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.
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..
In the financial year to date, the company has opened three pubs and sold, closed or surrendered to the landlord 28 pubs. Of these, 15 were leasehold, where the lease had expired or where the company had exercised a break clause in the lease. There was a net cash inflow of £6.5m from the 28 disposals. The company said: “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 where there is another Wetherspoon pub nearby.” 22 pubs remain on the market or are under offer, and the company currently has a trading estate of 827 pubs. As at 9 July 2023, net debt was £688m, approximately £114m lower than it reported in FY20, immediately before the pandemic. Since then, the company has invested £116m in new pubs, £82m in freehold reversions and has raised equity of approximately £240m. As previously reported, the company sold a number of interest rate swaps in the first quarter of this financial year, raising £169m 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 £289m. 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. JD Wetherspoon chairman Tim Martin (pictured) 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.”
Tim Martin added that it is not true that since Wetherspoon prices are lower than average, quality or service standards will also be lower than average, as some commentators have suggested. “In the crucial area of beer quality, Wetherspoon has more pubs (200) listed in CAMRA’s Good Beer Guide 2023 than any other company,” he said. “This is also reflected in inspections carried out by Cask Marque. 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 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, 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 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.”
Commenting on JD Wetherspoon’s trading update, Julie Palmer, partner at Begbies Traynor said:
“Squeezed consumers cutting back might mean trouble for many businesses but Wetherspoon doesn’t seem to be one of them. Sales are up on pre-pandemic levels and the company its expecting to meet City expectations for an annual profit, reversing last year’s loss.
“In a cost-of-living crisis with consumers seeking value, Wetherspoon is likely to benefit as its 800-plus pubs knock out beer and wine at prices that rivals just can’t seem to match.
“Wetherspoon’s chairman Tim Martin is famed for feisty commentaries in business updates and once again he’s lived up to his reputation. Among others, he’s taken aim at analysts who he claims repeat a ‘City urban myth’ that Wetherspoon’s customers are poorer. This is nothing but froth, according to the pub boss, citing research pointing to Wetherspoon’s customers’ average income being higher than the average ‘high street pub consumer’.
“It would take a brave person to challenge Mr Martin, looking at his track record of creating an empire while the UK is seeing pubs calling time for good at the rate of more than one a day as they close for good having failed to tough out the difficult environment.
“What Mr Martin’s research could also show is that consumers across the board are feeling the strain but still want a drink or two and aren’t bothered where as long as the beer is cheap – and that’s what Wetherspoon’s is known for.”
