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FINANCIAL HIGHLIGHTS
SECTION 1
J D Wetherspoon plc
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
1
Wetherspoon owns
and operates pubs
throughout the UK
and Ireland. The
company aims to
provide customers
with good-quality
food and drinks,
served by well-trained
and friendly staff, at
reasonable prices.
The pubs are
individually designed,
and the company aims
to maintain them in
excellent condition.
Contents
SECTION 1
1
2
Financial highlights
Chairman’s statement
12
Income statement
12 Statement of comprehensive income
13 Cash flow statement
14 Balance sheet
15 Statement of changes in equity
16 Notes to the financial statements
SECTION 2
40 Authorisation of financial statements and
statement of compliance with IFRSs
40 Accounting policies
47 Strategic report
50
Independent auditors’ report
55 Directors, officers and advisers
56 Directors’ report
59 Directors’ remuneration report
68 Corporate governance
73
Information for shareholders
74 Pubs opened and closed during the period
Financial calendar
Annual general meeting
21 November 2019
Interim report for 2020
March 2020
Year end
26 July 2020
Preliminary announcement for 2020
September 2020
View this report online:
jdwetherspoon.com/investors-home
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FINANCIAL HIGHLIGHTS
SECTION 1
Like-for-like sales
+6.8%
Revenue £1,818.8m
(2018: £1,693.8m)
+7.4%
Free cash flow1 £97.0m
(2018: £93.4m)
+3.9%
Free cash flow1 per share 92.0p
(2018: 88.4p)
+4.1%
Full-year dividend 12.0p
(2018: 12.0p)
Maintained
Contribution to the economy:
taxes paid £764.4m (2018: £728.8m)
+4.9%
Before exceptional items
After exceptional items2
Operating profit £131.9m
(2018: £132.3m)
-0.3%
Operating profit £131.9m
(2018: £132.3m)
-0.3%
Profit before tax £102.5m
(2018: £107.2m)
-4.5%
Profit before tax £95.4m
(2018: £89.0m)
+7.2%
Earnings per share
(including shares held in trust) 75.5p
(2018: 79.2p)
-4.7%
Earnings per share
(including shares held in trust) 69.0p
(2018: 63.2p)
+9.2%
Non-financial measures
Food hygiene rating3 4.97 out of 5
(2018: 4.97)
No change
Pub manager length of service
12.2 years
(2018: 12.0 years)
1 Free cash flow is defined in note 8 and in the company’s accounting policies. The calculation of free cash flow can be found on the cash flow statement.
2 Exceptional items as disclosed in the notes to the annual report and financial statements, note 4.
3 An average score of the pubs listed on the Food Standards Agency’s website.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
1
CHAIRMAN’S STATEMENT
Financial performance
I am pleased to report a year of record sales for the company.
The company was founded in 1979 – and this is the 36th year since incorporation in 1983.
The table below outlines some key aspects of our performance during that period.
Since our flotation in 1992, earnings per share before exceptional items have grown by
an average of 14.6% per annum and free cash flow per share by an average of 15.0%.
Summary accounts for the years ended July 1984 to 2019
Financial year
Total sales
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
£000
818
1,890
2,197
3,357
3,709
5,584
7,047
13,192
21,380
30,800
46,600
68,536
100,480
139,444
188,515
269,699
369,628
483,968
601,295
730,913
787,126
809,861
847,516
888,473
907,500
955,119
996,327
1,072,014
1,197,129
1,280,929
1,409,333
1,513,923
1,595,197
1,660,750
1,693,818
1,818,793
Profit/(loss)
before tax and
exceptional items
£000
Earnings
per share before
exceptional items
pence
Free cash flow
Free cash flow
£000
per share
pence
(7)
185
219
382
248
789
603
1,098
2,020
4,171
6,477
9,713
15,200
17,566
20,165
26,214
36,052
44,317
53,568
56,139
54,074
47,177
58,388
62,024
58,228
66,155
71,015
66,781
72,363
76,943
79,362
77,798
80,610
102,830
107,249
102,459
0
0.2
0.2
0.3
0.3
0.6
0.4
0.8
1.9
3.3
3.6
4.9
7.8
8.7
9.9
12.9
11.8
14.2
16.6
17.0
17.7
16.9
24.1
28.1
27.6
32.6
36.0
34.1
39.8
44.8
47.0
47.0
48.3
69.2
79.2
75.5
915
732
1,236
3,563
5,079
5,837
13,495
20,968
28,027
28,448
40,088
49,296
61,197
71,370
83,097
73,477
68,774
69,712
52,379
71,411
99,494
71,344
78,818
91,542
65,349
92,850
109,778
90,485
107,936
93,357
96,998
0.4
0.4
0.6
2.1
3.9
3.6
7.4
11.2
14.4
14.5
20.3
24.2
29.1
33.5
38.8
36.7
37.1
42.1
35.6
50.6
71.7
52.9
57.7
70.4
51.8
74.1
89.8
76.7
97.0
88.4
92.0
Notes
Adjustments to statutory numbers
1. Where appropriate, the earnings per share (EPS), as disclosed in the
statutory accounts, have been recalculated to take account of share splits,
the issue of new shares and capitalisation issues.
2. Free cash flow per share excludes dividends paid which were included
in the free cash flow calculations in the annual report and accounts for
the years 1995–2000.
3. The weighted average number of shares, EPS and free cash flow per
share include those shares held in trust for employee share schemes.
4. Before 2005, the accounts were prepared under UKGAAP.
All accounts from 2005 to date have been prepared under IFRS.
5. Apart from the items in notes 1–4, all numbers are as reported in
each year’s published accounts
2
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
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Total sales were £1,818.8m, an increase of 7.4%.
Like-for-like sales increased by 6.8%, bar sales by
5.8%, food sales by 8.3%, slot/fruit machine sales
by 10.3% and hotel room sales by 3.9%.
Operating profit, before exceptional items,
decreased by 0.3% to £131.9m (2018: £132.3m).
The operating margin, before exceptional items was
7.3% (2018: 7.8%).
Profit before tax and exceptional items decreased
by 4.5% to £102.5m (2018: £107.2m), including
property profit of £5.6m (2018: £2.9m). Earnings per
share, including shares held in trust by the
employee share scheme, before exceptional items,
were 75.5p (2018: 79.2p).
Net interest was covered 3.9 times by operating
profit before interest, tax and exceptional items
(2018: 4.8 times), owing mainly to an increase in the
cost of interest-rate ‘swaps’ or hedges and a
reduction in operating profit. Total capital investment
was £167.6m in the period (2018: £110.1m).
£35.2m was invested in new pubs and pub
extensions (2018: £35.9m), £55.2m in existing pubs
and IT (2018: £64.7m) and £77.2m in freehold
reversions, where Wetherspoon was already a
tenant (2018: £9.5m).
Exceptional items totalled £7.0m (2018: £18.3m).
There was a £1.6m loss on disposal and an
impairment charge of £5.5m.
The total cash effect of exceptional items is a
cash outflow of £6.0m. The outflow related to
payments to landlords in relation to lease
terminations. Since starting the current disposal
programme in 2015, the company has had a net
inflow of £20m from the disposal of 101 pubs.
Free cash flow, after capital payments of £54.3m
for existing pubs (2018: £68.9m), £16.0m for share
purchases for employees (2018: £13.6m) and
payments of tax and interest, increased by £3.6m to
£97.0m (2018: £93.4m). Free cash flow
per share was 92.0p (2018: 88.4p).
CHAIRMAN’S STATEMENT
Dividends and return of capital
The board proposes, subject to shareholders’
approval, to pay an unchanged final dividend of 8.0p
per share, on 28 November 2019, to shareholders
on the register on 25 October 2019, giving an
unchanged total dividend for the year of 12.0p
per share. The dividend is covered 5.8 times
(2018: 5.3 times).
In view of the level of capital investment made and
the potential for further investment going forward,
the board has decided to maintain the dividend per
share at its current level for the time being.
During the year, 402,899 shares (0.38% of the
share capital) were purchased by the company for
cancellation, at a cost of £5.4m, an average cost per
share of 1,327p.
My shareholding over the last 15 years has
increased, as a result of the company’s share
‘buybacks’, to 31.8% of the issued share capital.
The company has in place a rule 9 ‘whitewash’,
under the UK City Code on Takeovers and Mergers,
allowing further buybacks. At the annual general
meeting this year, the company will seek approval
for a renewal of the whitewash.
Financing
As at 28 July 2019, the company’s total net debt,
excluding derivatives, was £737.0m
(2018: £726.2m), an increase of £10.8m.
Year-end net-debt-to-EBITDA was 3.36 times
(2018: 3.39 times) – EBITDA was £5m higher in
2019, offsetting a small increase in debt.
As at 28 July 2019, the company had £158.0m
(2018: £133.9m) of unutilised banking facilities and
cash or cash equivalents, with a slight increase in
total facilities to £895.0m (2018: £860.0m). In
August the company raised an additional £98m from
a private placement debt facility.
In order to avoid increased costs, the company has
fixed its LIBOR interest rates in respect of £770m
until March 2029.
Corporation tax
The current tax charge (ie the cash the company will
pay to HMRC) for the period is £22.5m (2018:
£23.7m). The rate of corporation tax paid on current
year profits is the same as that of the previous year
at 22.8%. The ‘accounting’ tax charge, which
appears in the income statement, is £22.8m (2018:
£23.6m).
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
3
CHAIRMAN’S STATEMENT
IFRS 16
On 29 July 2019, the company adopted the IFRS 16
leases standard. This has not affected the financial
statements for the year under review (ended 28 July
2019). All things being equal, the company
estimates that for the year ending 26 July 2020,
EBITDA will increase by c£58m and operating profit
by c£8m. The interest charge will increase by
c£22m and profit before tax will decrease by c£14m.
On the balance sheet, a net lease liability of c£617m
and total assets of c£618m will be recognised, with
no change to net assets. There will be no impact on
cash flows except in relation to tax payments.
VAT equality
As we have previously stated, the government
would generate more revenue and jobs if it were to
create tax equality among supermarkets, pubs and
restaurants. Supermarkets pay virtually no VAT in
respect of food sales, whereas pubs pay 20%. This
has enabled supermarkets to subsidise the price of
alcoholic drinks, widening the price gap to the
detriment of pubs and restaurants.
Pubs also pay around 20 pence a pint in business
rates, whereas supermarkets pay only
about 2 pence, creating further inequality.
Pubs have lost 50% of their beer sales to
supermarkets in the last 35 or so years.
It makes no sense for supermarkets to be treated
more leniently than pubs, since pubs generate far
more jobs per pint or meal than supermarkets do, as
well as far higher levels of tax. Pubs also make an
important contribution to the social life of many
communities and have better visibility and control of
those who consume alcoholic drinks.
Tax equality is particularly important for residents of
less affluent areas, since the tax differential is more
important there – people can less afford to pay the
difference in prices between the on and off trade.
As a result, there are often fewer pubs, coffee
shops and restaurants, with less employment
and increased high-street dereliction, in
less affluent areas.
Tax equality would also be in line with the principle
of fairness in applying taxes to different businesses.
Contribution to the economy
Wetherspoon is proud to pay its share of tax and,
in this respect, is a major contributor to the
economy. In the year under review, we generated
total taxes of £764.4m, an increase of £35.6m,
compared with the previous year, which equates to
approximately 42% of our sales – and also amounts
to approximately one-thousandth of all UK
government revenue.
This results in an average payment per pub of
£871,400 per annum or £16,800 per week.
VAT
Alcohol duty
PAYE and NIC
Business rates
Corporation tax
Machine duty
Climate change levy
Stamp duty
Sugar tax
Fuel duty
Carbon tax
Premise licence and TV licences
Landfill tax
TOTAL TAX
Tax per pub (£000)
Tax as % of sales
2019
£m
357.9
174.4
121.4
57.3
19.9
11.6
10.4
3.7
2.9
2.2
1.9
0.8
–
764.4
871.4
2018
£m
332.8
175.9
109.2
55.6
26.1
10.5
9.2
1.2
0.8
2.1
3.0
0.7
1.7
728.8
825.0
42.0%
43.0%
Pre-exceptional profit after tax
79.6
Profit after tax as % of sales
4.4%
83.7
4.9%
Corporate governance
The underlying ethos of corporate governance is to
comply with the guidelines or to explain why you do
not.
The original creators of the rules must have realised
that business success takes many forms, so a rigid
structure, applicable to all companies cannot be
devised – hence the requirement to explain non-
compliance.
Wetherspoon has always explained its approach.
For example, in 2016, our approach to corporate
governance was summed up in the annual report as
follows:
“..I have said that many aspects of
current corporate governance advice, as laid out in
the Combined Code, are deeply flawed…”
4
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
I then went on to say:
“I believe that the following propositions
represent the views of sensible shareholders:
The Code itself is faulty, since it places excessive
emphasis on meetings between directors and
shareholders and places almost no emphasis on
directors taking account of the views of customers
and employees which are far more important, in
practice, to the future well-being of any company.
For example, in the UK Corporate Governance
Code (September 2014), there are 64 references to
shareholders, but only three to employees and none
to customers – this emphasis is clearly mistaken.
The average institutional shareholder turns over
his portfolio twice annually, so it is advisable for
directors to be wary of the often perverse views of
‘Mr Market’ (in the words of Benjamin Graham),
certainly in respect of very short-term shareholders.
A major indictment of the governance industry
is that modern annual reports are far too long and
often unreadable. They are full of semiliterate
business jargon, including accounting jargon,
and are cluttered with badly written and
incomprehensible governance reports.
It would be very helpful for companies,
shareholders and the public, if the limitations of
corporate governance systems were explicitly
recognised. Common sense, management skills
and business savvy are more important to
commercial success than board structures.
All of the major banks and many supermarket and
pub companies have suffered colossal business
and financial problems, in spite of, or perhaps
because of, their adherence to inadvisable
governance guidelines.
There should be an approximately equal balance
between executives and non-executives. A majority
of executives is not necessarily harmful, provided
that non-executives are able to make
their voices heard.
It is often better if a chairman has previously
been the chief executive of the company. This
encourages chief executives, who may wish to
become a chairman in future, to take a long-term
view, avoiding problems of profit-maximisation
policies in the years running up to the departure
of a chief executive.
A maximum tenure of nine years for non-
executive directors is not advisable, since
inexperienced boards, unfamiliar with the effects of
the ‘last recession’ on their companies, are likely to
reduce financial stability.
CHAIRMAN’S STATEMENT
An excessive focus on achieving financial or other
targets for executives can be counter-productive.
There’s no evidence that the type of targets
preferred by corporate governance guidelines
actually works and there is considerable evidence
that attempting to reach ambitious financial targets
is harmful.
As indicated above, it is far more important for
directors to take account of the views of employees
and customers than of the views of institutional
shareholders. Shareholders should be listened to
with respect, but caution should be exercised in
implementing the views of short-term shareholders.
It should also be understood that modern
institutional shareholders may have a serious
conflict of interest, as they are often concerned with
their own quarterly portfolio performance, whereas
corporate health often requires objectives which lie
five, 10 or 20 years in the future.”
I also quoted Sam Walton of Walmart in the 2014
annual report. He said:
“What’s really worried me over the years is not our
stock price, but that we might someday fail to take
care of our customers or that our managers might
fail to motivate and take care of our (employees)….
Those challenges are more real than somebody’s
theory that we’re heading down the wrong path….
As business leaders, we absolutely cannot afford to
get all caught up in trying to meet the goals that
some … institution … sets for us. If we do that, we
take our eye off the ball…. If we fail to live up to
somebody’s hypothetical projection for what we
should be doing, I don’t care. We couldn’t care less
about what is forecast or what the market says we
ought to do.”
It is, therefore, very disappointing that one large
institutional shareholder does not appear, by its
actions, to support the central tenet of our stance on
the issue of governance, which is that experience is
extremely important and that the so-called ‘nine-
year rule’ is perverse and counterproductive.
This shareholder failed to support the re-election of
two of our non-executive directors at last year’s
AGM. I arranged a meeting for all of our main
institutional shareholders in April 2019, to further
explain our position, which the shareholder in
question failed to attend. I then arranged a further
meeting with the shareholder at their offices
in May 2019.
Following the meeting there was no confirmation
that the shareholder would support the re-election of
our long-serving non-executive directors. As a
result, three of our four non-executives, in the best
interests of the company, offered to leave, on a
rotational basis.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
5
CHAIRMAN’S STATEMENT
The company contacted all of its main shareholders
to inform them of this proposal. The shareholder in
question agreed. However, a number of other
shareholders expressed their discontent with the
proposed resignations (Appendix 1).
The executive board and I strongly feel that these
sorts of board changes disrupt and weaken the
company. I wrote to the shareholder on
9 September 2019 to ask them to reconsider their
position, but have not received a reply.
Wetherspoon has had harmonious relationships
with almost all of its shareholders over many years
and has complied with the corporate governance
requirement for explanation. Judging from the
absence of any adverse comment, our approach
has generally been accepted by investors.
