Slide 1: JD Wetherspoon plc Preliminary Results 2008
JD WETHERSPOON PLC Preliminary Results 2008 5 September 2008
Slide 2: Highlights – Year to 27 July 2008
Highlights – Year to 27 July 2008 y Revenue up 2.1% to £907.5m (LFL -1.1%) y Operating profit down 4.3% to £87.2m y Operating margin down 0.6% pts to 9.6% y Adjusted profit before tax down 11.4% to £55.0m* y Statutory profit before tax down 12.7% to £54.2m** y Adjusted earnings per share down 8.4% t
Slide 3: Average Sales Per Pub Week
Average Sales Per Pub Week (including VAT) £000 30.3 31.0 30.1 30.0 29.0 29.0 28.0 28.2 28.0 26.4 27.0 26.0 24.7 25.0 24.0 23.0 22.0 21.0 20.0 2002 2003 2004 2005 2006 2007 2008 Sales resilient despite non-smoking 3
Slide 4: Like-for-Like Sales/Profits
Like-for-Like Sales/Profits % 2008 2007 2006 2005 2004 Bar -4.3 +3.3 +2.2 -1.4 +2.9 Food +7.9 +12.6 +3.6 +2.1 +4.2 Machines -5.8 +2.7 -1.4 -2.4 +6.1 Total LFL sales -1.1 +5.6 +2.0 -0.6 +3.4 LFL profits -6.6 +7.0 +5.9 -4.0 -0.7 Strong food sales and bar recovered slightly in second half of the year 4
Slide 5: Operating Margin
Operating Margin y Gross margin decline – Food costs – Marketing y Wages increased – Pay rates – Food service costs y Operating costs – Lower utilities y Depreciation – Investment in facilities Net decline in operating margin of 65 basis points 5
Slide 6: Operating Margin - Summary
Operating Margin - Summary 2008 2008 2007 2007 £000 % of £000 % of Sales Sales Turnover 907,500 - 888,473 - Pub operating profit 173,955 19.2 174,201 19.6 Head office costs (38,125) (4.2) (36,461) (4.1) Share Incentive Plan (2,319) (0.3) (3,086) (0.3) Depreciation (45,062) (5.0) (43,946) (4.9) (Loss
Slide 7: Allocation of Resources
Allocation of Resources £162m £130m £124m £92m Dividends £90m Buybacks Capex 2004 2005 2006 2007 2008 Careful management of resources 7
Slide 8: Capital Expenditure
Capital Expenditure 2008 openings £31.0m y Total £60.9m 2009 openings £17.6m re-investment £12.3m y Re-investment £12.3m £3.1m non-smoking £1.0m refurbishments £4.6m fixtures and fittings £3.6m head office (including £2m till project) Continued investment in the business 8
Slide 9: Movement in Net Borrowings
Movement in Net Borrowings y Free cash flow improved to £71.7m (2007: £52.4m) y Free cash flow per share 50.7p (2007: 35.6p) y Capital expenditure on new pubs covered by free cash flow y Overall increase in net borrowings of £5.8m during the year (2007: £78.2m increase) y Total net borrowings £439.6
Slide 10: Cash Flow
Cash Flow £’000 2008 2007 Cash from operations 134,369 124,933 Interest and tax (47,194) (47,019) Investment in existing pubs (12,323) (24,046) Investment in own shares (SIP) (3,181) (1,489) Free cash flow 71,671 52,379 Dividends (17,380) (10,295) Disposal proceeds 793 4,768 Investments in new pubs
Slide 11: Debt Position
Debt Position 2008 2007 y Net debt/ EBITDA 3.3 3.2 y Interest cover (times) 2.7 3.1 y Fixed charge cover (times) - statutory 1.6 1.8 - excluding depreciation * 2.2 2.3 * Excludes exceptional fair value loss on financial derivatives of £0.8m 11
Slide 12: Banking Facilities
Banking Facilities y UK Banking Facility £415m – Matures December 2010 – 10 participating lenders – £250m swap expiring in 2014 – £150m swap until 2009 replaced by new swap until 2016 – Average interest cost of swaps is 5.74% y US Private Placement $140m - £87m – Matures September 2009 – Fully hedge
Slide 13: Dividends and Return of Capital
Dividends y 4.4p interim dividend (2007: 4.0p) y 7.6p final dividend (2007: 8.0p) y Total of 12.0p for the year (2007: 12.0p) y Dividend cover 2.1 (2007: 2.3) Return of Capital y 3.8m of shares bought at a cost of £12.0m y Total of £282m since 2003 Total dividend unchanged 13
Slide 14: Property
Property y 23 pubs opened during the year, compared to 18 last year y Targeting around 30 openings in FY 2008/09 y Strong pipeline y 42% freehold y Property prices and rent review settlements Increased opportunities for profitable investment 14
Slide 15: ROC/CROCCE/ROE
ROC/CROCCE/ROE 2008 2007 y P&L return on capital 10.8%** 11.7%* y Crocce 11.0% 12.2% y P&L return on equity 18.8%** 20.2%* y Cash return on equity 13.8%** 15.5% * excludes one-off deferred tax credit ** excludes exceptional fair value loss on financial derivatives Detailed calculations in appendix D
Slide 16: Trading Performance Summary
Trading Performance Summary y Strong food sales y Bar and machine sales impacted by non-smoking y Reduction in operating margin driven by food costs, labour and marketing 16
