at our pubs and national
distribution centre.
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------- --------
Goods for resale
at cost 23,453 22,769 23,717
17. Receivables
This category relates to situations in which third parties owe
the company money. Examples include rebates from suppliers
and overpayments of certain taxes.
Prepayments relate to payments which have been made in respect
of liabilities after the period's end.
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Other receivables 1,810 1,054 1,135
Receivables loss
allowance - (22) (8)
Accrued income 1,777 1,593 2,327
Prepayments 18,804 21,710 18,449
22,391 24,335 21,903
Accrued income relates to discounts which are calculated based
on certain products being delivered at an agreed rate per item.
Credit risk Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Due from suppliers
- not due 1,451 996 898
Due from suppliers
- overdue 359 58 237
1,810 1,054 1,135
Credit risk is the risk that a counterparty does not settle its
financial obligation with the company. At the year end, the company
has assessed the credit risk on amounts due from suppliers, based
on historic experience, meaning that the expected
lifetime credit loss was GBPNil. Cash and cash equivalents are
also subject to the impairment requirements of IFRS 9 - the
identified impairment loss was immaterial.
18. Assets held for sale
These relate to situations in which the company has exchanged
contracts to sell a property, but the transaction is
not yet complete. As at 26 January 2020, one site was classified
as held for sale (2019: two).
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Property, plant and
equipment 350 3,383 3,146
19. Cash and cash equivalents
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Cash and cash equivalents 47,413 37,354 42,950
Cash at bank earns interest at floating rates, based on daily
bank deposit rates.
20. Trade and other payables
This category relates to money owed by the company to suppliers
and the government.
Accruals refer to allowances made by the company for future
anticipated payments to suppliers and other creditors.
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
-----------
Trade payables 165,309 202,514 162,070
Other payables 27,362 18,073 18,056
Other tax and Social Security 55,398 53,266 62,081
Accruals and deferred income 67,704 46,648 66,119
315,773 320,501 308,326
21. Borrowings
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
----------- --------
Current (due within
one year)
Other
Finance lease obligations 3,286 3,207 3,287
Total current borrowings 3,286 3,207 3,287
----------- --------
Non-current (due after
one year)
Bank loans
Variable-rate facility 750,000 750,000 775,000
Unamortised bank loan
issue costs (4,222) 17 (4,924)
745,778 750,017 770,076
Private placement
Fixed-rate facility 98,000 - -
Unamortised private placement
issue costs (301) - -
97,699 - -
Other
Finance lease obligations 5,177 8,095 6,607
Total non-current borrowings 848,654 758,112 776,683
----------- --------
22. Provisions
Legal Onerous Total
claims lease
GBP000 GBP000 GBP000
At 28 July 2019 3,523 2,483 6,006
Charged to the income statement:
- Transferred to right-of-use
assets (note 25) - (2,483) (2,483)
- Additional charges 1,053 - 1,053
- Unused amounts reversed (496) - (496)
- Used during year (964) - (964)
At 26 January 2020 3,116 - 3,116
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Current 3,116 5,499 4,072
Non-current - 2,453 1,934
Total provisions 3,116 7,952 6,006
Legal claims
The amounts represent a provision for ongoing legal claims
brought against the company by customers and employees
in the normal course of business. Owing to the nature of the
business, we expect to have a continuous provision for
outstanding
employee and public liability claims. All claim provisions are
considered current and are not, therefore, discounted to take into
account the passage of time.
Onerous lease
The amounts represent a provision for future rent payments on
sites which are not expected to generate sufficient profits.
Also included are provisions on any sublet properties for which
rent is not fully recovered. These provisions are expected to be
utilised over a period of up to 22 years and are discounted to take
into account the passage of time.
These amounts were transferred into the right-of-use assets
created on migration to IFRS 16.
23. Financial instruments
The table below analyses the company's financial liabilities in
relevant maturity groupings, based on the remaining period
at the balance sheet date to the contractual maturity date. The
amounts disclosed in the table are the contractual undiscounted
cash flows.