Further progress
As always, the company has tried to improve as
many areas of the business as possible, on a week-
to-week basis, rather than aiming for ‘big ideas’ or
grand strategies. Frequent calls on pubs by senior
executives, the encouragement of criticism from pub
staff and customers and the involvement of pub and
area managers, among others, in weekly decisions,
are the keys to success.
We now have 799 pubs rated on the Food
Standards Agency’s website – the average score is
4.97, with 97.4% of the pubs achieving a top rating
of five stars and 2.1% receiving four stars.
We believe this to be the highest average rating
for any substantial pub company.
In the separate Scottish scheme, which
records either a ‘pass’ or a ‘fail’, all of our 65 pubs
have passed.
We paid £46m in respect of bonuses and free
shares to employees in the year, of which 98% was
paid to staff below board level and 86% was paid to
staff working in our pubs
The company has been recognised as a Top
Employer UK (2019) by The Top Employers Institute
for the 16th consecutive year.
Thanks to fantastic efforts by our employees and
customers, in association with the charity CLIC
Sargent, approximately £1.6m was raised, bringing
the total (since August 2002) to over £17.6m.
Property
The company opened five pubs during the year,
with nine sold or closed, resulting in a trading estate
of 879 pubs at the financial year end.
The average development cost for a new pub
(excluding the cost of freeholds) was £2.6m,
compared with £2.8m a year ago. The full-year
depreciation charge was £81.8m (2018: £79.3m).
We currently intend to open 10–15 pubs in the year
ending July 2020.
Property litigation
As previously reported, Wetherspoon agreed on
an out-of-court settlement with developer
Anthony Lyons, formerly of property leisure agent
Davis Coffer Lyons, in 2013 and received
approximately £1.25m from Mr Lyons.
The payment relates to litigation in which
Wetherspoon claimed that Mr Lyons had been an
accessory to frauds committed by Wetherspoon’s
former retained agent Van de Berg and its directors
Christian Braun, George Aldridge and Richard
Harvey. Mr Lyons denied the claim – and the
litigation was contested.
The claim related to properties in Portsmouth,
Leytonstone and Newbury. The Portsmouth
property was involved in the 2008/9 Van de Berg
case itself.
In that case, Mr Justice Peter Smith found that
Van de Berg, but not Mr Lyons (who was not a party
to the case), fraudulently diverted the freehold from
Wetherspoon to Moorstown Properties Limited, a
company owned by Simon Conway. Moorstown
leased the premises to Wetherspoon. Wetherspoon
is still a leaseholder of this property – a pub called
The Isambard Kingdom Brunel.
The properties in Leytonstone and Newbury
(the other properties in the case against Mr Lyons)
were not pleaded in the 2008/9 Van de Berg case.
Leytonstone was leased to Wetherspoon and trades
today as The Walnut Tree public house. Newbury
was leased to Pelican plc and became Café Rouge.
As we have also reported, the company agreed to
settle its final claim in this series of cases and
accepted £400,000 from property investor Jason
Harris, formerly of First London and now of First
Urban Group. Wetherspoon alleged that Harris was
an accessory to frauds committed by Van de Berg.
Harris contested the claim and has not admitted
liability.
Before the conclusion of the above cases,
Wetherspoon also agreed on a settlement with Paul
Ferrari of London estate agent Ferrari Dewe & Co,
in respect of properties referred to as the ‘Ferrari
Five’ by Mr Justice Peter Smith.
6
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
Current trading and outlook
Journalists regularly ask Wetherspoon for
comments on Brexit – although some publications
begrudge our few paragraphs on the subject in this
section.
Remainer MPs’ main argument – having
consistently voted against the only deal on offer – to
justify their attempts to scupper Brexit, is that costs
for consumers and businesses will axiomatically
increase in the event of ‘no deal’.
However, leaving without a deal avoids a legal
liability to pay £39 billion (Appendix 5), allows the
UK to eliminate protectionist import taxes (tariffs) on
over 12,000 non-EU products, (including rice,
oranges, bananas, Antipodean wine, children’s
clothes and car parts etc) and results in resumption
of the control of fishing waters.
Above all, no-deal increases UK democracy
– the most powerful economic stimulant.
It is an absurdity to argue that a reduction in UK
input costs, combined with increased democracy,
will have a harmful effect on the economy – just as it
would be absurd for a business to adopt this
argument if its own costs were reduced.
Free trade, which the ending of tariffs implies, never
made any country poorer, as former Australian
High Commissioner, Alexander Downer, recently
said (Appendix 6).
Elite Remainers are ignoring the ‘big picture’,
regarding lower input costs and more democracy,
and are mistakenly concentrating on assumed
short-term problems, such as potential delays at
Channel ports – which are easier to extrapolate on
their computer models.
Despite continuing political problems, stemming
from the transfer of democratic power to a
technocratic elite, Wetherspoon continues to
perform well. Like-for-like sales for the six weeks
to 8 September 2019 were up 5.9%.
We currently anticipate a reasonable outcome
(pre IFRS16) for the current financial year, subject
to our future sales performance.
As in previous years, we will provide updates,
during the year, on the company’s trading.
Tim Martin
Chairman
12 September 2019
The UK is clearly in political deadlock, parliament
having refused to carry out the pre-referendum
promise in the leaflet (Appendix 2) sent to every
household which said “The Government will
implement what you decide.”
Democratic power in the UK in the last 30 years
has been diluted by a political faction in parliament,
the media and boardrooms, which has a quasi-
religious belief in the undemocratic EU – with its
unelected presidents, MEPs who cannot instigate
legislation and unaccountable court. Voters resent
this loss of power – and distrust of politicians and
the ‘elite’ is the result.
In recent weeks, the 21 ‘Tory rebels’ (over half
Oxbridge), who helped to block ‘no-deal’ were
joined by 25 bishops (two-thirds Oxbridge), the latter
group asserting (Appendix 3), contrary, many of us
believe, to common sense, that no-deal will be
disadvantageous to the poor.
As another straw in the wind, former Supreme Court
judge and Reith lecturer Lord Sumption described
Brexit supporters as ‘grim fanatics’ (Appendix 4).
John Bercow, Emily Thornberry, Dominic Grieve,
Keir Starmer, Jo Johnson, Philip Hammond, David
Gauke, David Lidington, Hilary Benn, Rory Stewart
and many other pro-EU Oxbridge MPs have played
a leading role in frustrating the referendum result,
by enmeshing parliament in a legal and
administrative spider’s web.
The economic judgement of this faction, led in the
past by the likes of Michael Heseltine, Peter
Mandelson and Tony Blair, the CBI and the
Financial Times, has been extremely poor.
It advocated joining the disastrous predecessor of
the euro, the exchange rate mechanism, the euro
itself, and incorrectly forecast an immediate
recession in the event of a Leave vote in the
referendum.
Author and athlete Matthew Syed has recently
illustrated how a lack of diversity among elites leads
to poor decisions. Investment guru Warren Buffett
has pointed out that forecasts tell you a lot about the
forecaster – but nothing about the future.
The faction’s forecast today is that leaving the EU
without a deal will be a ‘cliff-edge’, a ‘catastrophe’
or a ‘disaster’.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
7
CHAIRMAN’S STATEMENT
Appendix 1 – Comments from institutional
shareholders
Shareholder 1
“
I can confirm that XXX are willing to support all of
the proposed resolutions as outlined in your letter
dated 28th June 2019. XXX intends to vote in
favour of the re-election of all of the non-executive
directors and vote in favour of the remuneration
report at the next AGM.
“Furthermore, I would like to emphasise that XXX
are fully supportive of J D Wetherspoon in its
position regarding the UK Corporate Governance
Code. The explanations given by the company for
its non-compliance to the code are logical and
rational in our opinion.
”
Shareholder 2
“
We’d very much appreciate a brief chat on the
proposals in this letter—we’re happy to chat with
whoever can best answer our question:
“We’d like to understand why the board feels there’s
a need for Elizabeth, Debra, or Sir Richard to be
succeeded, given the shared views of Tim and
ourselves that tenure itself shouldn’t be a reason—
despite what the UK Corporate Governance Code
suggests. Does the board consider Elizabeth,
Debra, and Sir Richard to no longer be the most
qualified to be non-executive board members, even
when taking into account the benefit of their
experience with Wetherspoon, including their now
very well-developed understanding of its unique
approach and culture? Like Tim we believe that
experience helps not hinders non-executive
directors.
“Thank you, and we look forward to talking.
”
8
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
Appendix 2 – Extract from HM Government
pre-referendum promise leaflet, June 2016
Appendix 3 – Extract from open letter from 25
Bishops, 28 August 2019
A once in a generation decision.
“
The referendum on Thursday, 23rd June is your
chance to decide if we should remain in or leave
the European Union.
“
The Archbishop of Canterbury has conditionally
agreed to chair a Citizens Forum in Coventry and,
without prejudice for any particular outcome, we
support this move to have all voices in the current
Brexit debate heard.
The Government believes it is in the best interests
of the UK to remain in the EU.
This is the way to protect jobs, provide security, and
strengthen the UK’s economy for every family in this
country – a clear path into the future, in contrast to
the uncertainty of leaving.
This is your decision. The Government will
implement what you decide.
”
However, we also have particular concerns about
the potential cost of a No Deal Brexit to those least
resilient to economic shocks….
Exiting the EU without an agreement is likely to
have a massive impact on all our people and the
Government is rightly preparing for this outcome.
The Government believes that leaving the EU on
31 October is essential to restoring trust and
confidence. It is unlikely, however, that leaving
without an agreement, regardless of consequences,
will lead to reconciliation or peace in a fractured
country…..
”
The Rt Revd Nick Baines, Bishop of Leeds
The Rt Revd Donald Allister, Bishop of
Peterborough
The Rt Revd Robert Atwell, Bishop of Exeter
And 22 others
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
9
CHAIRMAN’S STATEMENT
Appendix 4 – Extract from The Spectator ‘Diary’
column, 1 June 2019, former Supreme Court
judge and Reith lecturer Lord Jonathan
Sumption
Appendix 5 – Extract from “Summary” of BREXIT
AND THE EU BUDGET (page 3) (House of Lords /
European Union Committee - 15th Report of
Session 2016-17), 4 March 2017
“
…the strictly legal position of the UK on this issue
appears to be strong. Article 50
provides for a ‘guillotine’ after two years if a
withdrawal agreement is not reached unless all
Member States, including the UK, agree to extend
negotiations. Although there are
competing interpretations, we conclude that if
agreement is not reached, all EU law—
including provisions concerning ongoing financial
contributions and machinery for
adjudication—will cease to apply, and the UK would
be subject to no enforceable obligation to
make any financial contribution at all.
”
“
…Back to London and the Brexit bubble. Theresa
May’s last days as Prime Minister have finally
arrived amid a torrent of abuse on every side. But
pause for a moment to reflect upon her personal
and political tragedy, for history will be kinder to her
than we have been. Faced with what many regard
as an act of economic vandalism by a bare majority
of the electorate, she did her loyal best to limit the
damage. Her mistake was to repudiate those who
would have been her natural allies. Instead, she
made her pitch to the grim fanatics behind her, with
whom no agreement on damage limitation was ever
possible. Their guide was faith, not reason;
compromise was treason and the EU was the
Antichrist. Naturally, they responded by devouring
her, and destroying their own party in the process.
But by the time she realised this, it was too late.
May’s courage in the face of adversity commands
respect. She was let down by her insularity, which
deprived her of wise advice, and by her own utter
lack of political imagination, tactical agility or basic
communication skills.
In Austria for the 150th anniversary of the Vienna
State Opera and the opening of Richard Strauss’s
Die Frau Ohne Schatten. The Viennese are in the
middle of their own political crisis, but over sekt and
canapés in the intervals, they seem more interested
in ours. They have heard of only one candidate for
May’s job. ‘Who is this Joris Hobson who is going to
be your next prime minister?’, they ask. ‘Boris
Johnson, but don’t count on it.’ ‘Yes, yes, Morris
Watson. Is he some kind of fascist?’ ‘Not at all. A
romantic, a bit of a clown, but perfectly harmless
when out of office.’ ‘Well, if it is not Moggson, then
who?’ ‘No idea.’ My short-lived authority as an
expert on British politics is over.
”
10
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
Appendix 6 – Extract from The Spectator,
12 May 2018, James Forsyth
What Aussies really think of Brexit
“
Alexander Downer is coming to the end of his
four-year stint as High Commissioner to the UK.
His common sense will be missed
When friends speak, you should listen
— and you would be hard pressed to
find a better friend of this country in
the London diplomatic corps than
Alexander Downer. The 66-year-old,
who has just finished a four-year stint
as the Australian High Commissioner,
is an Anglophile by instinct and
upbringing. He spent much of his
childhood here because his father was
appointed to the job in 1964.
When Downer’s father left in 1972, he
worried about this country joining the
European Economic Community and what
that would mean for relations with Australia
and other Commonwealth countries. So
there is a neat symmetry in his son being
High Commissioner when Britain decided
to reverse that decision. But Downer is not
particularly ideological about Brexit.
In 2016 he dutifully joined in the chorus
of diplomatic panjandrums urging Britain to
vote Remain. But since then, he has been
quick to talk about the opportunities
it presents.
On its own, he says Brexit won’t be
transformative: ‘Your fate when you leave the
EU will depend much more on the domestic
policies you pursue than the fact you’re not in
the EU. You will do well if you open your
markets and you embrace free trade; there
was never a country that embraced free trade
that was poor as a result.’
Free-trade will also mean leaving the
customs union: ‘If you stay in the single
market and the customs union, you have left
the decision-making part of the EU but you
remain in the rest of it… I can tell you what,
you wouldn’t persuade the average Aussie
to contract out decision making to ASEAN
[Association of South East Asian Nations],
they’d just change the government if the
government tried to do that!’ Some Tory
MPs might think the same is true in Britain.
CHAIRMAN’S STATEMENT
Downer argues that the more attention the
customs union gets, the more voters will
reject it: ‘The more the public understands
that remaining in the customs union means
that other people make all of your trade
policy for you, they would regard that as
completely unacceptable. I don’t think they
necessarily know the details of what all these
terms mean, because they’ve got other
things on their minds; you can’t blame them
for that. But I think if you were a really
effective politician, you could make a very
strong point on this.’
You might think: Downer would say that,
wouldn’t he? After all, if Britain stays in the
customs union there is no chance of that UK
Australia trade agreement. But he is surely
right that it would be absurd for the sixth
largest economy in the world not to have
control over its trade policy.
On a UK-Australia free trade deal, Downer is
keen to offer reassurance, emphasising it is
nothing to be afraid of. He stresses that
Australia doesn’t want ‘radical change to
regulations’ and that farmers shouldn’t fear
the market being flooded with cheap beef
and lamb, as Australia ‘doesn’t have much
interest in the British market’. Rather, its
sights are focused on Asia, where ‘there is a
massive rise of the middle class. Honestly, we
cannot produce enough meat at the moment
to meet the market demand in Asia.’
Whether the agricultural lobby is reassured
by this answer remains to be seen. But when
Downer talks about the Australia-US freetrade
deal, you can see why Canberra is so
keen on one with Britain. Downer points out
that in the 13 years since the deal was signed,
trade between the two countries has
increased by 50 per cent and investment is
up 130 per cent. Interestingly, Downer adds
that he would like a UK-Australia trade deal
to be accompanied by the kind of
immigration accord Australia and the US
have, which allows professionals to work in
each other’s country for two years, with the
option to renew indefinitely…
Perhaps Downer’s most important advice is
that the Brexit debate has ‘laid a little more
bare the division between the liberal elite
and the mainstream of British society’. The
‘great challenge’ will be to reconnect them
once this is over. If the two sides were
looking for a marriage counsellor, they
could do worse than this softly spoken
Australian.
