JD Wetherspoon reports rise in like-for-like sales

11-Sep-2014 - Last updated on 12-Sep-2014 at 09:35 GMT

Wetherspoon's reported record sales

JD Wetherspoon has reported a 5.5% rise in like-for-like sales in the year to 27 July, with profit before tax and exceptionals up 3.1% to £79.4m.

Turnover rose 10% as the company opened 46 pubs in the year, and closed five, leaving 927 at the year end. Operating profits grew 3.8% to £115.6m for the company , which said it planned to open around 30–40 pubs in its current financial year.

Meanwhile, like-for-likes in the six weeks to 7 September grew 6.3%, with total sales increasing by 11.4%.

Over the full year, earnings per share were up 4.9% to 47p and a full year dividend of 12p was maintained (all figures are pre-exceptional costs).

The operating margin before exceptional items decreased to 8.2% (2013: 8.7%), “mainly as a result of increases in staff costs and repairs”. The operating margin after exceptional items was 8.2% (2013: 7.1%).

Total investment in its existing estate was £56.2m. The average development cost for a new pub (excluding the cost of freeholds) was £1.64m, compared with £1.55 million a year ago, “as we continue to increase expenditure on kitchens, customer areas and beer gardens”. The full-year depreciation charge was £58.1m (2013: £53.1m).

As at 27 July 2014, the company’s total net debt, including bank borrowings and finance leases, but excluding derivatives, was £556.6m (2013: £474.2 million).

Costs

JDW said: “Factors which have led to the increase in debt are 46 new pub openings costing £97.7m, investment in existing pubs of £56.2 million, the acquisition of freehold reversions and investment properties of £23.6 million, the repurchase of shares of £24.6 million, a repayment of £16.7 million to HMRC in respect of a gaming machine legal judgement and dividend payments of £14.9 million. Year-end net-debt-to-EBITDA was 3.21 times (2013: 2.88 times).”

As at 27 July 2014, the company had £138.1m (2013: £111m) of unutilised banking facilities and cash balances, with total facilities of £690m (2013: £575m). The company’s existing interest-rate swap arrangements remain in place.

The firm said: “As in previous years, the company has tried to improve as many areas of the business as possible. For example, our food hygiene ratings are at record levels. We have 824 pubs rated on the Food Standards Agency’s website. The average score is 4.91, with 92% of the pubs achieving a top rating of five stars and 7% receiving four stars. This is the highest average rating for any pub or restaurant company. In the separate Scottish scheme, which records either a ‘pass’ or ‘fail’, all of our 65 pubs have passed.

“In the 2015 Good Beer Guide, a CAMRA publication, 317 of our pubs have been recommended, more than any other pub company. In addition, over 900 of our pubs are Cask Marque approved – Cask Marque is a pub-industry scheme, run in conjunction with several brewers, which checks and approves the quality of real ale in pubs. We continue to source our traditional ales from a large number of microbreweries of varying sizes and believe that we are the biggest purchaser of microbrewery beer in the UK.

“We continue to run the world’s biggest real-ale festival twice per annum and have added a cider festival in recent times, featuring a wide variety of suppliers from the UK, Europe and elsewhere in the world.”

Progress

Tim Martin, chairman, said: “I am pleased to report another year of progress, with record sales, profit and earnings per share. The company generated £600.2 million in taxes, an increase of £48.7 million, compared with the previous year, equivalent to £662,000 per pub. We now employ over 34,000 people, an increase of over 3,000 in the last year. In addition, £29.2 million in bonuses and free shares was paid to employees, 82% to those working in our pubs.

“The biggest danger to the pub industry is the VAT disparity between supermarkets and pubs. Wetherspoon, along with many pub and restaurant companies, is supporting Jacques Borel’s VAT Club on Tax Equality Day (Wednesday 24 September 2014) to publicise this inequality.

“A similar danger relates to the general tone of corporate governance advice and practice which has helped to create unstable board rooms, often preoccupied by the wrong considerations. For example, many do not even recognise the danger from the VAT disparity, despite the high weekly level of pub closures which has lasted for many years.

“In the six weeks to 7 September 2014, like-for-like sales increased by 6.3%, with total sales increasing by 11.4%.

”The company is aiming for a reasonable outcome in the current financial year.”