Maturity profile of financial liabilities
More
Within than
1-2 2-3 3-4
1 year years years years 4-5 years 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 26 January 2020
Bank loans 20,310 20,310 20,310 770,317 - - 831,248
Private placement 2,920 2,920 2,920 2,920 2,920 103,841 118,443
Trade and other payables 260,375 - - - - - 260,375
Derivatives 13,141 10,120 6,929 5,113 3,017 17,332 55,653
Finance lease obligations 3,286 3,286 2,465 - - - 9,037
More
Within than
1-2 2-3 3-4
1 year years years years 4-5 years 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 28 July 2019
Bank loans 20,039 20,039 20,039 20,039 786,726 - 866,882
Trade and other payables 246,245 - - - - - 246,245
Derivatives 13,089 13,089 6,962 6,877 3,052 18,651 61,720
Finance lease obligations 3,287 3,287 3,287 819 - - 10,680
----------
On 20 August 2019, the company authorised the issue and sale of
GBP98m aggregate principal amount of its
Senior Secured Notes due 20 August 2026; this extends its total
facilities, excluding finance leases, from GBP895m to GBP993m.
At the balance sheet date, the company had loan facilities of
GBP993m (2019: GBP895m) as detailed below:
n Secured revolving-loan facility of GBP875m
o Matures January 2024
o 14 participating lenders
n Private placement of GBP98m
o Matures August 2026
o The purchase of loan notes split among five participants
n Overdraft facility of GBP20m
The company has hedged its interest-rate liabilities to its
banks by swapping the floating-rate debt into fixed-rate debt
which
has fixed GBP770m of these borrowings at rates of between 0.61%
and 3.84%. The effective weighted average interest rate of
the swap agreements used during the year is 2.82% (2019: 2.88%),
fixed for a weighted average period of 4.6 years
(2019: 4.8 years). In addition, the company has entered into
forward-starting interest-rate swaps as detailed in the table
below.
Weighted average by swap period:
From To Total swap Weighted average
value GBPm interest %
02/07/2018 29/07/2021 770 2.42
30/07/2021 30/07/2023 770 1.61
31/07/2023 30/07/2026 770 1.10
31/07/2026 30/06/2028 770 1.33
01/07/2028 29/03/2029 770 1.32
At the balance sheet date, GBP750m (2019: GBP750m) was drawn
down under the GBP875m unsecured-term revolving-loan facility.
The amounts drawn under this agreement can be varied, depending
on the requirements of the business. In future, it is
expected that the draw-down required by the company will be more
than GBP770m for the duration of the interest-rate swaps
detailed above.
23. Financial instruments (continued)
Capital risk management
The company's capital structure comprises shareholders' equity
and loans. The objective of capital management
is to ensure that the company is able to continue as a going
concern and provide shareholders with returns on
their investment, while managing risk.
The company does not have a specific measure for managing
capital structure; instead, the company plans its capital
requirements and manages its loans, dividends and share buybacks
accordingly. The company measures loans using
a ratio of net debt to EBITDA which was 3.54 times (2019: 3.47
times) at the period end.
Financial risks associated with financial instruments, including
credit risk and liquidity risk, are discussed in the
annual report 2019 in section 2 on page 49.
Fair value of financial assets and liabilities
IFRS 7 requires disclosure of fair value measurements by level,
using the following fair value measurement hierarchy:
n Quoted prices in active markets for identical assets or
liabilities (level 1)
n Inputs other than quoted prices included in level 1 which are
observable for the asset or liability,
either directly or indirectly (level 2)
n Inputs for the asset or liability which are not based on
observable market data (level 3)
The fair value of the interest-rate swaps is considered to be
level 2. All other financial assets and liabilities
are measured in the balance sheet at amortised cost - and their
valuation is also considered to be level 2.
Interest-rate and currency risks of financial liabilities
An analysis of the interest-rate profile of financial
liabilities, after taking account of all interest-rate swaps,
is set out in the following table.