”
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
11
INCOME STATEMENT for the 52 weeks ended 28 July 2019
J D Wetherspoon plc, company number: 1709784
Notes
Revenue
Operating costs
Operating profit
Property gains/(losses)
Finance income
Finance costs
Profit before tax
Income tax expense
Profit for the period
Earnings per share (p)
– Basic1
– Diluted2
Operating profit per share (p)
– Diluted2
1
2
3
6
6
7
8
8
8
52 weeks
ended
28 July 2019
Before
exceptional
items
£000
1,818,793
(1,686,876)
131,917
5,599
41
(35,098)
102,459
(22,830)
52 weeks
ended
28 July 2019
Exceptional
items
(note 4)
£000
–
–
–
52 weeks
ended
28 July 2019
After
exceptional
items
52 weeks
ended
29 July 2018
Before
exceptional
items
52 weeks
ended
29 July 2018
Exceptional
items
(note 4)
52 weeks
ended
29 July 2018
After
exceptional
items
£000
£000
£000
£000
1,818,793
1,693,818
–
1,693,818
(1,686,876)
(1,561,527)
–
(1,561,527)
131,917
132,291
–
132,291
(7,040)
(1,441)
2,900
(18,251)
(15,351)
–
–
41
48
(35,098)
(27,990)
–
–
48
(27,990)
(7,040)
95,419
107,249
(18,251)
88,998
188
(22,642)
(23,567)
1,278
(22,289)
79,629
(6,852)
72,777
83,682
(16,973)
66,709
77.2
75.5
(6.6)
(6.5)
70.6
69.0
81.1
79.2
(16.5)
(16.0)
64.6
63.2
125.1
–
125.1
125.3
–
125.3
STATEMENT OF COMPREHENSIVE INCOME for the 52 weeks ended 28 July 2019
Items which may be reclassified subsequently to profit or loss:
Interest-rate swaps: (loss)/gain taken to other comprehensive income
Tax on items taken directly to other comprehensive income
Currency translation differences
Net (loss)/gain recognised directly in other comprehensive income
Profit for the period
Total comprehensive income for the period
Notes
52 weeks
ended
28 July 2019
£000
52 weeks
ended
29 July 2018
£000
23
7
(24,963)
14,787
4,243
(2,513)
181
(320)
(20,539)
11,954
72,777
66,709
52,238
78,663
1 Calculated excluding shares held in trust.
2 Calculated using issued share capital which includes shares held in trust.
12
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
CASH FLOW STATEMENT for the 52 weeks ended 28 July 2019
J D Wetherspoon plc, company number: 1709784
Notes
52 weeks
ended
28 July 2019
£000
Free cash
flow1
52 weeks
ended
28 July 2019
£000
52 weeks
ended
29 July 2018
£000
Free cash
flow1
52 weeks
ended
29 July 2018
£000
Cash flows from operating activities
Cash generated from operations
9
227,176
227,176
228,300
228,300
Interest received
Interest paid
Corporation tax paid
33
(33,957)
(19,661)
33
36
36
(33,957)
(25,824)
(25,824)
(19,661)
(26,113)
(26,113)
Net cash inflow from operating activities
173,591
173,591
176,399
176,399
Cash flows from investing activities
Reinvestment in pubs
(47,398)
(47,398)
(63,753)
(63,753)
Reinvestment in business and IT projects 2
Investment in new pubs and pub extensions
Freehold reversions
Proceeds of sale of property, plant and equipment
Lease premiums paid
(6,923)
(26,778)
(77,207)
9,319
(451)
(6,923)
(5,166)
(5,166)
(46,386)
(16,278)
4,742
–
Net cash outflow from investing activities
(149,438)
(54,321)
(126,841)
(68,919)
Cash flows from financing activities
Equity dividends paid
Purchase of own shares for cancellation
Purchase of own shares for share-based payments
Advances under bank loans
Repayment of bank loans
Loan issue costs
Advances under finance lease
Finance lease principal payments
Net cash outflow from financing activities
Net change in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
Free cash flow
Free cash flow per ordinary share
11
28
10
10
10
10
10
10
19
19
8
8
(12,652)
(5,399)
(12,655)
(51,647)
(16,004)
(16,004)
(13,605)
(13,605)
–
(13,865)
(6,268)
12,000
(2,106)
41,314
–
(6,268)
(518)
(518)
–
–
(44,294)
(22,272)
(37,111)
(14,123)
(20,141)
63,091
42,950
12,447
50,644
63,091
96,998
92.0p
93,357
88.4p
1Free cash flow is a measure not required by accounting standards; a definition is provided in our accounting policies.
2 Within reinvestment in business and IT projects, £5,859,000 were intangible assets (2018: £3,072,000), with the remaining balance being related equipment.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
13
BALANCE SHEET as at 28 July 2019
J D Wetherspoon plc, company number: 1709784
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment property
Other non-current assets
Derivative financial instruments
Deferred tax assets
Total non-current assets
Assets held for sale
Current assets
Inventories
Receivables
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Borrowings
Derivative financial instruments
Trade and other payables
Current income tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liabilities
Provisions
Other liabilities
Total non-current liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Hedging reserve
Currency translation reserve
Retained earnings
Total equity
Notes
28 July 2019
£000
29 July 2018
£000
13
12
14
15
23
7
18
16
17
19
21
23
20
22
21
23
7
22
24
28
1,384,971
1,306,073
23,070
5,531
7,888
321
8,342
24,779
7,494
7,925
14,976
4,099
1,430,123
1,365,346
3,146
1,455
23,717
21,903
42,950
88,570
23,300
23,122
63,091
109,513
1,521,839
1,476,314
(3,287)
–
(8,864)
(160)
(308,326)
(290,602)
(10,986)
(4,072)
(8,950)
(8,052)
(326,671)
(316,628)
(776,683)
(49,393)
(39,416)
(1,934)
(10,930)
(780,420)
(38,925)
(38,980)
(2,453)
(12,346)
(878,356)
(873,124)
316,812
286,562
2,102
143,294
2,329
(40,730)
5,370
204,447
316,812
2,110
143,294
2,321
(20,010)
4,767
154,080
286,562
The financial statements, on pages 12 to 46, approved by the board of directors and authorised for issue
on 12 September 2019, are signed on its behalf by:
John Hutson
Director
Ben Whitley
Director
14
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
STATEMENT OF CHANGES IN EQUITY
J D Wetherspoon plc, company number: 1709784
Reported at 30 July 2017
2,180 143,294
2,251
(32,284)
4,899
138,092
258,432
Notes
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Hedging
reserve
£000
Currency
translation
reserve
£000
Retained
earnings
Total
£000
£000
Total comprehensive income
Profit for the period
Interest-rate swaps: cash flow hedges
Tax taken directly to comprehensive income
Currency translation differences
Purchase of own shares for cancellation
Share-based payment charges
Tax on share-based payment
23
7
7
Purchase of own shares for share-based payments
Dividends
At 29 July 2018
Total comprehensive income
Profit for the period
Interest-rate swaps: cash flow hedges
Tax taken directly to comprehensive income
Currency translation differences
Purchase of own shares for cancellation
Share-based payment charges
Tax on share-based payment
11
23
7
7
Purchase of own shares for share-based payments
Dividends
At 28 July 2019
11
(70)
70
12,274
(132)
66,521
78,663
14,787
(2,513)
66,709
66,709
14,787
(2,513)
(132)
(188)
(320)
(36,205)
(36,205)
11,405
11,405
527
527
(13,605)
(13,605)
(12,655)
(12,655)
2,110 143,294
2,321
(20,010)
4,767
154,080
286,562
(8)
8
(20,720)
603
72,355
52,238
72,777
72,777
(24,963)
4,243
(24,963)
4,243
181
603
(422)
(5,399)
(5,399)
11,558
11,558
509
509
(16,004)
(16,004)
(12,652)
(12,652)
2,102 143,294
2,329
(40,730)
5,370
204,447
316,812
The balance classified as share capital represents proceeds arising on issue of the company’s equity share capital,
comprising 2p ordinary shares and the cancellation of shares repurchased by the company.
The capital redemption reserve increased owing to the repurchase of a number of shares in the year.
Shares acquired in relation to the employee Share Incentive Plan and the Deferred Bonus Scheme are held in trust,
until such time as the awards vest. At 28 July 2019, the number of shares held in trust was 2,259,401 (2018: 2,367,991),
with a nominal value of £45,188 (2018: £47,360) and a market value of £34,794,775 (2018: £28,865,810); these are
included in retained earnings.
During the year, 402,899 shares were repurchased by the company for cancellation, representing approximately 0.38% of the issued
share capital, at a cost of £5.4m, including stamp duty, representing an average cost per share of 1,327p.
Hedging gains and losses arise from fair value movements in the company’s financial derivative instruments,
in line with the accounting policy disclosed in section 2.
The currency translation reserve contains the accumulated currency gains and losses on the long-term financing and
balance sheet translation of the overseas branch. The currency translation difference reported in retained earnings
is the restatement of the opening reserves in the overseas branch at the current year end currency exchange rate.
As at 28 July 2019, the company had distributable reserves of £169.1m.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
15
NOTES TO THE FINANCIAL STATEMENTS
1. Revenue
Revenue disclosed in the income statement is analysed as follows:
Bar
Food
Slot/fruit machines
Hotel
Other
2. Operating profit – analysis of costs by nature
This is stated after charging/(crediting):
Concession rental payments
Minimum operating lease payments
Repairs and maintenance
Net rent receivable
Share-based payments (note 5)
Depreciation of property, plant and equipment (note 13)
Amortisation of intangible assets (note 12)
Depreciation of investment properties (note 14)
Amortisation of other non-current assets (note 15)
Auditors’ remuneration
Fees payable for the audit of the financial statements
– Standard audit fees
– Additional audit work
Fees payable for other services:
– Audit related services
– Assurance services
Total auditors’ fees
Analysis of continuing operations
Revenue
Cost of sales
Gross profit
Administration costs
Operating profit after exceptional items
52 weeks
ended
28 July
2019
£000
1,094,001
656,955
46,404
19,699
1,734
1,818,793
52 weeks
ended
29 July
2018
£000
1,031,672
599,937
42,161
18,400
1,648
1,693,818
52 weeks
ended
28 July
2019
£000
32,086
38,241
76,879
(1,545)
11,558
73,779
7,634
55
343
52 weeks
ended
28 July
2019
£000
167
23
–
27
217
52 weeks
ended
29 July
2018
£000
25,075
42,754
71,261
(1,407)
11,405
70,918
7,984
56
347
52 weeks
ended
29 July
2018
£000
167
–
38
27
232
52 weeks
ended
28 July
2019
£000
1,818,793
(1,639,378)
179,415
(47,498)
131,917
52 weeks
ended
29 July
2018
£000
1,693,818
(1,517,255)
176,563
(44,272)
132,291
Included within cost of sales is £640.5m (2018: £602.4m) relating to cost of inventory recognised as expense.
16
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
3. Property gains and losses
NOTES TO THE FINANCIAL STATEMENTS
52 weeks
ended
28 July 2019
Before
exceptional
items
£000
(4,650)
230
–
–
–
(1,179)
(5,599)
52 weeks
ended
28 July 2019
Exceptional
items
(note 4)
£000
1,015
568
3,550
145
1,762
–
7,040
(Gain)/loss on disposal of fixed assets
Additional costs of disposal
Impairment of property, plant and equipment
Impairment of other assets
Onerous lease provision
Other property gains
Total property (gains)/losses
The gain of £5,599,000 (2018: £2,900,000) relates to non-disposal programme sites.
4. Exceptional items
Exceptional property losses
Disposal programme
Loss on disposal of pubs
Impairment property plant and equipment
Impairment of other non-current assets
Onerous lease provision
Other property losses
Impairment of property, plant and equipment
Impairment of other non-current assets
Onerous lease provision
Total exceptional property losses
Exceptional tax
Tax effect on exceptional items
Total exceptional items
52 weeks
ended
52 weeks
ended
52 weeks
ended
52 weeks
ended
28 July 2019 29 July 2018 29 July 2018 29 July 2018
After
exceptional
items
£000
Before Exceptional
items
(note 4)
£000
After
exceptional
items
£000
exceptional
items
£000
(3,635)
798
3,550
145
1,762
(1,179)
1,441
(1,865)
117
–
–
–
(1,152)
(2,900)
5,076
3,625
3,588
–
5,962
–
18,251
3,211
3,742
3,588
–
5,962
(1,152)
15,351
52 weeks
ended
28 July
2019
£000
1,583
1,298
93
1,134
4,108
2,252
52
628
2,932
52 weeks
ended
29 July
2018
£000
8,701
–
–
4,520
13,221
3,588
–
1,442
5,030
7,040
18,251
(188)
(1,278)
6,852
16,973
Disposal programme
The company has offered several of its sites for sale. At the year end, a further eight (2018: 19) sites had been sold,
including those which were closed in the previous year; two (2018: one) were classified as held for sale.
In the table above, the costs classified as loss on disposal are the losses on sold sites and associated costs to sale.
Onerous lease provision relates to sites which have been closed.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
17
NOTES TO THE FINANCIAL STATEMENTS
4. Exceptional items (continued)
Other property losses
Property impairment relates to the situation in which, owing to poor trading performance, pubs are unlikely to generate sufficient
cash in the future to justify their current book value. In the year, an exceptional charge of £2,304,000 (2018: £3,588,000) was
incurred in respect of the impairment of assets as required under IAS 36. This comprises an impairment charge of £2,304,000
(2018: £6,898,000), offset by impairment reversals of £Nil (2018: £3,310,000).
The onerous lease provision relates to pubs for which future trading profits, or income from subleases, are not expected to
cover the rent. The provision takes several factors into account, including the expected future profitability of the pub and
also the amount estimated as payable on surrender of the lease, where this is a likely outcome. In the year, £628,000
(2018: £1,442,000) was charged net in respect of onerous leases outside of the disposal programme.
All exceptional items listed above generated a net cash outflow of £6,040,000 (2018: outflow of £629,000).
5. Employee benefits expenses
Wages and salaries
Social Security costs
Other pension costs
Share-based payments
Directors' emoluments
Aggregate emoluments
Aggregate amount receivable under long-term incentive schemes
Company contributions to money purchase pension scheme
52 weeks
52 weeks
ended
28 July
2019
£000
568,758
35,783
6,912
11,558
623,011
2019
£000
1,858
515
162
2,535
ended
29 July
2018
£000
501,229
34,455
4,510
11,405
551,599
2018
£000
1,895
1,297
154
3,346
For further details of directors’ emoluments, please see the directors’ remuneration report on pages 59 to 67.
The totals below relate to the monthly average number of employees during the year, not the total number of employees at the
end of the year (including directors on a service contract).
Full-time equivalents
Managerial/administration
Hourly paid staff
Total employees
Managerial/administration
Hourly paid staff
2019
Number
4,442
21,035
25,477
2019
Number
4,541
37,358
41,899
2018
Number
4,335
19,727
24,062
2018
Number
4,424
33,960
38,384
For details of the Share Incentive Plan and the Deferred Bonus Scheme, refer to the directors’ remuneration report
on pages 59 to 67.
18
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
5. Employee benefits expenses (continued)
The shares awarded as part of the above schemes are based on the cash value of the bonuses at the date of the awards.
These awards vest over three years – with their cost spread over their three-year life. The share-based payment charge above
represents the annual cost of bonuses awarded over the past three years. All awards are settled in equity.
The company operates two share-based compensation plans. In both schemes, the fair values of the shares granted are
determined by reference to the share price at the date of the award. The shares vest at a £Nil exercise price –
and there are no market-based conditions to the shares which affect their ability to vest.
Share-based payments
Shares awarded during the year (shares)
Average price of shares awarded (pence)
Market value of shares vested during the year (£000)
Reserve for share-based payments scheme (£000)
6. Finance income and costs
Finance costs
Interest payable on bank loans and overdrafts
Amortisation of bank loan issue costs (note 10)
Interest payable on swaps
Interest payable on obligations under finance leases
Interest payable on other loans
Total finance costs
Bank interest receivable
Total finance income
52 weeks
ended
28 July
2019
1,390,290
1,313
17,173
16,259
52 weeks
ended
29 July
2018
1,366,435
1,268
14,199
15,668
52 weeks
ended
28 July
2019
£000
21,089
925
12,705
152
227
52 weeks
ended
29 July
2018
£000
18,899
1,540
7,544
–
7
35,098
27,990
(41)
(41)
(48)
(48)
The finance costs in the income statement were covered 3.9 times (2018: 4.8 times) by earnings before interest,
tax and exceptional items.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
19
NOTES TO THE FINANCIAL STATEMENTS
7.
Income tax expense
(a) Tax on profit on ordinary activities
The standard rate of corporation tax in the UK is 19.00%. The company's profits for the accounting period are taxed at a rate of
19.00% (2018: 19.00%).
52 weeks
ended
52 weeks
ended
52 weeks
ended
52 weeks
ended
52 weeks
ended
52 weeks
ended
28 July 2019
28 July 2019
28 July 2019 29 July 2018 29 July 2018 29 July 2018
Before
exceptional
items
£000
Exceptional
items
(note 4)
£000
After
exceptional
items
£000
Before Exceptional
items
(note 4)
£000
exceptional
items
£000
After
exceptional
items
£000
23,406
(922)
22,484
2,174
(1,828)
346
(273)
–
(273)
85
–
85
23,133
(922)
22,211
24,466
(765)
23,701
(325)
–
(325)
24,141
(765)
23,376
2,259
(1,828)
431
(70)
(64)
(134)
(953)
–
(953)
(1,023)
(64)
(1,087)
Taken through income statement
Current income tax:
Current income tax charge
Previous period adjustment
Total current income tax
Deferred tax:
Temporary differences
Previous period adjustment
Total deferred tax
Tax charge/(credit)
22,830
(188)
22,642
23,567
(1,278)
22,289
52 weeks
ended
28 July 2019
Before
exceptional
items
£000
(514)
5
(509)
52 weeks
ended
28 July 2019
Before
exceptional
items
£000
(4,243)
(4,243)
Taken through equity
Tax on share-based payment
Current tax
Deferred tax
Tax credit
Taken through comprehensive income
Deferred tax charge on swaps
Tax (credit)/charge
52 weeks
ended
28 July 2019
Exceptional
items
(note 4)
£000
52 weeks
ended
52 weeks
ended
52 weeks
ended
52 weeks
ended
28 July 2019 29 July 2018 29 July 2018 29 July 2018
After
exceptional
items
£000
Before Exceptional
items
(note 4)
£000
After
exceptional
items
£000
exceptional
items
£000
–
–
–
(514)
5
(509)
(472)
(55)
(527)
–
–
–
(472)
(55)
(527)
52 weeks
ended
28 July 2019
Exceptional
items
(note 4)
£000
52 weeks
ended
52 weeks
ended
52 weeks
ended
52 weeks
ended
28 July 2019 29 July 2018 29 July 2018 29 July 2018
After
exceptional
items
£000
Before Exceptional
items
(note 4)
£000
After
exceptional
items
£000
exceptional
items
£000
–
–
(4,243)
(4,243)
2,513
2,513
–
–
2,513
2,513
20
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
7.
