Wetherspoon Reports “Return to Normal Trading”

Pub group JD Wetherspoon has reported that trading has almost returned to pre-Covid levels and revealed the hit from the rapid spread of the Omicron variant before the crucial Christmas trading period.

Alongside interim results Wetherspoon reported that in the past three weeks sales were only 2.6 per cent below the equivalent period in 2019.

It said that cash sales per week during this three-week period have been approximately 10% above the depressed levels of December 2021, its busiest month of the year, indicating an improving trend.

Cash sales per week during this three-week period have been around 10% above the depressed levels of December 2021, indicating an improving trend.

Total sales in the half-year period fell 13.5% compared to two years earlier to £807.4mln.

The unaudited pre-IFRS16 loss before tax and exceptional items was £21.3mln (2020: £57.9mln profit); this included property losses of £1.8mln (2020: £0.2mln).

As at 23 January 2022, the company’s total net debt, excluding derivatives, was £920.4 (2020: £804.5m), an increase of £115.9m.

The company opened four pubs during the first six months and sold or closed six, resulting in a trading estate of 859 pubs at the half year end. As at 23 January 2022, as a result of investment in freehold reversions (relating to pubs where the company was previously a tenant) and freehold pub openings, its freehold/leasehold split was 67.8%/32.2%. As at 23 January 2022, the net book value of the property, plant and equipment of the company was £1.4bn, including £1.1bn of freehold and long-leasehold property.

Total capital investment was £64.7m (2020: £128.5m). £26.6m was invested in new pubs and pub extensions (2020: £23.7m), £18.9m in existing pubs and IT (2020: £34.1m) and £19.2m in freehold reversions of properties where Wetherspoon was the tenant (2020: £70.7m).

Although debt has increased by £116m since H1 2020, trade creditors have reduced by £72m and £109m has been invested in new pubs and freehold reversions. The company has an agreement with its lenders, who have they say, been extremely supportive throughout the pandemic, that waives its debt covenants until October 2022 and replaces them with a minimum liquidity requirement of £75m. At the half-year-end liquidity was £159.1m.

Inflationary pressures in the economy have been widely publicised. Nearly 70% of the company’s properties are freehold, with interest rates fixed for the next decade. Most of the company’s leasehold pubs have rent reviews which are fixed at levels below the current level of inflation. There is pressure on input costs from food, drink and energy suppliers, mitigated to an extent, by a number of long-term contracts. Overall, the company expects the increase in input prices to be slightly less than the level of inflation,” said chairman Tim Martin.

“Draconian restrictions, which amount to a lockdown-by-stealth, are, of course, kryptonite for hospitality, travel, leisure and many other businesses. The company is confident of a strong future if restrictions are avoided. The readiness of the leaders of all the UK’s main political parties to resort to lockdowns, and extreme restrictions, which were not contemplated in the UK’s 2019 plans for pandemics, is the main threat to the future of the hospitality industry, but also to the economy,” Martin added

Most of the company’s leasehold pubs have rent reviews which are fixed at levels below the current level of inflation. There is pressure on input costs from food, drink and energy suppliers, mitigated to an extent, by a number of long-term contracts. Overall, the company expects the increase in input prices to be slightly less than the level of inflation. The government is reported to have spent over £400bn on covid measures, around nine times the annual defence budget. The expenditure has been financed by the creation of ‘new money’ by the Bank of England, which has led to significant inflation and higher taxes.”