REG - Wetherspoon (JD) PLC - Pre-close trading update

J D WetherspoonAnnouncement

12/07/2023 07:00

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RNS Number : 7116F  Wetherspoon (JD) PLC  12 July 2023

12 July 2023

J D WETHERSPOON PLC

Pre-close trading update

J D Wetherspoon plc (the "company") today publishes a pre-close trading
update. The preliminary results are due to be released on 6 October 2023.

 

 

Current Trading

 

Like-for-like sales for the first 10 weeks of the final quarter of our
financial year increased by 11.0%, compared to the same period in the last
full financial year before the pandemic, which ended on 28 July 2019 (FY19).
Year-to-date (YTD) sales increased by 7.4% compared to the same year.

 

Compared to FY22, like-for-like sales increased by 11.5% in the fourth quarter
to date and by 12.9% YTD.

 

 

Property

 

In the financial year-to-date, the company has opened three pubs and sold,
closed or surrendered to the landlord 28 pubs.

 

15 of these pubs were leasehold, where the lease had expired, or where the
company had exercised a 'break clause' in the lease.

 

In respect of 12 of these 15 leasehold pubs, the company had another pub
nearby - within a radius of about one mile.

 

As regards the remaining 13 pubs, 11 of these also had another Wetherspoon pub
nearby.

 

There was a net cash inflow of £6.5 million from the 28 disposals.

 

The disposals outlined above have been characterised in a small number of
newspaper articles as a "money-raising" exercise, provoked by the difficult
trading circumstances for the hospitality industry in recent years. This is a
misinterpretation.

 

In fact, the disposals have raised relatively modest amounts (although every
little helps) and almost all are related to circumstances, as outlined above,
where there is another Wetherspoon pub nearby.

 

22 pubs remain on the market, or are under offer. The company currently has a
trading estate of 827 pubs.

 

 

Financial Position

 

As at 9 July 2023, net debt was £688 million, approximately £114 million
lower than we reported in our interim results for FY20, immediately before the
pandemic - since then, the company has invested £116 million in new pubs,
£82 million in freehold reversions and has raised equity of approximately
£240 million.

 

As previously reported, the company sold a number of interest rate swaps in
the first quarter of this financial year, raising £169 million before tax. In
addition, as in the last financial year, the company's free cash flow this
financial year is anticipated to be substantially in excess of its profit
before tax.

 

The company currently has financial headroom of £289 million.

 

For the period of the pandemic, the company received waivers in respect of its
banking covenants from its banking syndicate and in respect of a US Private
Placement.

 

The company anticipates that the waivers will no longer be required as at the
end of the current quarter.

 

The company is grateful for the cooperation and flexibility of the lending
institutions, and of our financial advisers, during the pandemic, especially
in respect of the waivers.

 

 

Covid-19

 

The UK economy is at a crossroads now, following the various lockdowns and
restrictions.

 

Some witnesses to the government's official UK Covid-19 Inquiry, including the
former health minister Matt Hancock, appear to believe that tougher lockdowns
and restrictions might have produced better results.

 

In our view, this is contrary to the evidence. Peru, for example, which had
the longest and harshest lockdown, appears to have had by far the worst
outcome.

 

In contrast, Sweden, which did not lockdown, had superior results to the UK
and to many, if not most, countries.

 

These issues were discussed by Professor Francois Balloux in The Guardian and
Professor Robert Dingwall in The Telegraph, following the publication of a
World Health Organisation report in 2022 (see link:
https://www.jdwetherspoon.com/~/media/files/pdf-documents/events-2023/wetherspoon-news-summer-articles-trading-statement.pdf
(https://www.jdwetherspoon.com/~/media/files/pdf-documents/events-2023/wetherspoon-news-summer-articles-trading-statement.pdf)
).

 

There is a legitimate question as to whether the Covid Inquiry, through its
terms of reference, and through the amassing of a colossal amount of evidence,
taking years to assimilate, will result in the obfuscation of the essential
question as to whether the lockdowns and restrictions produced beneficial
outcomes, and whether they had positive effects on health, even disregarding
wider economic factors.