Income tax expense (continued)
(b) Reconciliation of the total tax charge
NOTES TO THE FINANCIAL STATEMENTS
The taxation charge for the 52 weeks ended 28 July 2019 is based on the pre-exceptional profit before tax of £102.5m
and the estimated effective tax rate before exceptional items for the 52 weeks ended 28 July 2019 of 22.3% (2018: 22.0%).
This comprises a pre-exceptional current tax rate of 22.0% (2018: 22.1%) and a pre-exceptional deferred tax charge
of 0.3% (2018: 0.1% credit).
The UK standard weighted average tax rate for the period is 19.00% (2018: 19.00%). The current tax rate is higher than the UK
standard weighted average tax rate owing mainly to depreciation which is not eligible for tax relief.
Profit before income tax
Profit multiplied by the UK standard rate of
corporation tax of 19.00% (2018: 19.00%)
Abortive acquisition costs and disposals
Other disallowables
Other allowable deductions
Capital gains – effects of reliefs
Non-qualifying depreciation
Deduction for shares and SIPs
Remeasurement of other balance sheet items
Unrecognised losses in overseas companies
Unrecognised losses capital losses
Previous year adjustment – current tax
Previous year adjustment – deferred tax
Total tax expense reported in the income statement
52 weeks
ended
28 Jul 2019
Before
exceptional
items
£000
102,459
52 weeks
ended
28 Jul 2019
After
exceptional
items
£000
52 weeks
ended
29 Jul 2018
Before
exceptional
items
£000
52 weeks
ended
29 Jul 2018
After
exceptional
items
£000
95,419
107,249
88,998
19,467
18,130
20,377
16,910
85
384
(111)
(380)
2,487
(449)
(71)
557
3,611
(922)
(1,828)
22,830
85
567
(111)
(295)
3,368
(449)
(71)
557
3,611
(922)
(1,828)
22,642
103
117
(106)
53
3,645
(61)
(272)
540
–
(765)
(64)
23,567
103
2,315
(106)
(471)
4,068
31
(272)
540
–
(765)
(64)
22,289
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
21
NOTES TO THE FINANCIAL STATEMENTS
7.
Income tax expense (continued)
(c) Deferred tax
The deferred tax in the balance sheet is as follows:
The Finance Act 2017 included legislation to reduce the main rate of corporation tax to 17% for the financial year
beginning 1 April 2020.
Deferred tax liabilities
At 29 July 2018
Previous year movement posted to the income statement
Movement during year posted to the income statement
At 28 July 2019
Deferred tax assets
At 29 July 2018
Previous year movement posted to the income statement
Movement during year posted to the income statement
Movement during year posted to comprehensive income
Movement during year posted to equity
At 28 July 2019
Share
based
payments
£000
1,443
–
200
–
(5)
1,638
Deferred tax assets and liabilities have been offset as follows:
Deferred tax liabilities
Offset against deferred tax assets
Deferred tax liabilities
Deferred tax assets
Offset against deferred tax liabilities
Deferred tax asset
Accelerated tax
depreciation
£000
40,178
(1,557)
(1,822)
36,799
Other
temporary
differences
£000
3,587
(82)
750
4,255
Total
£000
43,765
(1,639)
(1,072)
41,054
Capital
Interest-rate
Total
losses
carried
forward
£000
3,342
189
(3,531)
–
–
–
swaps
£000
4,099
–
–
4,243
–
8,342
2019
£000
41,054
(1,638)
39,416
9,980
(1,638)
8,342
£000
8,884
189
(3,331)
4,243
(5)
9,980
2018
£000
43,765
(4,785)
38,980
8,884
(4,785)
4,099
As at 28 July 2019 the company had a potential deferred tax asset of £3.6m relating to capital losses. A deferred tax asset
was recognised in respect of the losses in 2018, however, the deferred tax asset has been derecognised as there is not
sufficient certainty of recovery.
22
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
8. Earnings and free cash flow per share
(a) Weighted average number of shares
Earnings per share are based on the weighted average number of shares in issue of 105,439,345 (2018: 105,605,135),
including those held in trust in respect of employee share schemes. Earnings per share, calculated on this basis,
are usually referred to as ‘diluted’, since all of the shares in issue are included.
Accounting standards refer to ‘basic earnings’ per share – these exclude those shares held in trust in respect of
employee share schemes.
Weighted average number of shares
Shares in issue (used for diluted EPS)
Shares held in trust
Shares in issue less shares held in trust (used for basic EPS)
52 weeks
52 weeks
ended
28 July
ended
29 July
2019
2018
105,439,345 105,605,135
(2,313,464)
(2,402,603)
103,125,881 103,202,532
The weighted average number of shares held in trust for employee share schemes has been adjusted to exclude those shares
which have vested, yet remain in trust.
(b) Earnings per share
52 weeks ended 28 July 2019
Earnings (profit after tax)
Exclude effect of exceptional items after tax
Earnings before exceptional items
Exclude effect of property gains
Underlying earnings before exceptional items
52 weeks ended 29 July 2018
Earnings (profit after tax)
Exclude effect of exceptional items after tax
Earnings before exceptional items
Exclude effect of property gains
Underlying earnings before exceptional items
Profit
£000
72,777
6,852
79,629
(5,599)
74,030
Profit
£000
66,709
16,973
83,682
(2,900)
80,782
Basic EPS
Diluted EPS
pence
70.6
6.6
77.2
(5.4)
71.8
pence
69.0
6.5
75.5
(5.3)
70.2
Basic EPS
Diluted EPS
pence
64.6
16.5
81.1
(2.8)
78.3
pence
63.2
16.0
79.2
(2.7)
76.5
The diluted earnings per share before exceptional items have decreased by 4.7% (2018: increased by 14.5%).
(c) Free cash flow per share
The calculation of free cash flow per share is based on the net cash generated by business activities and available for
investment in new pub developments and extensions to current pubs, after funding interest, corporation tax, all other
reinvestment in pubs open at the start of the period and the purchase of own shares under the employee Share Incentive Plan
(‘free cash flow’). It is calculated before taking account of proceeds from property disposals, inflows and outflows of financing
from outside sources and dividend payments and is based on the weighted average number of shares in issue, including those
held in trust in respect of the employee share schemes.
52 weeks ended 28 July 2019
52 weeks ended 29 July 2018
Free cash
flow
£000
96,998
93,357
Basic free
cash flow
per share
pence
94.1
90.5
Diluted free
cash flow
per share
pence
92.0
88.4
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
23
NOTES TO THE FINANCIAL STATEMENTS
8. Earnings and free cash flow per share (continued)
(d) Owners’ earnings per share
Owners’ earnings measure the earnings attributable to shareholders from current activities adjusted for significant non-cash
items and one-off items. Owners’ earnings are calculated as profit before tax, exceptional items, depreciation and
amortisation and property gains and losses less reinvestment in current properties and cash tax. Cash tax is defined as the
current year’s current tax charge.
52 weeks ended 28 July 2019
Profit before tax and exceptional items (income statement)
Exclude depreciation and amortisation (note 2)
Less cash reinvestment in current properties
Exclude property gains and losses (note 3)
Less cash tax (note 7)
Owners’ earnings
52 weeks ended 29 July 2018
Profit before tax and exceptional items (income statement)
Exclude depreciation and amortisation (note 2)
Less cash reinvestment in current properties
Exclude property gains and losses (note 3)
Less cash tax (note 7)
Owners’ earnings
Owner's
Earnings
£000
102,459
81,811
(55,239)
(5,599)
(23,406)
100,026
Owner's
Earnings
£000
107,249
79,305
(64,665)
(2,900)
(24,466)
94,523
Basic
Diluted
Owner's EPS
Owner's EPS
pence
99.4
79.3
(53.6)
(5.4)
(22.7)
97.0
pence
97.2
77.6
(52.4)
(5.3)
(22.2)
94.9
Basic
Diluted
Owner's EPS
Owner's EPS
pence
103.9
76.8
(62.7)
(2.8)
(23.6)
91.6
pence
101.6
75.1
(61.2)
(2.7)
(23.3)
89.5
The diluted owners’ earnings per share increased by 6.0% (2018: increased by 19.8%). The increase is calculated using figures
to two decimal places.
Analysis of additions by type
Reinvestment in existing pubs
Investment in new pubs and pub extensions
Freehold reversions
Analysis of additions by category
Property, plant and equipment (note 13)
Intangible assets (note 12)
Other non-current assets (note 15)
(e) Operating profit per share
52 weeks
52 weeks
ended
28 July
2019
55,239
35,172
77,207
167,618
ended
29 July
2018
64,665
35,863
9,555
110,083
52 weeks
52 weeks
ended
28 July
2019
161,242
5,925
451
167,618
ended
29 July
2018
107,011
3,072
–
110,083
52 weeks ended 28 July 2019
52 weeks ended 29 July 2018
Operating
Basic operating
Diluted operating
profit
profit per share
profit per share
£000
131,917
132,291
pence
127.9
128.2
pence
125.1
125.3
24
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
9. Cash generated from operations
NOTES TO THE FINANCIAL STATEMENTS
Profit for the period
Adjusted for:
Tax (note 7)
Share-based charges (note 2)
Gain/(loss) on disposal of property, plant and equipment (note 3)
Net impairment charge (note 3)
Interest receivable (note 6)
Amortisation of bank loan issue costs (note 6)
Interest payable (note 6)
Depreciation of property, plant and equipment (note 13)
Amortisation of intangible assets (note 12)
Depreciation on investment properties (note 14)
Amortisation of other non-current assets (note 15)
Net onerous lease provision (note 22)
Aborted properties costs
Change in inventories
Change in receivables
Change in payables
52 weeks
52 weeks
ended
28 July
2019
£000
ended
29 July
2018
£000
72,777
66,709
22,642
11,558
(3,635)
3,695
(41)
925
34,173
73,779
7,634
55
343
1,762
430
226,097
(417)
1,228
268
22,289
11,405
3,211
3,588
(48)
1,540
26,450
70,918
7,984
56
347
5,962
541
220,952
(1,725)
(1,225)
10,298
Cash flow from operating activities
227,176
228,300
10. Analysis of change in net debt
Borrowings
Cash in hand
Bank loans – due before one year
Finance lease creditor – due before one year
Other loans
Current net borrowings
Bank loans – due after one year
Finance lease creditor – due after one year
Non-current net borrowings
29 July
Cash
Non-cash
28 July
2018
£000
flows
movement
£000
£000
2019
£000
63,091
(8,804)
–
(60)
54,227
(20,141)
8,804
(3,287)
60
(14,564)
–
–
–
–
–
42,950
–
(3,287)
–
39,663
(780,420)
–
(780,420)
11,269
(6,607)
4,662
(925)
–
(925)
(770,076)
(6,607)
(776,683)
Net debt
(726,193)
(9,902)
(925)
(737,020)
Derivatives
Interest-rate swaps asset – due after one year
Interest-rate swaps liability – due before one year
Interest-rate swaps liability – due after one year
Total derivatives
14,976
(160)
(38,925)
(24,109)
–
–
–
–
(14,655)
160
(10,468)
(24,963)
321
–
(49,393)
(49,072)
Net debt after derivatives
(750,302)
(9,902)
(25,888)
(786,092)
Non-cash movements
The non-cash movement in bank loans due after one year relates to the amortisation of bank loan issue costs.
The movement in interest-rate swaps relates to the change in the ‘mark to market’ valuations for the year.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
25
NOTES TO THE FINANCIAL STATEMENTS
10. Analysis of change in net debt (continued)
Profit before tax (income statement)
Interest (note 6)
Depreciation (note 2)
Earnings before interest, tax and depreciation (EBITDA)
Net debt / EBITDA
11. Dividends paid and proposed
Declared and paid during the year:
Dividends on ordinary shares:
– final for 2016/17: 8.0p (2015/16: 8.0p)
– interim for 2017/18: 4.0p (2016/17: 4.0p)
– final for 2017/18: 8.0p (2016/17: 8.0p)
– interim for 2018/19: 4.0p (2017/18: 4.0p)
Proposed for approval by shareholders at the AGM:
– final for 2018/19: 8.0p (2017/18: 8.0p)
Dividend cover (times)
Dividend cover is calculated as profit after tax and exceptional items over dividend paid.
52 weeks
52 weeks
ended
28 July
2019
£000
102,459
35,057
81,811
219,327
ended
29 July
2018
£000
107,249
27,942
79,305
214,496
3.36
3.39
52 weeks
52 weeks
ended
28 July
2019
£000
–
–
8,435
4,217
12,652
8,397
5.8
ended
29 July
2018
£000
8,437
4,218
–
–
12,655
8,428
5.3
26
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
12. Intangible assets
Cost:
At 30 July 2017
Additions
Disposals
At 29 July 2018
Additions
Disposals
At 28 July 2019
Accumulated amortisation:
At 30 July 2017
Provided during the period
Disposals
At 29 July 2018
Provided during the period
Disposals
At 28 July 2019
Net book amount at 28 July 2019
Net book amount at 29 July 2018
Net book amount at 30 July 2017
NOTES TO THE FINANCIAL STATEMENTS
£000
65,674
3,072
(3)
68,743
5,925
(22)
74,646
(35,983)
(7,984)
3
(43,964)
(7,634)
22
(51,576)
23,070
24,779
29,691
The majority of intangible assets relates to computer software and software development. Examples include
the development costs of our SAP accounting system, our ‘Wisdom’ property-maintenance system and the ‘Wetherspoon app’.
Included in the intangible assets is £4,429,000 of software in the course of development (2018: £1,799,000).
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
27
NOTES TO THE FINANCIAL STATEMENTS
13. Property, plant and equipment
Cost:
At 30 July 2017
Additions
Transfers
Exchange differences
Transfer to held for sale
Disposals
Reclassification
At 29 July 2018
Additions
Transfers from investment property
Transfers
Exchange differences
Transfer to held for sale
Disposals
Reclassification
At 28 July 2019
Accumulated depreciation and impairment:
At 30 July 2017
Provided during the period
Exchange differences
Impairment loss (reversal)
Transfer to held for sale
Disposals
Reclassification
At 29 July 2018
Provided during the period
Transfers from investment property
Exchange differences
Impairment loss (reversal)
Transfer to held for sale
Disposals
Reclassification
At 28 July 2019
Net book amount at 28 July 2019
Net book amount at 29 July 2018
Net book amount at 30 July 2017
75,547
1,984
23,689
226
(5,076)
(7,605)
Freehold and
Short-
Equipment,
Assets
Total
long-leasehold
leasehold
fixtures
under
property
property
and fittings
construction
£000
£000
£000
£000
£000
1,066,936
361,609
561,801
67,834
2,058,180
28,048
20,675
(87)
(1,509)
(9,302)
6,114
6,834
1,491
(16)
–
(7,644)
(6,114)
56,650
15,479
107,011
6,914
(29,080)
–
(31)
(347)
(7,187)
–
(31)
–
–
–
(165)
(1,856)
(24,133)
–
1,110,875
356,160
617,800
54,202
2,139,037
2,429
38,214
45,052
161,242
–
–
–
1,984
1,492
5,316
(30,497)
22
–
90
(810)
(3,412)
(4,349)
–
632
(5,886)
(15,366)
–
294
–
–
–
29,532
(29,532)
–
1,229,172
327,159
656,261
69,051
2,281,643
(205,374)
(179,793)
(390,380)
(16,428)
(12,966)
(41,524)
(36)
(953)
129
3,075
(2,450)
(14)
(109)
(1,516)
(1,119)
–
7,264
2,450
272
6,508
–
(222,037)
(184,575)
(426,352)
(18,271)
(11,733)
(43,775)
(76)
(45)
–
(18)
(1,326)
(1,404)
2,063
3,648
(17,781)
–
3,497
17,781
–
(117)
(820)
677
3,992
–
(253,825)
(176,452)
(466,395)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(775,547)
(70,918)
(159)
(3,588)
401
16,847
–
(832,964)
(73,779)
(76)
(180)
(3,550)
2,740
11,137
–
(896,672)
975,347
150,707
189,866
69,051
1,384,971
888,838
171,585
191,448
54,202
1,306,073
861,562
181,816
171,421
67,834
1,282,633
Impairment of property, plant and equipment
In assessing whether a pub has been impaired, the book value of the pub is compared with its anticipated future cash flows and
fair value. Assumptions are used about sales, costs and profit, using a pre-tax discount rate for future years of 7% (2018: 7%).