Interest-rate and currency risks
of financial liabilities
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Analysis of interest-rate profile of financial
liabilities
Bank loans
Floating rate due after one
year - - 76
Fixed rate due after one year 745,778 750,017 770,000
745,778 750,017 770,076
Finance lease obligation
Fixed rate due in one year 3,286 3,207 3,287
Fixed rate due after one year 5,177 8,095 6,607
8,463 11,302 9,894
Private placement
Fixed rate due after one year 97,699 - -
97,699 -
851,940 761,319 779,970
The floating-rate borrowings are interest-bearing borrowings at
rates based on LIBOR, fixed for periods of up to one month.
The fixed-rate loan is that element of the company's borrowings
which has been fixed with interest-rate swaps.
23. Financial instruments (continued)
Fair values
In some cases, payments which are due to be made in the future
by the company or due to be received by the company
have to be given a fair value.
The table below highlights any differences between book value
and fair value of financial instruments.
Unaudited Unaudited Unaudited Unaudited Audited Audited
26 January 26 January 27 January 27 January 28 July 28 July
2020 2020 2019 2019 2019 2019
Book Fair Book Fair Book Fair
value value value value value value
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Financial assets at amortised
cost
Cash and cash equivalents 47,413 47,413 37,354 37,354 42,950 42,950
Operating lease assets 12,880 12,955 - - - -
Receivables 1,810 1,810 1,032 1,032 1,127 1,127
62,103 62,178 38,386 38,386 44,077 44,077
Financial liabilities
at amortised cost
Trade and other payables (260,375) (260,375) (267,235) (267,235) (246,245) (246,245)
Finance lease obligations (8,463) (8,478) (11,302) (11,600) (9,894) (9,915)
Operating lease obligations (596,826) (606,018) - - - -
Private placement (97,699) (99,457) - - - -
Borrowings (745,778) (746,554) (750,017) (749,150) (770,076) (771,093)
(1,709,141) (1,720,882) (1,028,554) (1,027,985) (1,026,215) (1,027,253)
Derivatives - cash flow
hedges
Non-current derivative
financial asset - - 11,420 11,420 321 321
Non-current derivative
financial liability (57,096) (57,096) (35,465) (35,465) (49,393) (49,393)
(57,096) (57,096) (24,045) (24,045) (49,072) (49,072)
The fair value of derivatives has been calculated by discounting
all future cash flows by the market yield curve at the
balance sheet date. The fair value of borrowings has been
calculated by discounting the expected future cash flows at the
year end's prevailing interest rates.
Obligations under finance leases
The minimum lease payments under finance leases fall due as
follows:
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
Within one year 3,286 3,207 3,287
In the second to fifth
year, inclusive 5,751 9,116 7,393
9,037 12,323 10,680
Less future finance
charges (574) (1,021) (786)
Present value of lease
obligations 8,463 11,302 9,894
Less amount due for settlement
within one year (3,286) (3,207) (3,287)
Amount due for settlement during the
second to fifth year, inclusive 5,177 8,095 6,607
All finance lease obligations are in respect of various equipment used in the business.
No escalation clauses are included in the agreements.
23. Financial instruments (continued)
Interest - rate swaps
At 26 January 2020, the company had fixed-rate swaps designated
as hedges of floating-rate borrowings.
The floating-rate borrowings are interest-bearing borrowings at
rates based on LIBOR, fixed for periods of up to one month.
Loss/(gain) Deferred Charged
on
interest-rate tax to equity
swaps
GBP000 GBP000 GBP000
As at 27 January 2019 24,045 (4,088) 19,957
Change in fair value posted to comprehensive
income 25,027 - 25,027
Deferred tax posted to comprehensive income - (4,254) (4,254)
As at 28 July 2019 49,072 (8,342) 40,730
Change in fair value posted to comprehensive
income 8,024 - 8,024
Deferred tax posted to comprehensive income - (1,364) (1,364)
As at 26 January 2020 57,096 (9,706) 47,390
No ineffectiveness arose during the period (2019: GBPNil).
Amounts charged to the profit and loss account in relation
to interest-rate swaps are charged to finance costs - see note
6.
