JD Wetherspoon this morning confirmed it would repay a $140m (£87m) private placement after achieving a record year in sales, profit before tax and exceptional items and free cash flow – but added it would not rule out a rights issue to repay a £435m facility that expires next year.
Revealing its results for the year to 26 July the managed house group, which was founded by chairman Tim Martin in 1979, said like-for-like sales (LFLs) had grown by 1.2% in the 12 months.
Profit before tax and exceptional items increased by 13.6%, up to £66.2m from £58.2m, revenue jumped 5.2 % to £955.1m and cash flow improved by 39.4%, up from £71.4m to £99.5m
John Hutson, JDW’s chief executive, said all options were under review, including an issue of new equity . “We've ruled nothing out at all.
"A rights issue or an equity placing, a U.S. private placement, or even a bond issue. They're all options that are available to us.”
In the six weeks to 6 September JDW said that LFLs were up by 1.2% and total sales had grown by 5.8%.
Earnings per share before exceptional items increased by 18.1% to 32.6p up from 27.6p.
The operating margin, before exceptional items, interest and tax, increased to 10.2% with JDW saying that increases in energy, excise duty and labour costs had been offset by reduced energy consumption, lower staff turnover and better buying.
Net interest was covered 3.1 times by operating profit before exceptional items, up from 2.8 times.
The company invested £48.8m, £37.8m of which was on new pub openings and £11m in current sites.
The company said that exceptional items before tax were £21.1m – as a result of an impairment of £6.5m and the £4.4m charge for the disposal of properties it no longer wanted to develop.
JDW was also hit by £9.4m of depreciation in its estate value and spent £1.2m on the legal action against former property agents Van de Berg.
The company had net borrowings of £388.2m, as of 26 July, down by £51.4m on last year, despite new pub openings and last year’s final dividend.
Year end net-debt-to-ebitda had fallen to 2.73 times – down from 3.35 times in 2008.
The group said it had increased its banking facility to £542.2, following an agreement on a new £20m facility with Santander.
As previously indicated the company said it intended to repay its US$140m private placement, due for renewal this month, from cash flow and remaining facilities. At the balance sheet date JDW said £310m was drawn under the £435m revolving-loan facilities.
However, the company’s main £435m revolving facility expires in December 2010.
JDW said its low net-debt-to-ebitda ratio, “combined with our strong free cash flow and improving financial performance, provides a sound basis, we believe, for refinancing at the end of the next calendar year.”
The company opened 39 pubs during the year, 13 freeholds, disposed of one pub and closed one other, resulting in a total estate of 731 pubs.
It said that in contrast with previous years, most new openings were of existing pubs, with rents and development costs being lower than historic trends.
The average development cost for a new pub was £850,000, compared with £1.5m a year ago. The full-year depreciation charge was £45.1m and JDW expects next year to be a similar amount, assuming the same level of capital spend.
It will also open a similar amount of pubs in 2010.
As previously outlined in the interim accounts, the company said it had decided not to pay a final dividend for the year, in order to redirect our cash flow towards debt reduction.