If the value, based on the higher of future anticipated cash flows and fair value, is lower than the book value, the difference
is written off as property impairment.
As a result of this exercise, a net impairment loss of £3,550,000 (2018: £3,588,000) was charged to property losses
in the income statement, as described in note 4. The assets impaired in the year had a recoverable value at year end
of £3,742,000.
28
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
14. Investment property
NOTES TO THE FINANCIAL STATEMENTS
The company owns one (2018: two) freehold property with an existing tenant – and this asset has been classified
as an investment property. During the year, the company started developing one of its investment properties into a pub.
The property has been transferred to property, plant and equipment.
Cost:
At 30 July 2017
At 29 July 2018
Transfer to property, plant and equipment
At 28 July 2019
Accumulated depreciation:
At 30 July 2017
Provided during the period
At 29 July 2018
Provided during the period
Transfer to property, plant and equipment
At 28 July 2019
Net book amount at 28 July 2019
Net book amount at 29 July 2018
Net book amount at 30 July 2017
Rental income received in the period from investment properties was £310,000 (2018: £314,000).
Operating costs, excluding depreciation, incurred in relation to these properties amounted to £8,000 (2018: £23,000).
In the opinion of the directors, the fair value of the investment property is approximately £12,000,000.
15. Other non-current assets
Cost:
At 30 July 2017
At 29 July 2018
Additions
Disposals
At 28 July 2019
Accumulated depreciation:
At 30 July 2017
Provided during the period
At 29 July 2018
Provided during the period
Impairment loss (reversal)
Disposals
At 28 July 2019
Net book amount at 28 July 2019
Net book amount at 29 July 2018
Net book amount at 30 July 2017
£000
7,751
7,751
(1,984)
5,767
(201)
(56)
(257)
(55)
76
(236)
5,531
7,494
7,550
Lease
premiums
£000
12,727
12,727
451
(75)
13,103
(4,455)
(347)
(4,802)
(343)
(145)
75
(5,215)
7,888
7,925
8,272
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
29
NOTES TO THE FINANCIAL STATEMENTS
16. Inventories
Bar, food and non-consumable stock held at our pubs and national distribution centre.
Goods for resale at cost
17. Receivables
2019
£000
2018
£000
23,717
23,300
This category relates to situations in which third parties owe the company money. Examples include rebates from suppliers
and overpayments of certain taxes.
Prepayments relate to payments which have been made in respect of liabilities after the period’s end.
Other receivables
Receivables loss allowance
Accrued income
Prepayments
2019
£000
1,135
(8)
2,327
18,449
21,903
2018
£000
3,969
–
1,936
17,217
23,122
Accrued income relates to discounts which are calculated based on certain products delivered at an agreed rate per item.
Credit risk
Owed by suppliers – not due
Owed by suppliers – overdue
2019
£000
898
237
1,135
2018
£000
3,577
392
3,969
Credit risk is the risk that a counterparty does not settle its financial obligation with the company. At the year end, the company
has assessed the credit risk on amounts due from suppliers, based on historic experience, meaning that the expected lifetime
credit loss was £8,000. Cash and cash equivalents are also subject to the impairment requirements of IFRS 9 – the identified
impairment loss was immaterial.
18. Assets held for sale
These relate to situations in which the company has exchanged contracts to sell a property, but the transaction is not yet
complete. As at 28 July 2019, two sites were classified as held for sale (2018: one).
Property, plant and equipment
19. Cash and cash equivalents
Cash and cash equivalents
Cash at bank earns interest at floating rates, based on daily bank deposit rates.
2019
£000
2018
£000
3,146
1,455
2019
£000
2018
£000
42,950
63,091
30
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
20. Trade and other payables
This category relates to money owed by the company to suppliers and the government.
Accruals refer to allowances made by the company for future anticipated payments to suppliers and other creditors.
Trade payables
Other payables
Other tax and Social Security
Accruals and deferred income
21. Borrowings
Current (due within one year)
Bank loans
Variable-rate facility
Other
Finance lease obligations
Other borrowings
Total current borrowings
Non-current (due after one year)
Bank loans
Variable-rate facility
Unamortised bank loan issue costs
Other
Finance lease obligations
Total non-current borrowings
2019
£000
162,070
18,056
62,081
66,119
308,326
2018
£000
174,070
15,837
58,819
41,876
290,602
2019
£000
2018
£000
–
–
3,287
–
3,287
8,804
8,804
–
60
8,864
775,000
(4,924)
770,076
780,420
–
780,420
6,607
–
776,683
780,420
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
31
NOTES TO THE FINANCIAL STATEMENTS
22. Provisions
At 29 July 2018
Charged to the income statement:
– Additional charges
– Unused amounts reversed
– Used during year
At 28 July 2019
Current
Non-current
Total provisions
Legal claims Onerous lease
£000
3,131
3,254
(1,283)
(1,579)
3,523
£000
7,374
2,597
(834)
(6,654)
2,483
2019
£000
4,072
1,934
6,006
Total
£000
10,505
5,851
(2,117)
(8,233)
6,006
2018
£000
8,052
2,453
10,505
Legal claims
The amounts represent a provision for ongoing legal claims brought against the company by customers and employees
in the normal course of business. Owing to the nature of the business, we expect to have a continuous provision for outstanding
employee and public liability claims. All claim provisions are considered current and are not, therefore, discounted to take into
account the passage of time.
Onerous lease
The amounts represent a provision for future rent payments on sites which are not expected to generate sufficient profits.
Also included are provisions on any sublet properties for which rent is not fully recovered. These provisions are expected to be
utilised over a period of up to 22 years and are discounted to take into account the passage of time.
32
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
23. Financial instruments
NOTES TO THE FINANCIAL STATEMENTS
The table below analyses the company’s financial liabilities in relevant maturity groupings, based on the remaining period
at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted
cash flows.
Maturity profile of financial liabilities
At 28 July 2019
Bank loans
Trade and other payables
Derivatives
Finance lease obligations
At 29 July 2018
Bank loans
Trade and other payables
Derivatives
Other borrowings
Within
1 year
£000
20,039
246,245
13,089
3,287
Within
1 year
£000
29,092
231,783
12,934
60
1–2 years
£000
20,039
–
13,089
3,287
1–2 years
£000
791,059
–
12,968
–
2–3 years
£000
20,039
–
6,962
3,287
2–3 years
£000
–
–
12,968
–
3–4 years
£000
20,039
–
6,877
819
3–4 years
£000
–
–
6,820
–
4–5 years
£000
786,726
–
3,052
–
4–5 years
£000
–
–
6,757
–
More than
5 years
£000
–
–
18,651
–
More than
5 years
£000
–
–
10,025
–
Total
£000
866,882
246,245
61,720
10,680
Total
£000
820,151
231,783
62,472
60
On 22 January, the company entered into a new five-year banking agreement which extends its total facilities, excluding finance
leases, from £860m to £895m.
At the balance sheet date, the company had loan facilities of £895m (2018: £860m) as detailed below:
Unsecured revolving-loan facility of £875m
Matures January 2024
14 participating lenders
Overdraft facility of £20m
The company has hedged its interest-rate liabilities to its banks by swapping the floating-rate debt into fixed-rate debt which
has fixed £770m of these borrowings at rates of between 0.61% and 3.84%. The effective weighted average interest rate of the
swap agreements used during the year is 2.88% (2018: 1.68%), fixed for a weighted average period of 4.8 years
(2018: 3.7 years). In addition, the company has entered into forward-starting interest-rate swaps as detailed in the table below.
Weighted average by swap period:
From
02/07/2018
30/07/2021
31/07/2023
31/07/2026
01/07/2028
To
29/07/2021
30/07/2023
30/07/2026
30/06/2028
29/03/2029
Total swap value £m
Weighted average interest %
770
770
770
770
770
2.42%
1.61%
1.10%
1.33%
1.32%
At the balance sheet date, £775m (2018: £780m) was drawn down under the £875m unsecured-term revolving-loan facility. The
amounts drawn under this agreement can be varied, depending on the requirements of the business. It is expected that
the draw-down required by the company will not drop below £770m for the duration of the interest-rate swaps detailed above.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
33
NOTES TO THE FINANCIAL STATEMENTS
23. Financial instruments (continued)
Capital risk management
The company’s capital structure comprises shareholders’ equity and loans. The objective of capital management
is to ensure that the company is able to continue as a going concern and provide shareholders with returns on
their investment, while managing risk.
The company does not have a specific measure for managing capital structure; instead, the company plans its capital
requirements and manages its loans, dividends and share buybacks accordingly. The company measures loans using
a ratio of net debt to EBITDA which was 3.36 times (2018: 3.39 times) at the year end.
Section 2, on page 49, discusses the financial risks associated with financial instruments, including credit risk
and liquidity risk.
Fair value of financial assets and liabilities
IFRS 7 requires disclosure of fair value measurements by level, using the following fair value measurement hierarchy:
Quoted prices in active markets for identical assets or liabilities (level 1)
Inputs other than quoted prices included in level 1 which are observable for the asset or liability,
either directly or indirectly (level 2)
Inputs for the asset or liability which are not based on observable market data (level 3)
The fair value of the interest-rate swaps is considered to be level 2. All other financial assets and liabilities
are measured in the balance sheet at amortised cost, and their valuation is also considered to be level 2.
Interest-rate and currency risks of financial liabilities
An analysis of the interest-rate profile of financial liabilities, after taking account of all interest-rate swaps,
is set out in the following table.
Interest-rate and currency risks of financial liabilities
Analysis of interest-rate profile of financial liabilities
Bank loans
Floating rate due after one year
Fixed rate due after one year
Finance lease obligation
Fixed rate due in one year
Fixed-rate due after one year
Other borrowings
Fixed rate due in one year
2019
£000
2018
£000
–
76
770,000
770,076
8,804
85,420
695,000
789,224
3,287
6,607
9,894
–
–
–
–
–
60
60
779,970
789,284
The floating-rate borrowings are interest-bearing borrowings at rates based on LIBOR, fixed for periods of up to one month.
The fixed-rate loan is the element of the company’s borrowings which has been fixed with interest-rate swaps.
34
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
23. Financial instruments (continued)
NOTES TO THE FINANCIAL STATEMENTS
Fair values
In some cases, payments which are due to be made in the future by the company or due to be received by the company
have to be given a fair value.
The table below highlights any differences between book value and fair value of financial instruments.
Financial assets at amortised cost
Cash and cash equivalents
Receivables
Financial liabilities at amortised cost
Trade and other payables
Finance lease obligations
Borrowings
2019
2019
2018
2018
Book value
Fair value
Book value
Fair value
£000
£000
£000
£000
42,950
1,127
44,077
42,950
1,127
44,077
63,091
3,969
67,060
63,091
3,969
67,060
(246,245)
(9,894)
(770,076)
(1,026,215)
(246,245)
(9,915)
(771,093)
(231,783)
–
(788,923)
(1,027,253) (1,021,067) (1,020,706)
(231,783)
–
(789,284)
Derivatives used for hedging (fair value)
Non-current derivative financial asset: cash flow hedges
Current derivative financial asset: cash flow hedges
Non-current derivative financial liability: cash flow hedges
321
–
(49,393)
(49,072)
321
–
(49,393)
(49,072)
14,976
(160)
(38,925)
(24,109)
14,976
(160)
(38,925)
(24,109)
The fair value of derivatives has been calculated by discounting all future cash flows by the market yield curve
at the balance sheet date. The fair value of borrowings has been calculated by discounting the expected future cash flows at the
year end’s prevailing interest rates.
Obligations under finance leases
The minimum lease payments under finance leases fall due as follows:
Within one year
In the second to fifth year, inclusive
Less future finance charges
Present value of lease obligations
Less amount due for settlement within one year
Amount due for settlement during the second to fifth year, inclusive
2019
£000
3,287
7,393
10,680
(786)
9,894
–
(3,287)
6,607
2018
£000
–
–
–
–
–
–
–
All finance lease obligations are in respect of various equipment used in the business. No escalation clauses are included in the
agreements.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
35
NOTES TO THE FINANCIAL STATEMENTS
23. Financial instruments (continued)
Interest – rate swaps
At 28 July 2019, the company had fixed-rate swaps designated as hedges of floating-rate borrowings. The floating-rate
borrowings are interest-bearing borrowings at rates based on LIBOR, fixed for periods of up to one month.
As at 30 July 2017
Change in fair value posted to comprehensive income
Deferred tax posted to comprehensive income
As at 29 July 2018
Change in fair value posted to comprehensive income
Deferred tax posted to comprehensive income
As at 28 July 2019
Loss/(Gain) on
interest-rate
Deferred
Charged
tax
to equity
swaps
£000
38,896
(14,787)
–
24,109
24,963
–
49,072
£000
£000
(6,612)
–
2,513
(4,099)
–
(4,243)
(8,342)
32,284
(14,787)
2,513
20,010
24,963
(4,243)
40,730
No ineffectiveness arose during the period (2018: £Nil). Amounts charged to the profit and loss account
in relation to interest-rate swaps are charged to finance costs – see note 6.
Interest-rate hedges
The company’s interest-rate swap agreements are in place as protection against future changes in borrowing costs.
Under these agreements, the company pays a fixed interest charge and receives variable interest income which matches
the variable interest payments made on the company’s borrowings.
There is an economic relationship among the company’s revolving-loan facility, the hedged item and the company’s interest-rate
swaps, the hedging instruments, where the company pays a floating interest charge on the loan and receives a floating
interest-rate credit on the interest-rate swap. The interest-rate swap agreement allows the company to receive a floating
interest-rate credit and requires the company to pay an agreed fixed interest charge.
The company has established a hedging ratio of 1:1 between the interest-rate swaps and the company’s floating-rate
borrowings, meaning that floating interest rates paid should be identical to the amounts received for a given amount
of borrowings.
These hedges could be ineffective if the:
period over which the borrowings were drawn were changed. This could result in the borrowings
being made at a different floating rate than the interest-rate swap.
gross amount of borrowings was less than the value swapped.
impact of LIBOR reform causes a mismatch between the interest rate of the swaps and
that of the company’s debt
The company tests hedge effectiveness prospectively using the hypothetical derivative method and compares the changes
in the fair value of the hedging instrument with those in the fair value of the hedged item attributable to the hedged risk.
Interest rate sensitivity
During the 52 weeks ended 28 July 2019, if the interest rates on UK-denominated borrowings had been 1% higher, with all other
variables constant, pre-tax profit for the year would have been reduced by £692,000 and equity increased by £69,592,000. The
movement in equity arises from a change in the ‘mark to market’ valuation of the interest-rate swaps into which the Company
has entered, calculated by a 1% shift of the market yield curve. The Company considers that a 1% movement in interest rates
represents a reasonable sensitivity to potential changes. However, this analysis is for illustrative purposes only.
36
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
24. Other liabilities
Operating lease incentives
NOTES TO THE FINANCIAL STATEMENTS
2019
£000
2018
£000
10,930
12,346
Included in other liabilities are lease incentives on leases where the lessor retains substantially all of the risks and benefits of
ownership of the asset. The lease incentives are recognised as a reduction in rent over the lease term and shown as a liability
on the balance sheet. The current element of lease incentives is included within other payables.
The weighted average period to maturity of operating lease incentives is 6.1 years (2018: 6.4 years).
25. Financial commitments
About 39% of the company’s pubs are leasehold. New leases are normally for 30 years, with a break clause after 15 years.
Most leases have upwards-only rent reviews, based on open-market rental at the time of review, but most new pub leases
have an uplift in rent which is fixed at the start of the lease.
The minimum aggregate contractual operating lease commitments fall due as follows:
Land and buildings
Within one year
Between two and five years
After five years
2019
£000
2018
£000
61,252
47,439
233,150
169,765
541,916
510,345
836,318
727,549
The company has some lease commitments with rentals determined in relation to sales. The future minimum rental payments
under such leases are included in the table above.
The company has an investment property and sublets certain units or receives a rental income with respect to properties
with space ancillary to that of the pub. The minimum aggregate contractual operating lease rentals due
to the company are as follows:
Land and buildings
Within one year
Between two and five years
After five years
2019
£000
2,703
8,625
2018
£000
2,655
9,414
11,529
12,400
22,857
24,469
26. Capital commitments
At 28 July 2019, the company had £37.9m (2018: £55.3m) of capital commitments, relating to the purchase of 16 (2018: 17)
sites, for which no provision had been made, in respect of property, plant and equipment.
The company had some other sites in the property pipeline; however, any legal commitment is contingent on planning
and licensing. Therefore, there are no commitments at the balance sheet date.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
37
NOTES TO THE FINANCIAL STATEMENTS
27. Related-party disclosures
During the year Tim Martin paid the company £1,938,000 in reimbursement of the Company’s costs for distributing
Wetherspoon News to households in the UK. Operating costs have been shown net of this amount. At the year end, these
amounts had been paid in full.
During the year, no other transactions have been entered into with related parties.
The company has a written agreement with Tim Martin which covers the provision in listing rule 6.5.4 on
controlling shareholdings.
