JD WETHERSPOON PLC Preliminary Results 2006
8 September 2006
Highlights – Year to 30 July 2006 Excluding 53 week*
• Turnover up 5% to £847.5m
(+2.5%)
• Operating profit up 17% to £83.6m
(+14%)
• Profit before tax up 24% to £58.4m
(+20%)
• Earnings per share up 43% to 24.1p
(+38%)
• Free cash flow per share 42.1p (2005: 37.1p) • Dividend per share increased by 10% to 4.7p *Growth on a 52 week basis excluding benefit of 53rd week.
2
Average Sales Per Pub Week (including VAT) £000
30.0 29.0 28.0 27.0 26.0 25.0 24.0 23.0 22.0 21.0 20.0
29.0 28.0
28.2
26.4 24.7 23.5
2001
2002
2003
2004
2005
2006
Record level of weekly sales 3
Like for Like Sales/Profits %
2006
2005
2004
2003
2002
Bar
2.2
(1.4)
2.9
2.1
3.5
Food
3.6
2.1
4.2
11.4
9.9
Total sales
2.0
(0.6)
3.4
4.1
5.0
LFL Profits
5.9
(4.0)
(0.7)
(0.9)
3.8
4
Operating Margin - Summary 2006 £000
2006 % of Sales
2005 £000
2005 % of Sales
Turnover
847,516
-
809,861
-
Pub Operating Profit
163,541
19.3
152,505
18.8
Head Office Costs
(32,860)
(3.9)
(31,428)
(3.9)
Share Incentive Plan
(2,480)
(0.3)
(985)
(0.1)
Licensing Reform Costs
(1,192)
(0.1)
(1,330)
(0.2)
Depreciation
(43,393)
(5.1)
(47,256)
(5.8)
83,616
9.9
71,506
8.8
Operating Profit
10% operating margin achieved in H2 5
Non-Smoking Pubs (England & Wales) • Total 53 pubs (15 new / 38 conversions) • Further evidence of initial impact on sales/profits • Pubs converted H1 2006 – H2 sales down 6.5% • Some signs of recovery after initial 12 months but still below 2 years ago • Overall still a mixed picture
6
Non-Smoking Pubs (Scotland) • 39 pubs • Initial marketing campaign • Capital investment £40k per pub • Still too early to judge
7
Non-Smoking Pubs (Scotland) April 2006
Q4 2006
– total
+3.2%
-0.3%
– bar
-0.8%
-3.4%
+12.8%
+7.7%
-8.4%
-11.3%
-5.4%
-11.0%
• Sales
– food – machines • LFL pub profits pre HO costs
8
IFRS Impact £m • P&L impact minimal
- Depreciation
0.9
- Lease incentives
0.2
Increase in PBT • Shareholders’ funds
- Depreciation
£1.1m 2
- Lease incentives
(5)
- Hedging
(7)
- Tax on hedging
2
- Taxation
(13)
- Dividends
5
Reduction in SF
£(16)m
9
Cash Flow 2006
2005
Cash from operations
133,366
123,460
Interest and tax
(37,963)
(36,697)
(1,412)
-
(20,810)
(14,173)
Investment in own shares (SIP)
(3,469)
(3,816)
Free cash flow
69,712
68,774
Dividends
(7,367)
(7,520)
-
3,555
4,645
8,547
(16,766)
(24,495)
50,224
48,861
(78,683)
(45,718)
6,974
271
(21,485)
3,414
42.1p
37.1p
Re-financing costs Investment in existing pubs
Interest received Disposal proceeds Investments in new pubs Cash flow before share capital changes Share buybacks Issue of new shares Movement in net debt Free cash flow per share
10
Financial - Funding 2006
2005
Net debt/ EBITDA
2.8
2.8
Interest cover (times)
3.3
2.9
Fixed charge cover (times) - statutory
1.8
1.7
2.3
2.3
- excluding depreciation
Improvement in ratios 11
New Banking Facility • 5 year facility • Expanded bank group • Total facilities £472m • Attractive terms
Material headroom available 12
ROC/CROCCE/ROE 2006
2005
• P&L return on capital
11.0%
9.1%
• Crocce
11.9%
11.7%
• P&L return on equity
16.2%
11.3%
• Cash return on equity
14.7%
14.4%
Detailed calculations in appendix D
13
2007 Considerations
• Further utilities increase, circa £6.5m – 7m • Minimum wage +6% (October 2006) • Increased re-investment
14
Trading Performance • Encouraging sales trends • Improving margin performance • Continued focus on innovation/cash flow
15
NEC Birmingham
16
Windsor
17
Continued Focus on Real Ale • 120+ pubs in CAMRA Good Beer Guide • 640 with Cask Marque accreditation • JDW real ale festivals (2 million pints)
18
Marketing
World Beers
Guest Lagers 19
Wine Range • Expanded house range • Fetzer Syrah rose • Villa Maria Sauvignon blanc • Rioja / Chateauneuf-du-pape
20
Coffee • Coffee – 6% of branded coffee sales – 25% of Starbucks volume – Organic milk – Machine upgrades 21