Slide 17: Improvements In The Business
Improvements In The Business 17
Slide 18: New Pub Openings
New Pub Openings The Six Templars, Hertford – opened 3rd March 2008 18
Slide 19: New Pub Openings
New Pub Openings The Flying Horse, Gatwick Airport – opened 19th May 2008 19
Slide 20: New Pub Openings
New Pub Openings The Royal Hop Pole, Tewkesbury – opened 12th May 2008 20
Slide 21: Developing Product Mix
Developing Product Mix Mach Ma Ma ch chi Food ines ine nes Food s5 17% 21% Food 6% 7% % 29% Bar Bar Bar 76% 73% 66% 1997 2002 2008 (Sales £139m) (Sales £601m) (Sales £907m) Food sales per week up to £8.8k from £3.3k over 11 years 21
Slide 22: Real Ale & Wine
Real Ale & Wine y The biggest beer and wine festivals in the world – in the festivals held in H2 2008, each lasting 19 days, we sold 2.5m pints of real ale and 0.5m bottles of wine y JDW stocks over 600 guest ales over the year y 131 of our pubs are in the CAMRA Good Beer Guide 2007 22
Slide 23: On-trade Comparisons
On-trade Comparisons y Total on-trade wine sales (AC Nielsen August 2008): – On-trade: decline of 3.6% to 9th August 2008 – JD Wetherspoon wine sales up 3.5% for the year (LFL volume) y Real ale sales (AC Nielsen July 2008): – On-trade: decline of 8.6% for the year to May 2008 – JD Wetherspoon real
Slide 24: The Environment
The Environment y Recycling has exceeded 16,400 tonnes in 4 years y FY08 recycled nearly 5,300 tonnes of cardboard, cooking oil, plastic, aluminium and paper y 5,000 tonnes glass recycled last year y Letsrecycle.com High Street Recycling Champion 2007 24
Slide 25: Investment in our Staff
Investment in our Staff y Comprehensive employee training system y Award winning National Diploma in Leisure Retail Management Course y Top 100 Employers Handbook, 5th year running y Encourage internal promotion y £16m paid in the year on employee bonuses plus free shares 25
Slide 26: JDW – Did You Know?
JDW – Did You Know? y Coldwater Creek, a brand unique to JDW, is twice the size of Blossom Hill in the managed on-trade. y World’s no. 1 seller of ‘Tierra’, Lavazza’s sustainable coffee from Rainforest Alliance y World’s biggest seller of Kopparberg cider, outselling the whole of the Swedish home ma
Slide 27: Pipeline
Pipeline y 11 on site y 10 permissions in place y 26 deals agreed subject to permits y 163 in negotiation y 210 total pipeline 27
Slide 28: Current Trading and Outlook
Current Trading and Outlook y Record sales in 5 weeks to 31st August 2008: – Total sales +5.5% – LFL sales +1.1% y Cost increases in energy, food, labour and tax y Current estimate LFL sales growth of 3% to maintain trading performance y Weaker comparatives y Opportunities for profitable investment
Slide 29: Appendices
Appendices A - 10-year financial graphs B - 10-year trends C - Capital trends D - ROC/CROCCE/ROE calculations 29
Slide 30: 10-Year Summary
Appendix A 10-Year Summary Number of Pubs 700 643 655 657 671 694 Average Sales Per Pub Week (including VAT) 635 608 £000 600 30.3 30.1 522 30 29.0 28.0 28.2 500 26.4 428 24.7 25 23.5 22.7 400 20.4 327 20 300 15 200 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1999 2000 2001 2002 2003 2004 2005
Slide 31: JDW - Financial Trends
Appendix B JDW - Financial Trends 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Sales per pub (£000) 904 1,004 1,040 1,093 1,169 1,239 1,246 1,283 1,354 1,333 EBITDA per pub (£000) (1) 188.0 203.8 205.9 207.4 201.9 204.4 195.7 205.6 219.0 206.8 Number of pubs 327 428 522 608 635 643 655 657 671
Slide 32: Capital Trends
Appendix C Capital Trends 2000 2001 2002 2003 2004 2005 2006 2007 2008 Average size (sq.ft.) – openings 3,217 3,526 3,808 3,721 4,317 4,176 3,928 3,855 3,618 Number of openings 101 94 87 45 28 13 9 18 23 % which are freehold 67 75 53 56 43 54 22 61 57 Freehold average cost (£k) 465 506 597 511 640 8
Slide 33: ROC/CROCCE/ROE
Appendix D1 ROC/CROCCE/ROE 2008 2007 £000 £000 Profit after tax 35,535 46,834 Less: deferred tax credit - (5,472) Underlying PAT (e) 35,535 41,362 Add: interest (f) 33,023 29,089 Profit pre-interest (g) 68,558 70,451 Deferred tax (credit) / charge (128) 2,192 Depreciation 45,062 43,946 Cash return (
Slide 34: ROC/CROCCE/ROE
Appendix D2 ROC/CROCCE/ROE 2008 2007 £000 £000 Shareholders’ funds per balance sheet 180,547 172,607 Add: cum losses on disposal 13,884 13,884 : hedging provision 856 1,318 (a) 195,287 187,809 Add: net debt (b) 442,205 433,805 Capital employed (c) 637,492 621,614 Add: deferred tax provision 78,648 7