J D Wetherspoon is the owner of the share capital of the following companies:
Company name
J D Wetherspoon (Scot) Limited
J D Wetherspoon Property Holdings Limited
Moon and Spoon Limited
Moon and Stars Limited
Moon on the Hill Limited
Moorsom & Co Limited
Sylvan Moon Limited
Checkline House (Head Lease) Limited
Country of incorporation
Ownership
Scotland
England
England
England
England
England
England
Wales
Wholly owned
Wholly owned
Wholly owned
Wholly owned
Wholly owned
Wholly owned
Wholly owned
Wholly owned
Status
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
All of these companies are dormant and contain no assets or liabilities and are, therefore, immaterial.
As a result, consolidated accounts have not been produced. The company has an overseas branch
located in the Republic of Ireland.
As required by IAS 24, the following information is disclosed about key management compensation.
Key management compensation
Short-term employee benefits
Post-employment pension benefits
Share-based payment
2019
£000
2,796
263
848
3,907
2018
£000
2,881
319
2,187
5,387
Key management comprises the executive directors, non-executive directors and management board, as detailed on page 55.
For additional information about directors’ emoluments, please refer to the directors’ remuneration report on pages 59 to 67.
Directors’ interests in employee share plans
Details of the shares held by executive members of the board of directors’ are included in the remuneration report
on pages 59 to 67 which forms part of these financial statements.
38
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
28. Share capital
At 30 July 2017
Repurchase of shares
At 29 July 2018
Repurchase of shares
At 28 July 2019
NOTES TO THE FINANCIAL STATEMENTS
Number of
shares
000s
108,999
(3,498)
105,501
(403)
105,098
Share
capital
£000
2,180
(70)
2,110
(8)
2,102
The total authorised number of 2p ordinary shares is 500,000,000 (2018: 500,000,000). All issued shares are fully paid.
In the year, there were no proceeds from the issue of shares (2018: £Nil).
During the year, 402,899 shares were repurchased by the company for cancellation, representing approximately 0.38% of the
issued share capital, at a cost of £5.4m, including stamp duty, representing an average cost per share of 1,327p.
While the memorandum and articles of association allow for preferred, deferred or special rights to attach
to ordinary shares, no shares carried such rights at the balance sheet date.
29. Events after the balance sheet date
On 20 August 2019, the company signed an additional funding agreement. This was for a £98m private placement
with a fixed seven-year term. All existing financing agreements will remain in place.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
39
SECTION 2
Exceptional items
A degree of judgement is required in determining
whether certain transactions merit separate
presentation to allow shareholders to better understand
financial performance in the year, when compared with
that of previous years and trends.
Important estimates
The areas where the Company has made significant
estimates are listed below.
Impairment of property, plant and equipment
The Company will impair the value of a pub if it is
believed it will generate future cash flows lower than its
current book value. Future cash flows will be the
greater of those generated by continued trading or the
sale of the pub’s assets. Cash flows in future periods
are reduced by applying a pre-tax discount rate for
future years of 7%.
Management makes several estimates when assessing
the recoverable value of each pub, in terms of future
sales growth, costs, operating efficiency and standards,
management and staffing performance, as well as
general economic factors. In all of these areas,
different estimates could be made. Management
believed that applying a different set of reasonable
estimates will change the recoverable value of pubs,
yet the impact of such a change would be less than
reported materiality.
If a previously recognised impairment charge is
reversed, the value of the pub will be increased to
the lower of the book value as if the asset had not been
impaired and the future cash flows which the pub
will generate.
Onerous leases
A provision for onerous leases is made for pubs for
which future trading profits, or income from subleases,
are not expected to cover rent. The provision takes
several factors into account, including the expected
future profitability of the pub and the amount estimated
as payable on surrender of the lease, where this is a
likely outcome.
Segmental reporting
The Company operates predominantly one type of
business (pubs) in the United Kingdom and the
Republic of Ireland. Given the size of the
Company’s hotel business and trading presence in the
Republic of Ireland, these have not been separately
disclosed as a business segment.
ACCOUNTING POLICIES
Authorisation of financial statements and
statement of compliance with IFRSs
The financial statements of J D Wetherspoon plc
(the ‘Company’) for the year ended 28 July 2019
were authorised for issue by the board of directors on
12 September 2019, and the balance sheet was signed
on the board’s behalf by John Hutson and Ben Whitley.
J D Wetherspoon plc is a public limited company,
incorporated and domiciled in England and Wales.
The Company’s ordinary shares are traded on the
London Stock Exchange.
The Company’s financial statements have been
prepared in accordance with the European Union-
endorsed IFRSs and IFRSIC (IFRS Interpretations
Committee) interpretations as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006 as applicable to
companies reporting under IFRS. The principal
accounting policies adopted by the Company are
set out on pages 40 to 46.
Basis of preparation
The financial statements of the Company have been
prepared in accordance with IFRSs as adopted by
the European Union, IFRSIC interpretations and
the Companies Act 2006, applicable to companies
reporting under IFRS. The financial statements have
been prepared on the going-concern basis, using the
historical cost convention, except for the revaluation
of financial instruments.
The accounting policies which follow set out those
policies which apply in preparing the financial
statements for the year ended 28 July 2019.
These policies have been consistently applied to
all of the years presented, unless otherwise stated.
Important judgements
The key judgements made in preparing the financial
statements are detailed below.
Hedging
The Company adopts hedge accounting, meaning that
the effective portion of the changes in the fair value of
the derivatives is dealt with in comprehensive income.
Any gain or loss relating to the ineffective portion would
be recognised immediately in the income statement.
The Company makes assumptions on the requirements
for future borrowings, as well as future interest rates,
when assessing the effectiveness of interest-rate
swaps. Changes in the forecast amount of future
borrowings or interest rates may result in all or part of
the gain or loss, which was originally reported in equity,
being transferred to the income statement.
Accounting standards require interest-rate swaps,
purchased at market interest rates, to be recognised at
a zero fair value. At acquisition swaps will have a
market value which represents the margin charged by
the issuing counterparty. This margin is amortised over
the term of the interest-rate swap.
40
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
Exceptional items
The Company presents, on the face of the income
statement, those items of income and expense which,
because of the nature and magnitude of the event
giving rise to them, merit separate presentation to allow
shareholders to better understand the elements of
financial performance in the year. This helps to
facilitate comparison with previous years and to better
assess trends in financial performance. Impairment of
fixed assets and onerous lease charges and reversals
are reported as exceptional, regardless of magnitude,
to provide consistency of treatment with previous
years and a better understanding for the financial
statements’ users.
Property gains and losses
The Company defines property gains and losses as
those items of income and expenditure which are the
result of owning and leasing assets which are non-
recurring in nature. These include the impairment of
fixed assets, movements in the onerous lease provision
and proceeds and costs from the disposal of assets.
These items are presented on the face of the income
statement to more clearly show the Company’s
underlying performance.
Fixed assets
Fixed assets include property, plant and equipment,
intangible assets, investment property and lease
premiums. They are all stated at cost, less
accumulated depreciation and any impairment in value.
Cost of assets includes acquisition costs, as well as
other directly attributable costs in bringing the asset
into use.
Depreciation is charged on a straight-line basis
over the estimated useful life of the asset as follows:
Freehold land is not depreciated
Freehold and long-leasehold buildings are
depreciated to their estimated residual values
over 50 years
Short-leasehold buildings and lease premiums are
depreciated over the lease period
Equipment, fixtures and fittings are depreciated over
3 to 10 years
Computer software, including related development
and implementation costs – 3 to 10 years
Assets are not depreciated until such time as they
are ready for use
Residual values and useful economic lives are
reviewed and adjusted, if appropriate, at each balance
sheet date.
Profits and losses on disposal of fixed assets reflect the
difference between the net selling price and the
carrying amount at the date of disposal and are
recognised in the income statement.
The carrying value of fixed assets is reviewed annually
for impairment, with any impairment losses recognised
in the income statement.
ACCOUNTING POLICIES
Assets held for sale
Where the value of an asset will be recovered through
a sale transaction, rather than continuing use, the asset
is classified as held for sale. Assets held for sale are
valued at the lower of book value and fair value, less
any costs of disposal, and are no longer depreciated.
Inventories
Inventories are stated at the lower of cost and net
realisable value. Cost is calculated on a weighted
average basis, with net realisable value being the
estimated selling price, less any costs of disposal.
Provision is made for obsolete, slow-moving or
damaged inventory, where appropriate.
Bar and food inventory is recognised as an expense
when sold. Non-consumable inventory is recognised as
an expense immediately on receipt at a pub or hotel.
Provisions
Provisions are recognised when the Company has a
present legal or constructive obligation as a result of a
past event and it is probable that an outflow of
resources will be required to settle the obligation
and a reliable estimate can be made of that
obligation’s amount.
Revenue recognition
Revenue is recognised when bar and food products are
served to customers, after deducting discounts and
sales-based taxes.
Slot machine sales are recognised at the net proceeds
taken from the machines, after deducting gaming duty.
Revenue from hotel rooms is recognised when
rooms are occupied and services are provided,
after deduction of discounts and sales-based taxes.
The Company operates a gift card scheme – revenue
from these cards is deferred until the card is redeemed
in pubs. Except for hotel revenue, which is generally
received in advance of occupation, all other payments
for goods and services are received at the point of sale.
There are no significant judgements or estimations
made in calculating and recognising revenue.
Revenue is not materially accrued or deferred between
one accounting period and the next.
Like-for-like sales
Like-for-like sales growth is calculated by taking the
revenue, as per the accounting policy, for all pubs
which have traded for more than 12 months and
comparing their revenue to the corresponding
revenue of the previous year.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
41
ACCOUNTING POLICIES
Leases
Leases where the Company assumes substantially
all of the risks and rewards of ownership are classified
as finance leases. Assets acquired under finance
leases are capitalised at the lower of their fair value
and the present value of future lease payments.
The corresponding liability is included in the
balance sheet as a finance lease payable. Finance
charges included in lease payments are charged as
an expense to the income statement, while the asset
is depreciated in line with the accounting policy for
property, plant and equipment.
Leases where the lessor retains substantially all of the
asset’s risks and benefits of ownership are classified as
operating leases. If the operating lease is subject to
fixed uplifts over the term of the lease, rental payments
are charged to the income statement on a straight-line
basis, over the period of the lease, in line with adopted
accounting standards. If the operating lease is subject
to open-market rents, rental payments are charged at
the prevailing rates.
The Company also has concession rentals,
payable based on turnover. These are charged to
operating profit at the higher of minimum contractual
obligations under the agreements or based as a
percentage of turnover.
Lease incentives
Lease incentives are recognised as a reduction of
rental expense and are amortised on a straight-
line basis.
Borrowing costs
Borrowing costs are recognised as an expense
in the period in which they are incurred, unless
the requirements by the adopted accounting standards
for the capitalisation of borrowing costs relating
to assets are met. For the purpose of the cash flow
reporting interest paid and received are considered
operating cash flows.
Income taxes
Current tax assets and liabilities are measured at the
amount expected to be recovered from, or paid to, the
taxation authorities, based on tax rates and laws which
are enacted or substantively enacted by the balance
sheet date.
Deferred income tax is recognised on all temporary
differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements, with the following exceptions:
Where the temporary difference arises from an asset
or liability in a transaction which, at the time of the
transaction, affects neither accounting nor taxable
profit or loss
Deferred income tax assets are recognised only to
the extent that it is probable that taxable profit will be
available against which the deductible temporary
differences, carried-forward tax credits or tax losses
can be utilised
Deferred income tax assets and liabilities are
measured at the tax rates which are expected to apply
when the related asset is realised or liability settled,
based on tax rates and laws enacted or substantively
enacted at the balance sheet date.
Income tax is charged or credited directly to the
income statement, comprehensive income or equity.
The income tax charged or credited will follow the
accounting treatment of the underlying item which has
given rise to the income tax charged or credited.
Free cash flow
The calculation of free cash flow is based on the
net cash generated by business activities after
funding interest, corporation tax, loan issue costs,
all reinvestment in information technology, head office
and pubs trading at the start of the period (excluding
extensions) and the purchase of own shares under
the employee share incentive plan.
Financial instruments
Financial assets and liabilities are recognised on the
date on which the Company becomes party to the
contractual provisions of the instrument giving rise to
the asset or liability.
Financial assets held at amortised costs
Financial assets held at amortised costs are non-
derivative financial assets with fixed or determinable
payments which are not quoted in an active market.
They are included in current assets, except for
maturities greater than 12 months after the balance
sheet date. These are classified as non-current assets.
Loans and receivables comprise ‘other receivables’
and ‘cash and cash equivalents’ on the balance sheet.
Other receivables
Other receivables are recognised initially at fair value
and carried at amortised cost less any expected credit
losses. The Company has a small number of
receivables at any one time; these are generally with
companies with which the Company has an established
trading relationship.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet
comprise cash at bank and in hand and short-term
deposits. For the purpose of the cash flow statement,
cash and cash equivalents comprise cash and
short-term deposits as defined above. Bank overdrafts
are shown within current financial liabilities on the
balance sheet.
Credit risk
Credit risk losses arise when debtors fail to pay their
obligation to the Company. The Company assesses
credit risk, based on historic experience. The Company
has no significant history of non-payment; as a result,
the expected credit losses on financial assets
are not material.
42
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
ACCOUNTING POLICIES
Foreign currencies
Transactions denominated in foreign currencies
are recorded at the rates of exchange prevailing
at the date of transaction. Monetary assets and
liabilities are translated at the year-end exchange rates,
with the resulting exchange differences taken to the
income statement.
The Irish branch’s results are translated at the average
exchange rate for the reporting period; the balance
sheet is translated at the year-end exchange rate.
Resulting exchange differences are recognised in
comprehensive income.
Revaluation gains and losses on the long-term
financing of the Irish branch are recognised in
comprehensive income.
Retirement benefits
Contributions to personal pension schemes are
recognised in the income statement in the period in
which they fall due. All contributions are in respect of
a defined contribution scheme. The Company has
no future payment obligations, once the contributions
have been paid.
Owners’ earnings
Owners’ earnings measures the earnings attributable
to shareholders from current activities adjusted for
significant non-cash items and one off items. Owners’
earnings are calculated as profit before tax, exceptional
items, depreciation and amortisation and property
gain and losses less reinvestment in current
properties and cash tax. Cash tax is defined as the
current year’s current tax charge.
Dividends
Dividends recommended by the board, but unpaid at
each period end, are not recognised in the financial
statements until they are paid (in the case of the interim
dividend) or approved by shareholders at the annual
general meeting (in the case of the final dividend).
Changes in net debt
Changes in net debt are both the cash and non-cash
movements of the year, including movements in
finance leases, borrowings, cash and cash equivalents.
fdfdfds
Financial liabilities
The Company classifies its financial liabilities as other
financial liabilities. Other financial liabilities are
measured at fair value on initial recognition and
subsequently measured at amortised cost, using the
effective-interest method.
Trade and other payables
Trade and other payables are recognised initially
at fair value and subsequently at amortised cost,
using the effective-interest method.
Bank loans and borrowings
Interest-bearing bank loans and other borrowings are
recorded initially at fair value of consideration received,
net of direct issue costs. Borrowings are subsequently
recorded at amortised cost, with any difference
between the amount recorded initially and the
redemption value recognised in the income statement
over the period of the bank loans, using the effective-
interest method.
Bank loans and loan notes are classified as current
liabilities, unless the Company has an unconditional
right to defer settlement of the liability for at least
12 months after the balance sheet date.
Derivative financial instruments
and hedging activities
Derivative financial instruments used by the
Company are stated at fair value on initial recognition
and at subsequent balance sheet dates.
Hedge accounting is used only where, at the inception of
the hedge, there is formal designation and documentation
of the hedging relationship, there is an economic
relationship between the item being hedged and the
hedging derivative and credit risk does not dominate the
economic relationship.
Interest-rate swaps
Interest-rate swaps are classified as hedges
where they hedge exposure to cash flow variability
in interest rates.
For interest-rate swaps, the effective portion of the gain
or loss on the hedging instrument is recognised directly
in comprehensive income, while the ineffective portion
is recognised in the income statement within ‘fair value
gain/loss on financial derivatives’.
Share capital
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax,
from the proceeds.
When the Company repurchases its own shares the
cost of the shares purchased and associated
transaction costs are taken directly to equity and
deducted from retained earnings. The nominal value of
shares purchases is transferred from share capital to
the capital redemption reserve.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
43
ACCOUNTING POLICIES
Share-based charges
The Company has an employee share incentive plan
which awards shares to qualifying employees; there is
also a deferred bonus scheme which awards shares to
directors and senior managers, subject to specific
performance criteria.
The cost of the awards in respect of these plans is
measured by reference to the fair value at the date at
which they are granted and is amortised as an expense
over the vesting period. In assessing the initial fair
value, no account is taken of any vesting conditions,
other than market conditions linked to the price of the
shares of the Company.
The Company currently has no other share-based
transactions.
Shares purchased for share-based payment awards
are held in equity at historic cost, until the awards vest,
when they are transferred to employees.
