JD Wetherspoon, the high street pub retailer, has this morning reported like-for-like sales of 1.9% in the six months to 29 January, and moved to reassure investors over refinancing fears.
The interim like-for-like figure was down slightly from the 2.0% reported at the group’s interim management statement on 20 January.
On the refinancing concerns that have impacted its share price in recent times, the company said that it intended to pay off a US $140m private placement – due for renewal in September 2009 – from cashflow and existing facilities. To that end, it had agreed a new £20m facility with Abbey Santander to run along side its current banking arrangements until December 2010.
In the 12 months to 25 January 2009, JDW’s debt to ebitda had fallen from 3.6 times to 3.2 times, and the group said it would fall below 3.0 times by the end of the current financial year, and would continue to decline in the following financial year.
At the half year the company’s net borrowings were £435.2m, with total available facilities remaining at £522.2m. This represented a reduction of £4.4m in the six months and came after accounting for payments for 21 pubs totalling £23.9m and last year’s dividend of £10.4m. In the 12 months net borrowings decreased by £27m after payments of £44m, dividends of £17m and the purchase of shares for cancellation of £6m.
On taxes, the group said: “JDW is a major contributor to UK tax revenues and is pleased to be able to benefit the UK economy in this way.
“While supporting the principle of reasonable taxes, we believe that the scale of tax increases in recent years, combined with the exceptionally heavy costs of implementing social legislation imposed by the government, is proving a considerable burden for many pubs.”
JDW said in the six months it had paid £190m in taxes against post-tax profits of £17.3m. Taxes comprised: £79m in VAT; £53m in Excise Duty; £30m in PAYE and National Insurance; £18m in property taxes and £10m in Corporation Tax.
This equated to JDW making about £50,000 after-tax profit per pub while generating tax of about £530,000 per pub.
It said: “In our view, the levels of tax now being levied are unsustainable for many pubs, and this, combined with other factors, is contributing to the closure of pubs in record numbers.
“The government seems not to understand the economic impact of new taxes and legislation and continues to impose new burdens at a huge rate.”
It said that the increase in Excise Duty would add £15m this year while new legislation increasing holiday entitlements would add a further £4m.
JDW said taxes needed to decrease in order for pubs, and business in general, to prosper.
On people, the company said that it had awarded bonuses of £9.8m to employees in the six months – 80% of those payments were made to employees working in pubs.
It held over 700 training courses in 2008 attended by 12,000 staff and promoted over 600 workers to management positions. In January it collected three National Innkeeping Training Awards, known as Nitas, from the British Institute of Innkeeping, including “best training programme in a managed estate”.
During the first half it opened 21 new pubs and disposed of one, taking estate numbers to 714. In contrast with previous years, the majority of new openings had been existing pubs so rents and development costs were substantially lower.
Capital expenditure on new pubs for the current year as a whole was expected to be £16m lower than the previous year, despite pub openings anticipated to increase from 23 to 35 pubs.
Operating profits before exceptional items increased 1.3% to £46.8m on sales up 6.5% to £468.7m. At a pre-tax level, profits before exceptional items increased by 2.0% to £30.8m, and after exceptional items fell by 10.2% to £25.6m. Exceptional items related mainly to disposals of property that the company no longer intended to develop and to major litigation costs against its former property adviser Van De Berg.
JDW said it was currently selling 700,000 breakfasts and 700,000 coffees – “more than many coffee shops”.
Tim Martin, chairman, concluded: “Although the pub industry as a whole is under great pressure from higher taxes and the social legislation referred to above, as well as a difficult economy, as a result of our strong cashflow, reducing debt and the excellent work of our employees, I remain confident of the company's future prospects.”
As announced in its last trading statement, the company had decided not to pay a dividend.
In the six weeks since the half year, like-for-like sales had increased 1.9%. total sales were up 5.6%.