Interest-rate hedges
The company's interest-rate swap agreements are in place as
protection against future changes in borrowing costs.
Under these agreements, the company pays a fixed interest charge
and receives variable interest income which matches
the variable interest payments made on the company's
borrowings.
There is an economic relationship among the company's
revolving-loan facility, the hedged item and the company's
interest-rate swaps, the hedging instruments, where the company
pays a floating interest charge on the loan and receives a
floating
interest-rate credit on the interest-rate swap. The
interest-rate swap agreement allows the company to receive a
floating interest-rate credit and requires the company to pay an
agreed fixed interest charge.
The company has established a hedging ratio of 1:1 between the
interest-rate swaps and the company's floating-rate borrowings,
meaning that floating interest rates paid should be identical to
the amounts received for a given amount
of borrowings.
These hedges could be ineffective, if the:
n period over which the borrowings were drawn were changed. This
could result in the borrowings
being made at a different floating rate than the interest-rate
swap.
n gross amount of borrowings were less than the value
swapped.
n impact of LIBOR reform were to cause a mismatch between the
interest rate of the swaps and
that of the company's debt.
The company tests hedge effectiveness prospectively using the
hypothetical derivative method and compares the changes
in the fair value of the hedging instrument with those in the
fair value of the hedged item attributable to the hedged risk.
Interest rate sensitivity
During the 26 weeks ended 26 January 2020, if the interest rates
on UK-denominated borrowings had been 1% higher,
with all other variables constant, pre-tax profit for the year
would have been increased by GBP146,000 and equity increased by
GBP67,386,000. The movement in equity arises from a change in the
'mark to market' valuation of the interest-rate swaps into which
the company has entered, calculated by a 1% shift of the market
yield curve. The company considers that a 1% movement in interest
rates represents a reasonable sensitivity to potential changes.
However, this analysis is for illustrative purposes only.
24. Other liabilities
Unaudited Unaudited Audited
26 January 27 January 28 July
2020 2019 2019
GBP000 GBP000 GBP000
------------
Operating lease
incentives - 11,235 10,930
-------
Included in other liabilities were lease incentives on leases
where the lessor retains substantially all of the risks and
benefits of ownership of the asset. The lease incentives were
recognised as a reduction in rent over the lease term and shown as
a liability on the balance sheet. These amounts now form part of
the right-of-use assets, please see note 25.
25. Leases
About 36% of the company's pubs are leasehold. New leases are
normally for 30 years, with a break clause after 15 years. Most
leases have upwards-only rent reviews, based on open-market rental
at the time of review, but most new pub leases
have an uplift in rent which is fixed at the start of the
lease.
(a) Right-of-use assets
The table below shows the movements in the company's
right-of-use assets.
GBP000
Cost:
Recognition of assets 617,837
Additions 27,361
Remeasurement (77)
Exchange differences (216)
Disposals (41,886)
At 26 January 2020 603,019
Accumulated depreciation and impairment:
Provided during the
period (24,425)
Exchange differences 4
Disposals 577
At 26 January 2020 (23,844)
Net book amount at
26 January 2020 579,175
25. Leases (continued)
(b) Leas e maturity profile
The tables below analyse the company's lease liabilities and
assets in relevant maturity groupings, based on the remaining
period at the balance sheet date to the end of the lease. The
amounts disclosed in the table are the contractual undiscounted
cash flows. The impact of discounting reconciles these amounts to
the values disclosed in the balance sheet.
Lease liabilities Unaudited Unaudited
maturity profile
26 January 28 July
2020 2019
GBP000 GBP000
Within one year 59,328 61,252
Between one and two
years 58,597 61,177
Between two and three
years 55,965 58,523
Between three and
four years 55,074 57,050
Between four and
five years 54,623 56,400
After five years 506,892 541,916
Lease commitments
payable 790,479 836,318
Discounting lease
liability (193,653) (205,014)
Lease liability 596,826 631,304
Lease assets maturity Unaudited Unaudited
profile
26 January 28 July
2020 2019
GBP000 GBP000
Within one year 1,561 1,583
Between one and two
years 1,501 1,545
Between two and three
years 1,413 1,448
Between three and
four years 1,258 1,391
Between four and
five years 1,110 1,125
After five years 8,850 9,338
15,693 16,430
Discounting lease
asset (2,813) (2,994)
Lease asset 12,880 13,436
The comparative numbers disclosed above are those included in
the migration note in the 2019 annual report.