Changes in standards
The following new standards, amendments to
standards or interpretations are mandatory for the
first time for the financial year beginning
29 July 2019 and will have a minimal impact on
the financial statements:
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
Amendments to IFRS 2: Classification and
Measurement of Share-based Payment Transactions
IFRS 9 Financial Instruments
The standard sets out the requirements of the
recognition, derecognition, impairment and
measurement of financial instruments, as well as the
rules for hedge accounting. The standard replaces IAS
39 Financial Instruments: reporting and measurement.
The Company applied the new hedge accounting
requirements in IFRS 9 prospectively from 30 July
2018. Comparative figures have not been restated.
On adoption of IFRS 9, all hedging relationships which
were hedging relationships under IAS 39 at the
29-July-2018 reporting date met IFRS 9’s criteria for
hedge accounting at 30 July 2018 and were therefore
regarded as continuing hedging relationships. There
has been no change in measurement of the numbers
recognised as a result of the transition.
Finance assets which were classified as loans and
receivables under IAS 39 and measured at amortised
cost are classified and measured at amortised cost
under IFRS 9. There is no change in the
classification and measurement for the Company’s
financial liabilities.
IFRS 9 introduced a new impairment model of
assessing the recoverability of debts. The Company’s
financial assets are a small amount of trade
receivables in relation to retrospective discounts from
suppliers with which the Company generally has a long
trading relationship and bank deposits which are
immediately accessible and held with major UK and
Irish banks. The Company has assessed that
the application of the impairment requirements as at
30 July 2018 is not material.
IFRS 15 Revenue from Contracts with Customers
The standard was adopted on 30 July 2018, using the
modified retrospective approach. Under IFRS 15,
revenue is recognised when goods or services are
transferred to a customer. The Company does not
have a loyalty programme which would extend the
period over which goods and services are transferred
to the customer.
The Company has undertaken a review of its revenue
streams under IFRS 15 and has concluded that a large
proportion of revenue is recognised at the point of sale
when goods or services are provided to the customer in
exchange for payment. Based on this, it is concluded
that IFRS 15 does not materially differ from the
revenues previously recognised under IAS 18.
There are no significant judgements or estimations
made in calculating and recognising revenue.
Revenue is recognised when the goods or services are
provided to the customer.
Standards and interpretations which are not yet
effective and have not been early adopted by
the Company.
Other standards which are not expected to have a
material impact are shown below:
Prepayment Features with Negative Compensation
(Amendments to IFRS 9)
Long-term Interests in Associates and Joint Ventures
(Amendments to IAS 28)
IFRIC 23 Uncertainty over Income Tax Treatments
Annual Improvements to IFRS 2015-2017 Cycle
(Amendments to IAS 12, IAS 23, IFRS 3 and IFRS 11)
Plan Amendments, Curtailment or Settlement
(Amendments to IAS 19)
IFRS 16 Leases
This standard replaces IAS 17 Leases and is effective
for accounting periods beginning on or after 1 January
2019. The standard was adopted by the Company
on 29 July 2019.
When the new standard becomes effective, the
Company will recognise, on the balance sheet, a right-
of-use asset and a lease liability for future lease
payments in respect of all leases, excluding those with
terms less than 12 months and those for
low-value assets.
44
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
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Lessor accounting remains similar to the current
standard. The lessor continues to classify leases as
finance or operating leases, depending on whether the
risks and rewards of ownership have been transferred
to the lessee. Some of the Company’s sublet properties
will be classified as finance leases under the new
standard as the risks and rewards of ownership of the
IFRS 16 right-of-use asset will have been transferred to
the lessee, whereas, under IAS 17, there was no asset
recognised in the accounts; as a result, the leases
were treated as operating leases.
Transition
On 29 July 2019, the Company adopted the standard
using the modified retrospective approach. The new
standard allows, on a lease-by-lease basis, for the
value of the right-of-use assets to be determined as if
the lease had started on the date of transition or the
start date of the lease. This choice does not affect the
recognised lease liability, but does affect the value of
the asset. Valuing on the day of transition results in a
right-of-use asset of broadly the same value as the
lease liability. Valuing at the start date of the lease
results in a lower asset value at transition, reflecting the
amortisation which would have been charged on the
asset between the start of the lease and the date of
transition. The reduction in the asset value would be
offset by a reduction in distributable reserves on the
balance sheet. The Company has chosen to value all
leases on the date of transition.
The Company has elected to use the following practical
exemptions in transitioning to IFRS 16:
The application of a signal discount rate to a portfolio
of leases with reasonably similar characteristics
The use of existing onerous lease provisions,
rather than preforming an impairment review on right-
of-use assets
The use of hindsight in determining the lease term
Balance sheet
On 29 July 2019, the Company recognised a right-of-
use asset of £618m, a lease liability of £631m and a
finance lease asset of £14m, related to sublet sites.
The right-of-use assets comprise the net lease liability
of £617m, rent prepayments of £14m, operating
lease incentives of £11m and onerous leases of £2m.
There was no adjustment to retained earnings.
As at 28 July 2019, see note 25, the Company had
contractual operating lease commitments payable of
£836m and contractual operating lease commitments
receivable of £23m. A reconciliation to the transition
value is provided below.
ACCOUNTING POLICIES
The table below shows the transition
adjustments applied to the opening balance sheet
for the year ending 26 July 2020.
Other
Other non-current assets
Right-of-use assets
Lease receivables
Total non-current assets
Other current assets
Lease receivables
Receivables
Total assets
Other current liabilities
Lease liabilities
Total current liabilities
Other non-current liabilities
Lease liabilities
Provisions
Other liabilities
Total liabilities
Net assets
Equity
July 19
£m
1,422
8
–
–
1,430
70
–
22
1,522
(326)
–
(326)
(866)
–
(2)
(11)
(1,205)
317
317
IFRS 16 Re-stated
£m
1,422
–
618
12
2,052
70
2
16
2,140
(326)
(61)
(387)
(866)
(570)
–
–
(1,823)
317
317
£m
–
(8)
618
12
622
–
2
(6)
618
–
(61)
(61)
–
(570)
2
11
(618)
–
–
The incremental borrowing rate applied to lease
liabilities was 2.7–3.9%, depending on the length of the
lease.
Income statement
The total profit and loss charge over the life of a lease
will remain unchanged under IFRS 16, but the new
standard will change the pattern of how the expense is
recognised in the income statement, over time, with
more costs recognised in the early years of a lease and
fewer in the latter. The expense will be recognised as a
depreciation and interest charge replacing the
operating expenses under IAS 17.
The Company estimates that, for the year ending
26 July 2020, EBITDA will have increased by
£58m and operating profit by £8m. Finance costs are
expected to increase by £22m, resulting in a decrease
in profit before tax of £14m. These estimates are based
on the leaseholds held at year end and will be affected
by the Company purchasing the freehold interest in its
leasehold sites.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
45
ACCOUNTING POLICIES
Tax impact on changes to the income statement
The IFRS 16 depreciation and interest expense will be
deducted when calculating current tax. It is estimated,
in the next financial year, that current tax will be
reduced by £2m. The reduction in tax payments in the
early years of a lease will be offset by higher tax
payments in the later years of the lease.
The Company expects a small increase in the effective
tax rate. This is due to the disallowable expenses,
which will remain unchanged, being a larger proportion
of reduced profits.
Cash flow statement
There will be no impact to cash flows on the application
of IFRS 16, except in relation to tax payments.
The presentation of cash flows will change.
Cash flows from operating activities will increase,
yet will be exactly offset by an increase in interest
and lease principal payments.
Reconciliation to lease commitments
The table below shows a reconciliation between the
operating lease commitments, as disclosed in note 25,
and the lease liability and assets to be recognised
under IFRS 16.
Lease commitments, payable
Discounting lease liability
Lease liability recognised
Lease commitments, receivable
Leases not capitalised
Discounting lease asset
Lease asset recognised
2019
£000
836,318
(205,014)
631,304
2019
£000
22,857
(6,427)
(2,994)
13,436
46
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
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STRATEGIC REPORT
Strategy
The Company’s strategy is to seek a return on capital
in excess of the cost of the capital which will provide
funds for developments, dividends and reinvestment.
Business model
The Company operates pubs in the UK and Ireland and
aims to sell high-quality products, at reasonable prices,
in well-maintained premises.
Business review and future trends
A review of the Company’s business and the
key measures of its performance, sometimes called
key performance indicators (KPIs), can be found in the
chairman’s statement under the financial performance
section. The chairman’s statement also discusses
trends and factors likely to affect the future
development, performance and position
of the Company. The Company’s financial and non-
financial KPIs are listed in the financial highlights
section of this report.
Social matters
Wetherspoon provides jobs for over 40,000 people,
paying a reasonable percentage of its profits as bonus
for those working in our pubs and head office, training
large numbers of staff and paying a significant
percentage of our sales as taxes to the government.
Further information about these policies are published
on: jdwetherspoon.com
Environment
The Company has several initiatives which reduce its
environmental impact, some examples of these being:
Plastic straws removed and replaced with
100% biodegradable and 100% recyclable paper
straws and wrappers
Complimentary water fountains available in all pubs,
as part of the nationwide Refill scheme; alternatives
to the current single-use plastic bottles are
being reviewed
Most hot drinks sold in the pubs are consumed on
the premises, including unlimited complimentary refills,
all served in mugs
During the financial year, 11.6 tonnes of food waste
recycled (2018: 3.2 tonnes)
Used cooking oil is converted to biodiesel
for agricultural use
Human rights
The Company is committed to respecting human rights
within our business by complying with all relevant laws
and regulations. We prohibit any form of discrimination,
forced, trafficked or child labour and are committed to
safe and healthy working conditions for all individuals,
whether employed by the Company directly or by a
supplier in our supply chain.
Employees
All employees are encouraged to participate
in the business, some examples of how this is
achieved being:
Several Company initiatives to encourage
employees to suggest small and continuous
improvements to the running of their pubs
‘Tell Tim’ suggestion scheme for all employees
Pub managers, area managers and other pub
employees attending and contributing to weekly
operations meetings, hosted by the chairman or
chief executive
Area managers invited to meet the
board of directors (before each board meeting)
Regular liaison meetings held with employees,
at all levels, to gain feedback on aspects of the
business and ideas for improvement
Directors and senior management complete
regular visits to pubs – and pub employees regularly
visiting head office
Weekly e-mail from the chief executive
to all employees
Employee-related measures are
part of the pub bonus scheme
Head-office staff complete regular pub and kitchen
shifts (both front of house and in the kitchen) to help
in understanding any staff/customer issues
Pub employees involved in the decision-making
process for key business issues
Employee diversity
The table below shows the breakdown of directors,
senior managers and employees.
Directors
Senior managers
All employees
Male
5
734
19,565
Female
3
462
21,958
Legal and ethical conduct
The Company has comprehensive measures to meet
its statutory requirements across all areas of its
operation and also those expected by our customers
and employees, as necessary, for the long-term
success of the business. Risks in this area can occur
from corruption, bribery and human rights abuses,
including discrimination, harassment and bullying.
The Company has training programmes for all
employees. It also has a documented whistleblowing
procedure programme, documented process and
procedures and a supply chain audit programme.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
47
STRATEGIC REPORT
Principal risks and uncertainties
facing the Company
In the course of normal business, the Company
continually assesses significant risks faced and takes
action to mitigate their potential impact.
The following risks, while not intended to be a
comprehensive analysis, constitute (in the opinion of
the board) the principal risks and uncertainties currently
facing the Company
Strategic risks
Economic outlook
The Company aims to improve its customer offering
continually, so that it remains competitively placed in
the market in which it operates. Adverse economic
conditions can theoretically have an effect on the
Company’s performance, although, historically, these
effects have been muted.
Regulation of the sale of alcohol
The pub business is highly regulated, with frequent
increases in alcohol duty and other taxes – a feature of
the industry for many decades.
Succession-planning
The Company is reliant on the knowledge and
experience of its executive management team. The
Company involves the broader senior management
team in decision-making to provide it with
sufficient exposure, so that, if the need to replace a
member of the executive management team were to
arise there are well-qualified internal candidates.
Commercial risks
Cost increases
Inflationary pressures on the Company’s costs
pose a risk to profits, although the Company has been
able to achieve satisfactory arrangements with its
suppliers, up until now, in both good and difficult
economic conditions.
Operational risks
Recruitment and retention
Ensuring that our pubs are sufficiently staffed is crucial
to their successful operation. Reductions in the pool of
available labour will make it harder for the Company to
staff its pubs.
To attract and retain employees, the Company offers
bonuses, free shares, long-services awards, paid
training, staff discounts and a genuine opportunity to
progress within the business.
Health and safety
The Company endeavours to ensure that
all reasonable standards of health and safety are met,
by trying to identify risks and taking action to
avert problems.
Supply chain risks
It is fundamental to our operations that we should
be able to supply our pubs with the required goods
and services.
It is important that we understand our supply chain
and have accurate information relating to provenance,
ingredients and ethical practices.
We work closely with our suppliers and central
distribution partners, in order to maintain availability
of products, at all times.
The Company conducts audits of its supply chain
– and standards are assessed in accordance with
our Supplier Charter.
Food safety
Achieving and maintaining food hygiene standards
are critical to any organisation which prepares
food for public consumption. Ensuring the safety of our
customers and employees is a priority for the
Company. The Company takes food hygiene very
seriously; extensive operational procedures have
been implemented to embed best practice in our pubs.
The Company monitors the results of food hygiene
audits and provides its pubs with the necessary
resources and support to ensure that standards are
met at all times.
Head office and national distribution centre
Any disasters at the Company’s head office
(in Watford) or its national distribution centre
(in Daventry) could seriously disrupt its daily
operations. Various measures have been undertaken
by the Company, including a comprehensive disaster-
recovery plan, seeking to minimise the impact of any
such incidents.
Information technology
The Company’s daily operations are increasingly reliant
on its information technology systems. Any prolonged
or significant failure of these systems could pose a risk
to trading. The Company seeks to minimise this risk by
ensuring that there are technologies, policies and
procedures to ensure protection of hardware, software
and information (by various means), including a
disaster-recovery plan, a system of backups and
external hardware and software.
The Company recognises that cyber threats pose
a significant risk to the hospitality industry.
The Company continually assesses the risks posed by
cyber threats and makes changes to its technologies,
policies and procedures to mitigate identified risks.
Reputational risk
The Company is aware that, in operating in a
consumer-facing business, its business reputation,
built over many years, can be damaged in a
significantly shorter timeframe. The Company,
therefore, in its daily business, maintains substantial
efforts in this area to improve operational controls.
48
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
STRATEGIC REPORT
Liquidity risk
The Company regularly monitors cash flow forecasts
and endeavours to ensure that there are enough funds,
including committed bank and finance lease facilities,
to meet its business requirements and comply with
banking covenants.
The risks in this area relate to miscalculating cash flow
requirements, being unable to renew credit facilities or
a substantial fall in sales and profits.
Foreign currency
Foreign exchange exposure is currently not significant
to the Company. The Company monitors the growth
and risks associated with its overseas operations
and will undertake hedging activities as and when
they are required.
By order of the board
Nigel Connor
Company Secretary
12 September 2019
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Financial risks
Capital risk management
The Company aims to maintain reasonable levels of
capital and debt. Debt always involves risk, although
the Company has always been able to fulfil its
obligations under its loan agreements.
Sales, profitability, debt requirements and
cash flow are reviewed weekly by a team which
includes the chairman, chief executive, finance director
and senior finance managers (see note 23).
Interest-rate risk
The Company has dealt with the risks of an increase
in interest rates by swapping the majority of its floating-
rate borrowings into fixed rates which expire in 2029
(see note 23).
During the 52 weeks ended 28 July 2019, if the interest
rates on UK-denominated borrowings had been 1%
higher, with all other variables constant, pre-tax profit
for the year would have been reduced by £692,000 and
equity increased by £69,592,000. The movement in
equity arises from a change in the ‘mark to market’
valuation of the interest-rate swaps into which the
Company has entered, calculated by a 1% shift of the
market yield curve. The Company considers that a
1% movement in interest rates represents a reasonable
sensitivity to potential changes. However, this analysis
is for illustrative purposes only.
Credit risk
The Company does not have a significant
concentration of credit risk, as the majority of its
revenue is in cash. At the balance sheet date,
the Company was exposed to a maximum
credit risk of £1.1m, of which £0.2m was overdue.
Cash deposits with financial institutions and derivative
transactions are permitted with investment-grade
financial institutions only. The Company receives a
small amount of income from properties which it has
sublet to third parties, but the sums involved from any
one letting are immaterial.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
49
INDEPENDENT AUDITORS’ REPORT to the members of J D Wetherspoon plc
the directors’ statement, set out on page 57 of the
financial statements about whether the directors
considered it appropriate to adopt the going concern
basis of accounting in preparing the financial
statements and the directors’ identification of any
material uncertainties to the company’s ability to
continue to do so over a period of at least twelve
months from the date of approval of the financial
statements;
whether the directors’ statement relating to going
concern required under the Listing Rules in accordance
with Listing Rule 9.8.6R(3) is materially inconsistent
with our knowledge obtained in the audit; or
the directors’ explanation, set out on page 57 of the
annual report as to how they have assessed the
prospects of the company, over what period they have
done so and why they consider that period to be
appropriate, and their statement as to whether they
have a reasonable expectation that the company will
be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment,
including any related disclosures drawing attention to
any necessary qualifications or assumptions.
