J D Wetherspoon plc (LON:JWD) has announced an update on current trading, before entering its close period for its interim results, for the six months ending 29 January 2023, which are expected to be announced on 24 March 2023.
Current trading
In the 25 weeks to 22 January 2023, like-for-like sales were 13.1% higher than the same period a year ago and 0.7% lower than the same period immediately before the pandemic – the 25 weeks to 26 January 2020.
Like-for-like sales in the last 12 weeks were 17.8% higher than the same period a year ago and were 2.0% lower than the pre-pandemic period.
The Coffer CGA Business Tracker monitors sales for the UK pub and restaurant sector. It reported that one-year like-for-like sales for the sector in December 2022 were +15.0%. Wetherspoon’s like-for-like sales in December were +21.3%.
As has been widely reported, costs in the hospitality industry are far higher than the pre-pandemic period, especially in respect of labour, food, energy and maintenance.
Free cash flow is expected to be substantially in excess of profits, as a result of a cash inflow of approximately £170 million from the October 2022 sale of interest rate swaps, as previously announced.
Financing
As at 22 January 2023, the company’s net debt was £745 million, approximately £60 million lower than the company reported at the same stage in FY2020, before the pandemic.
Since January 2020, the company has invested £80.4 million in the freehold reversions of 31 properties, of which Wetherspoon was previously the tenant.
In the period under review, the company has repaid government “CLBILS” loans of £100 million, which had been due to mature in August 2023.
Financial headroom at the period-end (29 January 2023) is expected to be c£225 million.
Property
The company has opened two pubs in the period and has sold ten. The sale of the ten pubs has resulted in a cash inflow of £2.9 million. 35 pubs remain on the market. The company currently has a trading estate of 844 pubs.
Top Employer
Wetherspoon has recently been recognised by the Top Employers Institute as a ‘Top Employer in the United Kingdom’ for 2023. It is the 18th time that Wetherspoon has been certified by the Institute.
The Institute said: “Being certified as a Top Employer showcases an organisation’s dedication to a better world of work and exhibits this through excellent HR policies and people practices.”
Outlook
J D Wetherspoon chairman Tim Martin said:
“We are cautiously optimistic about the company’s prospects for the financial year.
“The biggest threat to the hospitality industry is the vast disparity in tax treatment between pubs and restaurants and supermarkets.
“Supermarkets pay zero VAT in respect of food sales, whereas pubs and restaurants pay 20%. This tax benefit allows supermarkets to subsidise the selling price of beer.
“We estimate that supermarkets have taken about half of the pub industry’s beer volumes since Wetherspoon started trading in 1979, a process that has likely accelerated following the pandemic.
“Pub industry directors have, in general, failed to campaign for tax equality, which is an important principle of taxation.
“A recent exception is Peter Borg-Neal of Oakman Inns and Restaurants, who said:
“In my opinion, we need to stop campaigning for short-term interventions to support our sector. The focus needs to be on long-term structural change. Our sector is ridiculously overtaxed compared with the rest of Europe. We should focus our efforts and campaign on two issues only – business rates and VAT. The first is an antiquated tax that delivers an unfair burden on our sector. The second is a nonsense. For there to be no VAT on processed meals but for VAT to be charged on food in our sites is an abject nonsense. Furthermore, I think it can be proven these taxes reduce income for the (government) by depressing growth in our sector.” *
Mr Martin added:
“Unless the industry campaigns strongly for equality, it will inevitably shrink relative to supermarkets, which will not help high streets, tourism, the economy overall, or the ancient institution of the pub.”
* quote from Propel News Briefing, Wednesday 18th Jan 2023.