25. Leases (continued)
(c) Lease liability
The tables below show the movements in the period of the lease
liability and the lease asset.
Lease liability Unaudited
26 January
2020
GBP000
At 28 July 2019 -
Recognition of liability 631,304
Additions 27,361
Remeasurements of leases (77)
Disposals (41,656)
Exchange differences (194)
Lease liabilities before
payments 616,738
Interest due 9,320
Payments made (29,232)
Net principal repayments (19,912)
At 26 January 2020 596,826
Future rental payments, up to the end of the lease, are
capitalised, including any agreed increases. Future rent
payments
could change as a result of open-market rent reviews or options
being exercised to terminate a lease early. Any changes in the
minimum unavoidable lease payments will be included as a
remeasurement of the lease liability.
Leases with lease terms of less than one year are not
capitalised.
Lease assets Unaudited
26 January
2020
GBP000
At 28 July 2019 -
Recognition of asset 13,436
Lease assets before
payments 13,436
Interest due 186
Payments made (742)
Net principal repayments (556)
At 26 January 2020 12,880
The company has sublet several of its leases which have been
capitalised above, with lease assets being the capitalised
future rent receivables from sublet sites.
The interest payable and receivable shown in the tables above is
the interest element of the payments made and received
in the period. These amounts differ from the lease interest
charged/credited to the income statement in the period - see note
6. The amounts charged/credited to the income statement in the
period will also include amounts due, but not paid, in the
period.
The incremental borrowing rate applied to lease liabilities and
assets was 2.7-3.9%, depending on the lease's length.
25. Leases (continued)
(d) IFRS 16 migration
IFRS 16 Leases
This standard replaces IAS 17 Leases and is effective for
accounting periods beginning on or after 1 January 2019.
The standard was adopted by the company on 29 July 2019.
When the new standard became effective, the company recognised,
on the balance sheet, a right-of-use asset and a lease liability
for future lease payments, in respect of all leases, excluding
those with terms less than 12 months and those for
low-value assets.
Lessor accounting remains similar to the previous standard. The
lessor continues to classify leases as finance or operating leases,
depending on whether the risks and rewards of ownership have been
transferred to the lessee. Some of the company's sublet properties
were classified as finance leases under the new standard, as the
risks and rewards of ownership of the IFRS 16 right-of-use asset
was transferred to the lessee, whereas, under IAS 17, there was no
asset recognised in the accounts;
as a result, the leases were treated as operating leases.
Transition
On 29 July 2019, the company adopted the standard using the
modified retrospective approach. The new standard allows, on a
lease-by-lease basis, for the value of the right-of-use assets to
be determined as if the lease had started on the date of transition
or the start date of the lease. This choice does not affect the
recognised lease liability, but does affect the value of the asset.
Valuing on the day of transition results in a right-of-use asset of
broadly the same value as the lease liability. Valuing at the start
date of the lease results in a lower asset value at transition,
reflecting the amortisation which would have been charged on the
asset between the start of the lease and the date of transition.
The reduction in the asset value would be offset by a reduction in
distributable reserves on the balance sheet. The company has chosen
to value all leases on the date of transition.
The company has elected to use the following practical
exemptions in transitioning to IFRS 16:
n The application of a single discount rate to a portfolio of
leases with reasonably similar characteristics
n The use of existing onerous lease provisions, rather than
preforming an impairment review on right-of-use assets
n The use of hindsight in determining the lease term
Balance sheet
On 29 July 2019, the company recognised a right-of-use asset of
GBP618m, a lease liability of GBP631m and a finance lease asset
of GBP14m, related to sublet sites. The right-of-use assets
comprise the net lease liability of GBP617m, rent prepayments of
GBP14m, operating lease incentives of GBP11m and onerous leases of
GBP2m. There was no adjustment to retained earnings.