Breakfast • Breakfasts – Open 9am – Free range eggs – National price point
22
Burger Offer
23
Training • Age positive government award 2005 • Nominations for 2006 National Innkeeping Training Awards • Over 200 graduates through JDW Diploma in Leisure Retail Management
24
Training
25
Responsibility • 2005 Responsible Drinks Retailing Award • Healthy Eating Award (kids menu) • New licensing legislation
Building sustainable long term business 26
Environment • National recycling awards 2005 • Environmental Improvement nomination • Working with Carbon Trust: – Energy saving initiatives – Urinal water management system – Melton Mowbray pub (50% energy saving target) 27
Current Trading and Outlook • Encouraging start to new financial year • 2007 challenges • Investment where necessary • Preparation for smoking bans
Confident of longer term prospects 28
Appendices A
-
10 Year Financial Graphs
B
-
10 Year Trends
C
-
Capital Trends
D
-
ROC/CROCCE/ROE Calculations
29
Appendix A
10 Year Summary Number of Pubs 700 608
635
Average Sales Per Pub Week (including VAT) 643
655
657
£000 30
600 522 500
28.0
26 22.7
24 400
22
327
29.0
26.4
28
428
28.2
23.5
24.7
19.7 20.4
19.2
20 252
300
18
194
16
200
14 12
100 0
10 1997
1998
1999
2000
2001
2002
2003
2004
2005
1997
1998
1999
2000
2001
2002
2003
2004
Profit Before Tax £ millions 56.1
60
£ millions 847.5 787.1 809.9
900
730.9
700
53.6
484.0
20
188.5 10 0
17.6
20.2
269.7
300 200
26.2
30
369.6
47.2
36.1
600 500
58.4 54.1
44.3
50 40
601.3
400
2006
2006
Turnover
800
2005
10
139.4 19 9 7
19 9 8
19 9 9
2000
2001
2002
2003
2004
2005
2006
0
19 9 7
19 9 8
19 9 9
2000
2001
2002
2003
2004
2005
2006
30
Appendix B
JDW - Financial Trends 1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
786
848
872
904
1,004
1,040
1,093
1,169
1,239
1,246
1,283
177.6
190.8
184.9
188.0
203.8
205.9
207.4
201.9
204.4
195.7
205.6
Number of pubs
146
194
252
327
428
522
608
635
643
655
657
% freeholds (%)
35
31
30
21
32
40
42
42
41
41
41
CROCCE (%) (2)
17.1
14.1
15.0
15.7
15.6
15.3
13.9
13.0
12.6
11.7
11.9
Cash return on equity (%) (2)
21.7
18.3
20.8
20.9
20.3
20.1
18.8
17.1
15.8
14.4
14.7
Free cash flow per share (pence)
11.3
14.4
13.3
20.3
24.2
29.1
33.5
38.8
36.7
37.1
42.1
Sales per pub (£000) EBITDA per pub (£000) (1)
(1) (2)
Excluding sale & leaseback See appendix D for calculation
31
Appendix C
Capital Trends 1999
2000
2001
2002
2003
2004
2005
2006
3,037
3,217
3,713
3,808
3,721
4,317
4,176
3,637
Number of openings
84
101
94
87
45
28
13
9
% which are freehold
58
67
75
53
56
43
54
22
Freehold average cost (£k)
427
465
506
597
511
640
873
625
Average development cost (£k)
941
1,049
1,178
1,262
1,317
1,431
1,401
1,301
Average cost per sq. ft.
310
326
334
331
354
331
335
331
9
4
3
-1
7
-6
1
-1
70,000 77,000
70,000
70,000
73,000
51,000
62
46
51
54
Size (sq.ft.) – openings
Increase in average cost (%) Population within 2 miles Pub openings with beer gardens (%)
50
73
64,000 59,000 62
88
32
Appendix D1
ROC/CROCCE/ROE Profit after tax Add: interest Profit pre-interest Add: deferred tax Depreciation Cash return • • • •
P&L return on capital [(g)/average (c)] CROCCE [(h)/average (d)] P&L return on equity [(e)/average (a)] Cash return on equity [(h)-(f)/average (d)-(b)]
(e) (f) (g)
(h)
2006 £000 39,901 25,228 65,129 422 43,393 108,944
2005 £000 31,390 24,329 55,719 1,517 47,256 104,492
11.0% 11.9% 16.2% 14.7%
9.1% 11.7% 11.3% 14.4%
33
ROC/CROCCE/ROE
Appendix D2
2006 £000 201,575
2005 £000 246,745
13,884
13,884
15,156
-
(a)
230,615
260,629
Add: net debt
(b)
355,631
334,145
Capital employed
(c)
586,246
594,774
Add: deferred tax provision
82,958
83,211
Less: deferred tax asset
(3,030)
(1,560)
Cumulative depreciation
282,497
245,877
Less: revaluation reserve
(22,554)
(22,554)
926,117
899,748
Shareholder funds per balance sheet Add: cum losses on disposal : hedging provision
Cash capital employed
(d)
34
