TIDMJDW
RNS Number : 0517O
Wetherspoon (JD) PLC
02 November 2016
2 November 2016
J D WETHERSPOON PLC
Q1 Trading Update
J D Wetherspoon plc ('Wetherspoon' or 'the Company') presents
below its Q1 trading update for the 13-week period up to 23 October
2016.
Current trading
For the 13 weeks to 23 October 2016, like-for-like sales
increased by 3.5% and total sales increased by 2.3%. The level of
like-for-like sales reduced to 2.3% in the last 5 weeks of the
period.
The operating margin, excluding property gains, in the 13 weeks
to 23 October 2016 was 8.6%, compared with 5.8% in the same 13
weeks last year. The margin was unusually high during the period
and was unusually low for the same three months last year. The
Company currently anticipates an operating margin of around 7% for
the current financial year.
Property
The Company has opened one new pub since the start of the
financial year and has sold nine. We intend to open about 15 pubs
in the current financial year.
Financial position
The Company remains in a sound financial position.
Information on debt levels
Following a recent meeting with a major shareholder, the Company
issued a summary of its current views in respect of debt. The
summary is as follows:
"The Company understands that debt always involves risk: the
greater the debt, the greater the risk. As a rapidly expanding
company, Wetherspoon has historically had higher debt levels than
the conservatively financed 'family brewers', the debts of which
have often been around 2 times EBITDA, but the levels have usually
been lower than the large pub 'PLCs', where they sometimes rose to
5 to 8 times EBITDA, in recent years, often with unfortunate
consequences.
"As well as expanding rapidly by opening new pubs, Wetherspoon
has bought back approximately half of its shares in this
millennium, at a cost of GBP400m and has spent approximately
GBP140m on freehold reversions: freeholds of properties where
Wetherspoon was the tenant. This level of expenditure and debt may
be justifiable in an era of (a) low interest rates, (b) reasonable
historic prices for shares and property and (c) an experienced
board which is sceptical of dangerous fashions in the financial
world. Even so, the Company's debt levels during this period, which
have benefited shareholders, have clearly involved significant
risk.
"As at 24 July 2016, the Company's net debt/EBITDA was 3.47
times. Over the past 15 financial year ends, this ratio has
been:
Financial Net Debt
Year End / EBITDA
----------- ----------
2002 2.85
----------- ----------
2003 2.61
----------- ----------
2004 2.78
----------- ----------
2005 2.81
----------- ----------
2006 2.80
----------- ----------
2007 3.21
----------- ----------
2008 3.24
----------- ----------
2009 2.74
----------- ----------
2010 2.70
----------- ----------
2011 2.98
----------- ----------
2012 2.96
----------- ----------
2013 2.88
----------- ----------
2014 3.21
----------- ----------
2015 3.37
----------- ----------
2016 3.47
----------- ----------
"Weighing the level of debt and risk is a difficult job. Our aim
is to be conservatively financed as the business matures, although
a precise timetable depends on many factors. For the foreseeable
future, it is intended that the Company's net debt/EBITDA will be
around 3.5 times. The ratio may rise for a temporary period, for
example, if there were 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."
Outlook
The chairman of Wetherspoon, Tim Martin, said:
"Angela Merkel of Germany and François Hollande of France have
supported the stance of the unelected EU 'President' Juncker in
stating that the "UK must pay a price" for leaving the EU and that
there "must be a threat" to the UK. According to press reports,
Juncker told European business leaders, in October, not to
negotiate with UK companies and to adopt an "intransigent"
attitude. This suggested approach puts an unfair burden on the
excellent European suppliers with which UK companies, like
Wetherspoon, have traded for many decades. For example, Wetherspoon
normally agrees on trade deals with suppliers for 3 to 10 years. If
we, and companies like ours, are unable to agree on tariff-free
transactions, it will inevitably result in a loss of business for
European companies which have done nothing to deserve this outcome.
Indeed, the ultimate sanction will be in the hands of UK consumers,
should they take offence at the hectoring and bullying approach of
Juncker and co. French wine, Champagne and spirits, German beer and
Swedish cider, for example, are all at extreme risk.
"The Company's sales growth has been strong in the last few
months, but has slowed in recent weeks. The Company anticipates
higher costs in the remainder of the current year, for instance in
the areas of wages, business rates and repairs. The Company also
intends to increase the level of capital investment in existing
pubs from GBP34m in 2015/6 to around GBP60m in the current
year.
"The Company has made a reasonable start in the current year,
but any forecasts for the full year are inevitably tentative, with
nine months still to go - and the outlook for the current financial
year is unchanged. We will provide updates as we progress through
the year."
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
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 on J D Wetherspoon plc.
5. The current financial year comprises 53 trading weeks to 30 July 2017.
6. The next trading update is expected to be the Company's statement on 18 January 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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