As at 28 July 2019, the company had contractual operating lease
commitments payable of GBP836m and contractual operating lease
commitments receivable of GBP23m. A reconciliation to the
transition value is provided below.
Income statement
The total profit and loss charge over the life of a lease will
remain unchanged under IFRS 16, but the new standard will change
the pattern of how the expense is recognised in the income
statement, over time, with more costs recognised in the early years
of a lease and fewer in its later years. The expense will be
recognised as a depreciation and interest charge replacing the
operating expenses under IAS 17.
In the 2019 annual report, the company estimated that, for the
year ending 26 July 2020, EBITDA will have increased by
GBP58m and operating profit by GBP8m. Finance costs are expected
to increase by GBP22m, resulting in a decrease in profit before tax
of GBP14m. These estimates are based on the leaseholds held at year
end and will be affected by the company purchasing the freehold
interest in its leasehold sites.
Tax impact on changes to the income statement
The IFRS 16 depreciation and interest expense will be deducted
when calculating current tax. It is estimated, in the current
financial year, that current tax will be reduced by GBP2m. The
reduction in tax payments in the early years of a lease will be
offset by higher tax payments in its later years.
The company expects a small increase in the effective tax rate.
This is due to disallowable expenses, which will remain unchanged,
being a larger proportion of reduced profits.
Cash flow statement
On the application of IFRS 16, there will be no impact on cash
flows, except in relation to tax payments. The presentation of cash
flows will change. Cash flows from operating activities will
increase, yet will be exactly offset by an increase in interest and
lease principal payments.
25. Leases (continued)
The table below shows the transition adjustments applied to the
opening balance sheet for the year ending 26 July 2020.
July 2019 IFRS 16 Re-stated
GBP000 GBP000 GBP000
Other 1,422,235 - 1,422,235
Other non-current assets 7,888 (7,888) -
Right-of-use assets - 617,837 617,837
Lease receivables - 11,853 11,853
Total non-current assets 1,430,123 621,802 2,051,925
Other current assets 69,813 - 69,813
Lease receivables - 1,583 1,583
Receivables 21,903 (5,693) 16,210
Total assets 1,521,839 617,692 2,139,531
Other current liabilities (326,671) 748 (325,923)
Lease liabilities - (61,252) (61,252)
Total current liabilities (326,671) (60,504) (387,175)
Other non-current liabilities (865,492) - (865,492)
Lease liabilities - (570,052) (570,052)
Provisions (1,934) 1,934 -
Other liabilities (10,930) 10,930 -
Total liabilities (1,205,027) (617,692) (1,822,719)
Net assets 316,812 - 316,812
Equity 316,812 - 316,812
Reconciliation to lease commitments
The table below shows a reconciliation between the operating
lease commitments (as disclosed in the 2019 annual report
in note 25) and the lease liability and assets to be recognised
under IFRS 16.
2019
GBP000
Lease commitments, payable 836,318
Discounting lease liability (205,014)
Lease liability recognised 631,304
2019
GBP000
Lease commitments, receivable 22,857
Leases not capitalised (6,427)
Discounting lease asset (2,994)
Lease asset recognised 13,436
25. Leases (continued)
Recognition of right-of-use assets
The table below shows how the value of the right-of-use asset
was calculated on migration.
Unaudited
26 January
2020
GBP000
Recognition of leases
Lease receivables (note 25) (13,436)
Lease liabilities
(note 25) 631,304
Non-current assets
Other non-current assets
(note 15) 7,888
Current assets
Rent prepayments (note 17) 5,693
Current liabilities
Rent payables (note
20) (199)
Onerous lease creditor less than one
year (note 22) (549)
Non-current liabilities
Other non-current liabilities
(note 24) (10,930)
Onerous lease creditor more than one year (note
22) (1,934)
Right-of-use assets 617,837
Determining the right-of-use asset
Lease liabilities and assets were calculated by discounting
future unavoidable rental payments and rents receivable
for any of those sites which had been sublet. To the value of
the lease liabilities and assets were added all balance
sheet items held in relation to these leases. These included
lease premiums paid, disclosed as other non-current
assets, prepaid and accrued rental charges, the onerous lease
provision and lease incentives, disclosed as other
non-current liabilities.