 

 

Price, Quality and Myths

 

Since Wetherspoon prices are lower than average, some commentators assume that
quality or service standards will also be lower than average.

 

However, in the crucial area of beer quality, for example, Wetherspoon has
more pubs (200) listed in CAMRA's Good Beer Guide 2023 than any other company.

 

This is also reflected in inspections carried out by Cask Marque, an
organisation run by small and regional brewers, which aims to promote high
real ale standards in pubs. We receive approximately 1,800 visits a year from
Cask Marque experts, with over 99% of our pubs gaining the Cask Marque
accreditation, the highest, we believe, of any pub company.

 

Wetherspoon also has the best results of any substantial hospitality company
in respect of local authorities' "scores on the doors" schemes, run by
environmental health officers - which are designed to reflect adherence to
cleanliness and health legislation.

 

In this respect, Wetherspoon has 762 pubs listed on the government's Food
Standards Agency website and our average score is 4.99 out of a maximum 5.
99.1% of our pubs have achieved the maximum score.

 

Another urban myth, occasionally reflected in social media comments, is that
Wetherspoon has below-average employment standards.

 

In fact, Wetherspoon has recently been recognised as a Top Employer United
Kingdom 2023 by the independent Top Employers Institute, for the 18th time.

 

In this area, for example, Wetherspoon, awards free shares to all
participating employees, subject to a qualifying period.

 

Since the free-share scheme was introduced in 2006, 23.4 million shares have
been awarded, which equates to 18.2% of all the shares in existence today.
14,000 employees were awarded free shares in March 2023.

 

Another related urban myth, sometimes repeated by City analysts, is that
Wetherspoon does not attract customers in higher income groups.

 

In fact, a recent survey by market researchers CGA indicates that the average
income of Wetherspoon customers is 7% above that of the average 'high street
pub consumer'.

 

As regards misinformation generally, Wetherspoon took issue with a number of
false reports which appeared in the mainstream media, during the pandemic, and
received corrections or apologies from a wide range of publications. These
have been collated and can be read in "Does Truth Matter?", a Wetherspoon
publication which is available online (see link:
https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/does-truth-matter_.pdf
(https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/does-truth-matter_.pdf)
)

 

 

Tax

 

The company estimates that it, its customers and employees will generate total
taxes for the Treasury of approximately £775 million in FY23, compared to
£663 million in FY22.

 

 

Outlook

 

The chairman of JD Wetherspoon, Tim Martin, said:

 

"The company expects profits in the current financial year to be in line with
market expectations.

 

"As a result of a continued improvement in sales and a slightly reduced
expectation for cost increases, for example energy costs, the company
anticipates an improved outcome for the next financial year, and anticipates
an outcome for the first half of FY24 approximately in line with the second
half of FY23."

 

 

 

 

 

 

Enquiries:

 

John Hutson                Chief Executive
Officer                      01923 477777

Ben Whitley                 Finance Director
               01923 477777

Eddie Gershon            Company spokesman
   07956 392234

 

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: www.jdwetherspoon.com
(https://protect-eu.mimecast.com/s/eb03CBLMZIl3p9mCNcSBB?domain=jdwetherspoon.com)
 

 

3. This announcement has been prepared solely to provide additional
information to the shareholders of J D Wetherspoon, to meet the requirements
of the FCA's Disclosure and Transparency Rules. It should not be relied on by
any other party, for any other purposes. Forward-looking statements have been
made by the directors in good faith, using information available up until the
date on which they approved this statement. Forward-looking statements should
be regarded with caution, because of the inherent uncertainties in economic
trends and business risks.

 

4.   This announcement contains inside information. The person responsible
for arranging release of the announcement on behalf of the Company is Ben
Whitley, Finance Director.

 

5.   The current financial year comprises 52 trading weeks to 30 July 2023.

 

6.   The next trading update is expected to be the Company's final results
announcement on 6 October 2023.

 

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