Lease terminology
Before the introduction of IFRS 16, leases in a lessee's
accounts were defined as finance leases and operating leases.
Although this distinction no longer exists within IFRS 16, the
distinction has been maintained in the narrative description
of leases within the company's accounts, so that the impact of
the new standard can be clearly seen.
26. Capital commitments
At 26 January 2020, the company had GBP 28.2 m (July 2019: GBP
37.9 m) of capital commitments, relating to the purchase of
10 (July 2019: 16) sites, for which no provision had been made,
in respect of property, plant and equipment.
The company had some other sites in the property pipeline;
however, any legal commitment is contingent on planning
and licensing. Therefore, there are no commitments at the
balance sheet date.
27. Related-party disclosures
J D Wetherspoon is the owner of the share capital of the
following companies:
Company name Country of incorporation Ownership Status
J D Wetherspoon (Scot) Limited Scotland Wholly owned Dormant
J D Wetherspoon Property Holdings Limited England Wholly owned Dormant
Moon and Spoon Limited England Wholly owned Dormant
Moon and Stars Limited England Wholly owned Dormant
Moon on the Hill Limited England Wholly owned Dormant
Moorsom & Co Limited England Wholly owned Dormant
Sylvan Moon Limited England Wholly owned Dormant
Checkline House (Head Lease) Limited Wales Wholly owned Dormant
All of these companies are dormant and contain no assets or
liabilities and are, therefore, immaterial. As a result,
consolidated accounts have not been produced. The company has an
overseas branch located in the Republic of Ireland.
28. Share capital
Number Share
of
shares capital
000s GBP000
Balance at 29 July 2018 (audited) 105,501 2,110
Closing balance at 27 January 2019 (unaudited) 105,501 2,110
Repurchase of shares (403) (8)
Balance at 28 July 2019 (audited) 105,098 2,102
Repurchase of shares (420) (8)
Closing balance at 26 January 2020 (unaudited) 104,678 2,094
The balance classified as share capital represents proceeds
arising on issue of the company's equity share capital,
comprising 2p ordinary shares and the cancellation of shares
repurchased by the company.
The total authorised number of 2p ordinary shares is 500,000,000
(2019: 500,000,000). All issued shares are fully paid.
In the period, there were no proceeds from the issue of shares
(2019: GBPNil).
During the period, 419,741 shares were repurchased by the
company for cancellation, representing approximately 0.40%
of the issued share capital, at a cost of GBP6.5m, including
stamp duty, representing an average cost per share of 1,523p.
The capital redemption reserve increased owing to the repurchase
of a number of shares in the period.
While the memorandum and articles of association allow for
preferred, deferred or special rights to attach
to ordinary shares, no shares carried such rights at the balance
sheet date.
29. Events after the balance sheet date
On 11 March 2020, the chancellor presented the UK budget
announcement and confirmed that the rate of corporation tax would
remain at 19% from 1 April 2020. This is expected to be
substantively enacted by the year-end balance sheet date.
As a result of this post balance sheet announcement, the
prevailing tax rate used to calculate the income and deferred
tax
liabilities for the year ended 26 July 2020 will be 19%, instead
of 18.33% used in the half-year results. Furthermore, the
deferred tax balances will be recalculated at the year end to
19%; it is anticipated that this will result in a rate-change
adjustment of approximately GBP3.4m.
For information on COVID-19, please see note 31.
30. General information
J D Wetherspoon plc is a public limited company, incorporated
and domiciled in England and Wales.
Its registered office address is: Wetherspoon House, Central
Park, Reeds Crescent, Watford, WD24 4QL.
The company is listed on the London Stock Exchange.
This condensed half-yearly financial information was approved
for issue by the board on 19 March 2020.
This interim report does not comprise statutory accounts within
the meaning of Sections 434 and 435 of the Companies Act 2006.
Statutory accounts for the year ended 28 July 2019 were approved by
the board of directors on 12 September 2019 and delivered to the
Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis-of-matter
paragraph or any statement under Sections 498 to 502 of the
Companies Act 2006.
The advent of the COVID-19 virus supersedes the principal risks
and uncertainties as set out in the financial statements for the 52
weeks ended 28 July 2019, pages 48 and 49, and will remain the most
significant risk facing the company in the next six months, please
see note 31.
31. Basis of preparation
This condensed half-yearly financial information of J D
Wetherspoon plc (the 'Company'), which is abridged and unaudited,
has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Services Authority and with
International Accounting Standards (IAS) 34, Interim Financial
Reporting, as adopted by the European Union. This interim report
should be read in conjunction with the annual financial statements
for the 52 weeks ended 28 July 2019 which were prepared in
accordance with IFRSs, as adopted by the European Union.
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. Material uncertainty
which may cast significant doubt regarding the Company's ability to
trade as a going concern has resulted from the impact of the
COVID-19 virus on the economy and the hospitality industry. The
directors have considered the impact on the company, including the
possibility of temporary closure. The directors are satisfied that
the Company will not breach its borrowing covenants during a
temporary closure. If the closure is prolonged, the Company would
consider whether to take further actions at that time. In that
respect, the directors have considered the comments of the Bank of
England on 17 March 2020 in which it said that the "CCFF (a new
funding facility) will provide funding to businesses by purchasing
commercial paper of up to 1 year maturity, issued by firms making a
material contribution to the UK economy. It will help businesses
across a range of sectors to pay wages and suppliers, even while
experiencing severe disruption to cashflows". The directors have
also taken account of the suspension of business rates for 12
months from April 2020, which will result in a saving by the
Company of over GBP50m. As a result, the directors have satisfied
themselves that the Company will continue in operational existence
for the foreseeable future. For this reason, they continue to adopt
the going-concern basis in preparing the Company's financial
statements.
The financial information for the 52 weeks ended 28 July 2019 is
extracted from the statutory accounts of the Company for that
year.
The interim results for the 26 weeks ended 26 January 2020 and
the comparatives for 27 January 2019 are unaudited, yet have been
reviewed by the independent auditors. A copy of t he review report
is included at the end of this report.
32. Accounting policies
With the exception of tax and IFRS 16, which has been
implemented in these financial statements, the accounting policies
adopted in the preparation of the interim report are consistent
with those applied in the preparation of the Company's annual
report for the year ended 28 July 2019 - and the same methods of
computation and presentation are used.
Income tax
Taxes on income in the interim periods are accrued using the tax
rate which would be applicable to expected total annual
earnings.
Changes in standards
At the date of authorisation of these financial statements,
certain new standards and amendments to existing standards have
been published which are not yet effective and have not been
adopted early by the Company. Information on those expected to be
relevant to the financial statements is provided below:
n Conceptual framework for Financial Reporting
n Amendments to IFRS 3: Definition of a Business
n Amendments to IAS 1 and IAS 8: Definition of a Material
n Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform
n IFRS 17 Insurance contacts
IFRS 16 Leases is effective for accounting periods starting on
or after 1 January 2019, replacing IAS 17 Leases. The impact of
this change is disclosed in note 25 of these accounts.
Other standards which are not expected to have a material impact
are shown below:
n Amendments to IFRS 9: Prepayment Features with Negative Consideration
n Amendments to IAS 28: Long-Term Interest in Associates and Joint Ventures
n Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
n Annual Improvement to IFRS 2015-2017 Cycle
n IFRIC Interpretation 23: Uncertainty Over Income Tax Treatments
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DDGDXRBBDGGC
(END) Dow Jones Newswires
March 20, 2020 03:00 ET (07:00 GMT)
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