Overview of our audit approach
Overall materiality: £5.1m, which represents 5.0% of
the company's profit before taxation and exceptional
items;
Key audit matters were identified as impairment of
property, plant and equipment, the impact of the new
financial reporting standard - IFRS 16, Leases and the
classification of exceptional items;
We have performed full scope audit procedures on
the financial statements of the Company.
Key audit matters
Key audit matters are those matters that, in our
professional judgment, were of most significance in our
audit of the financial statements of the current period
and include the most significant assessed risks of
material misstatement (whether or not due to fraud)
that we identified. These matters included those that
had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters
were addressed in the context of our audit of the
financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate
opinion on these matters.
Opinion
Our opinion on the financial statements is
unmodified
We have audited the financial statements of J D
Wetherspoon plc (the Company’) for the period ended
28 of July 2019, which comprise the Income statement,
the Statement of comprehensive income, the Cash flow
statement, the Balance Sheet, the Statement of
changes in equity and notes to the financial
statements, including a summary of significant
accounting policies and notes to the financial
statements. The financial reporting framework that has
been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
In our opinion the financial statements:
give a true and fair view of the state of the
Company’s affairs as at 29 July 2019 and of the
Company’s profit for the period then ended;
the financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union; and
have been prepared in accordance with the
requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those
standards are further described in the ‘Auditor’s
responsibilities for the audit of the financial statements’
section of our report. We are independent of the
company in accordance with the ethical requirements
that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as
applied to public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to principal risks, going
concern and viability statement
We have nothing to report in respect of the following
information in the annual report, in relation to which the
ISAs (UK) require us to report to you whether we have
anything material to add or draw attention to:
the disclosures in the annual report set out on pages
48-49 that describe the principal risks and explain how
they are being managed or mitigated;
the directors’ confirmation, set out on page 56 of the
annual report that they have carried out a robust
assessment of the principal risks facing the company,
including those that would threaten its business model,
future performance, solvency or liquidity;
50
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
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INDEPENDENT AUDITORS’ REPORT
Key Audit Matters
How the matter was addressed in the audit
Impairment of property, plant and equipment
As explained in Note 13 management has
produced an annual impairment assessment for
property, plant and equipment in line with IAS
36. The process for measuring and recognising
impairment under IAS 36: “Impairment of
Assets” is complex and requires significant
judgement.
Each individual pub is treated as a separate
cash-generating unit for impairment purposes,
and assumptions include management’s
assessment of the trading activity of each pub
and the determination of the appropriate
discount rate.
We have therefore identified the impairment of
property, plant and equipment as a significant
risk, which was one of the most significant
assessed risks of material misstatement.
Future impact of the new Financial
Reporting Standard – IFRS 16, Leases
As explained on pages 44-46 management
have disclosed, in respect of IFRS 16, the
Company’s accounting policy, and the impact it
will have on next year’s financial statements.
Management have elected to adopt the modified
retrospective approach to transitioning to the
new standard.
The process for measuring the impact of IFRS
16 is complex and requires significant
judgement.
Our audit work included, but was not restricted to:
Assessing the accounting policy and disclosures for compliance
with IFRS as adopted by the EU;
Checked the book value of assets and profits are being
appropriately allocated to each cash generating unit;
Testing the arithmetical accuracy and integrity of the underlying
data, by checking the consistency of the formulas and agreeing inputs
to supporting documentation including lease agreements and historic
profit figures and the fixed asset register;
Challenging the model prepared by management for the
assessment of the impairment of each pub and an assessment of
current trading for each pub, considering local market conditions;
Obtaining corroborative evidence to support the judgments used for
high risk pubs;
Using our valuation experts to assess the reasonableness of the
discount rate applied to cash flows, which included benchmarking to
comparative companies and market information.
The Company’s accounting policy for impairment and onerous leases
is shown on page 40 and related disclosures are included in respect
of impairment in Note 13.
Key observations
As a result of the audit procedures performed and after considering
management’s disclosures of judgements applied by them, we have
concluded that the total impairment charge recognised of £3.8m is
free from misstatement and is in accordance with the relevant
accounting standards.
Our audit work included, but was not restricted to:
Assessing the accounting policy and disclosures for compliance
with IFRS as adopted by the EU;
Testing the arithmetical accuracy and integrity of the underlying
data, by checking the consistency of the formulas and agreeing inputs
to supporting documentation including lease agreements;
Testing the completeness of the leases identified to known leases
and lease payments made in the year;
Using our valuation experts to assess the reasonableness of the
discount rate applied;
Obtaining corroborative evidence to support the judgements made
by management for the key assumptions in applying IFRS 16.
The Company’s accounting policy and related disclosures in relation
to IFRS 16 is shown on pages 44-46.
We have therefore identified the disclosure of
the future impact of the new Financial Reporting
Standard - IFRS 16, as a significant risk, which
was one of the most significant assessed risks
of material misstatement.
Key observations
As a result of the audit procedures performed and after considering
management’s disclosures of judgements applied by them, we have
concluded that the disclosure included on pages 44-46 is free from
misstatement and is in accordance with the relevant accounting
standards.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
51
INDEPENDENT AUDITORS’ REPORT
Key Audit Matters
How the matter was addressed in the audit
The classification of exceptional items
The risk of management override of controls
relates to judgmental areas within the annual
report. The key judgments are highlighted on
page 40 of the annual report and exceptional
items is flagged as one of these areas.
Exceptional items include impairments, onerous
leases and costs associated with the pub
disposal programme, which is in line with
previous years. There are a number of key
judgements around the disposal programme
including, when is it ending, which pubs are
ring-fenced as being within the programme and
whether it is part of a one- off strategic exit from
underperforming pubs.
Given the high levels of judgment included
within this classification, we therefore identified
the classification of exceptional items as a
significant risk, which was one of the most
significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
Assessing items included as exceptional in the financial statements,
and discussing with management as to the rationale for this
classification;
Checking that management’s classification of exceptional items is
consistent with prior year;
Challenging management around the classification of gains and
losses in relation to the continuing pub disposal programme;
Testing of a sample of items classified as exceptional to agree to
supporting documentation, including completion statements
and invoice;
Checking disclosures in respect of exceptional items provide clear
and adequate information for the users of the financial statements.
The Company’s accounting policy for exceptional items is shown on
page 41 and related disclosures are included in Note 4.
Key observations
As a result of the audit procedures performed, we have concluded
that management’s classification of exceptional items is appropriate
and consistent with prior years.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in
determining the nature, timing and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Company
Financial statements as a whole
£5.1 million (2018: £5.3 million), which is 5% (2018: 5%) of the
Company’s profit before tax and exceptional items. This benchmark is
considered the most appropriate because this is a key measure used
by the directors to report to investors on the financial performance of
the Company.
Materiality for the current period is lower than the level determined for
the period ended 29 July 2018 to reflect the lower profit before tax and
exceptional items in the period.
Performance materiality used to drive the extent
of our testing
65% of financial statement materiality.
Specific materiality
We determined a lower level of materiality for certain specific areas
such as directors’ remuneration and related party transactions.
Communication of misstatements to the audit
committee
All misstatements above £265,000 have been reported to the Audit
Committee.
An overview of the scope of our audit
Our audit approach was based on a thorough
understanding of the Company’s business and is risk
based, undertaking substantive testing on significant
transactions and material account balances. We have
formulated our risk assessment based on discussions
with management, internal audit and operational
teams, including visits to the National Distribution
Centre in Daventry and ten pubs around the country in
order to perform stock counts and to obtain a detailed
understanding of the operations of the business. Our
audit has been carried out in line with the agreed audit
plan.
52
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
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Explanation as to what extent the audit was
considered capable of detecting irregularities,
including fraud
The objectives of our audit are to identify and assess
the risks of material misstatement of the financial
statements due to fraud or error; to obtain sufficient
appropriate audit evidence regarding the assessed
risks of material misstatement due to fraud or error;
and to respond appropriately to those risks. Owing to
the inherent limitations of an audit, there is an
unavoidable risk that material misstatements in the
financial statements may not be detected, even though
the audit is properly planned and performed in
accordance with the ISAs (UK).
In identifying and assessing risks of material
misstatement in respect of irregularities, including fraud
and non-compliance with laws and regulations, our
procedures included the following:
We obtained an understanding of the legal and
regulatory frameworks applicable to the Company and
industry in which it operates. We determined that the
following laws and regulations were most significant:
IFRSs as adopted by the European Union, Companies
Act 2006, Listing Rules and the UK Corporate
Governance Code.
We obtained an understanding of how the Company
is complying with those legal and regulatory
frameworks by making inquiries of management, those
responsible for legal and compliance procedures and
the company secretary. We corroborated our inquiries
through our review of board minutes and papers
provided to the Audit Committee.
We assessed the susceptibility of the Company’s
financial statements to material misstatement, including
how fraud might occur. Audit procedures performed by
the audit team included:
identifying and assessing the design
effectiveness of controls management has in
place to prevent and detect fraud;
understanding how those charged with
governance considered and addressed the
potential for override of controls or other
inappropriate influence over the financial
reporting process;
challenging assumptions and judgements
made by management in its significant
accounting estimates;
identifying and testing journal entries, in
particular any journal entries posted with
unusual account combinations.
We did not identify any key audit matters relating to
irregularities, including fraud.
INDEPENDENT AUDITORS’ REPORT
Other information
The directors are responsible for the other information.
The other information comprises the information
included in the annual report and financial statements,
other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements
does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise
appears to be materially misstated. If we identify such
material inconsistencies or apparent material
misstatements, we are required to determine whether
there is a material misstatement in the financial
statements or a material misstatement of the other
information. If, based on the work we have performed,
we conclude that there is a material misstatement of
the other information, we are required to report that
fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard
to our responsibility to specifically address the following
items in the other information and to report as
uncorrected material misstatements of the other
information where we conclude that those items meet
the following conditions:
Fair, balanced and understandable set out on page
57 – the statement given by the directors that they
consider the annual report and financial statements
taken as a whole is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Group’s performance,
business model and strategy, is materially inconsistent
with our knowledge obtained in the audit; or
Audit committee reporting set out on pages 70 and
71 – the section describing the work of the audit
committee does not appropriately address matters
communicated by us to the audit committee; or
Directors’ statement of compliance with the UK
Corporate Governance Code set out on page 68 – the
parts of the Directors’ statement required under the
Listing Rules relating to the Company compliance with
the UK Corporate Governance Code containing
provisions specified for review by the auditor in
accordance with Listing Rule 9.8.10R(2) do not
properly disclose a departure from a relevant provision
of the UK Corporate Governance Code.
Our opinions on other matters prescribed by the
Companies Act 2006 are unmodified
In our opinion, the part of the directors’ remuneration
report to be audited has been properly prepared in
accordance with the Companies Act 2006.
the information given in the strategic report and the
directors’ report for the financial period for which the
financial statements are prepared is consistent with the
financial statements and those reports have been
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
53
INDEPENDENT AUDITORS’ REPORT
prepared in accordance with applicable legal
requirements;
the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 in the Disclosure
Rules and Transparency Rules sourcebook made by
the Financial Conduct Authority (the FCA Rules), is
consistent with the financial statements and has been
prepared in accordance with applicable legal
requirements; and
information about the company’s corporate
governance code and practices and about its
administrative, management and supervisory bodies
and their committees complies with rules 7.2.2, 7.2.3
and 7.2.7 of the FCA Rules.
Matter on which we are required to report under the
Companies Act 2006
In the light of the knowledge and understanding of the
company and its environment obtained in the course of
the audit, we have not identified material
misstatements in:
the strategic report or the directors’ report; or
the information about internal control and risk
management systems in relation to financial reporting
processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 of the FCA
Rules.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
the financial statements and the part of the directors’
remuneration report to be audited are not in agreement
with the accounting records and returns; or
certain disclosures of directors’ remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.
Responsibilities of directors for the financial
statements
As explained more fully in the directors’ responsibilities
statement set out on page 56 the directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a true
and fair view, and for such internal control as the
directors determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Other matters which we are required to address
We were appointed by the Board on 9 November 2017
after going through an audit tender process in the
Summer of 2017. The period of total uninterrupted
engagement including previous renewals and
reappointments of the firm is between 1 and 2 years.
We did not provide any non-audit services to the
Company which are prohibited by the FRC’s Ethical
Standard and we remain independent of the company
in conducting our audit. Non audit services provided to
the Company have been disclosed within note 2 to the
financial statements on page 16.
Our audit opinion is consistent with the additional report
to the audit committee.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the
company and the company’s members as a body, for
our audit work, for this report, or for the opinions we
have formed.
Mark Henshaw
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
12 September 2019
54
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
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DIRECTORS, OFFICERS AND ADVISERS
Registered office
Wetherspoon House
Central Park
Reeds Crescent
Watford
WD24 4QL
Company number
1709784
Registrars
Computershare Investor Services
plc
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
Independent auditors
Grant Thornton UK LLP
Chartered Accountants and
Statutory Auditors
30 Finsbury Square
London
EC2A 1AG
Solicitors
Macfarlanes LLP
20 Cursitor Street
London
EC4A 1LT
Bankers
Allied Irish Banks
Banco de Sabadell S.A London
Branch
Barclays Bank plc
BNP Paribas
Clydesdale Bank plc
Co Operative Rabbobank U.A
Crédit Industriel et Commercial.
Handelsbanken Bank
HSBC Bank plc
Mediobanca S.p.A
MUFG Bank Ltd
National Westminster Bank plc
Santander UK plc
The Governor and Company of the
Bank of Ireland
Financial advisers
Investec Bank plc
Stockbrokers
Investec Bank plc
Tim Martin Chairman, aged 64
Founded the Company in 1979, having previously studied law at Nottingham University
and qualified as a barrister. He became chairman in 1983.
John Hutson Chief Executive Officer, aged 54
Joined in 1991 and was appointed to the board in 1996. He is a graduate of Exeter
University and previously worked with Allied Domecq.
Ben Whitley Finance Director, aged 41
Joined in 1999 and was appointed to the board in 2015. He is a graduate of
Durham University and qualified as a chartered management accountant in 2012.
Su Cacioppo Personnel and Legal Director, aged 52
Joined in 1991 and was appointed to the board in 2008. She is a graduate of
South Bank University and London Guildhall University and previously worked for
Courage Limited and Allied Leisure.
Nigel Connor Company Secretary and Head of Legal, aged 50
Joined in 2009 and was appointed Company Secretary in 2014.
He is a graduate of Newcastle University and qualified as a solicitor in 1997.
Elizabeth McMeikan Senior Independent Director, aged 57
Appointed to the board in 2005 and is a member of the audit, remuneration and
nomination committees. She is a graduate of Cambridge University. She is the Senior
Independent Director and Remuneration Committee Chair for UNITE plc. She also sits
on the board of one privately owned company.
Debra van Gene Non-Executive Director, aged 64
Appointed to the board in 2006 and is chair of the remuneration committee and a
member of the audit and nomination committees. She is a graduate of Oxford University.
She has previously been a partner at Heidrick and Struggles Inc and a Commissioner
with the Judicial Appointments Commission.
Sir Richard Beckett Non-Executive Director, aged 75
Appointed to the board in 2009 and is chair of the nomination committee and a member
of the audit and remuneration committees. He was called to the bar in 1965 and took silk
in 1987. He was one of the pre-eminent practitioners in regulatory and licensing matters.
Harry Morley Non-Executive Director, aged 54
Appointed to the board in 2016 and is chair of the audit committee and a member of the
nomination and remuneration committees. He is a graduate of Oxford University. He is a
non-executive director of The Mercantile Investment Trust plc and TheWorks.co.uk plc.
He is also a trustee of the Ascot Authority. He qualified as a chartered accountant in
1991.
Management board
The management board comprises John Hutson, Su Cacioppo, Ben Whitley
and the following:
David Capstick IT and Property Director, aged 58
Joined in 1998. He was appointed to the management board in 2003.
He is a graduate of the University of Surrey and previously worked for Allied Domecq.
Martin Geoghegan Operations Director, aged 50
Joined in 1994, having previously worked for Safeway plc. He worked in several
operational roles, before being appointed as operations director in 2004.
Miles Slade Retail Director, aged 38
Joined in 2000. He worked in several operational roles before being appointed as deputy
operations director in January 2012. He is a graduate of Nottingham Trent University.
James Ullman, Audit Director, aged 48
Joined in 1994. He was appointed to the management board in 2018. He is a graduate of
Brighton University and Birmingham City University and became a chartered auditor in
2011.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
55
DIRECTORS’ REPORT
Directors
The directors of the Company who were in office
during the year and up to the date of signing the
financial statements are listed on page 55.
Dividends
The board proposes, subject to shareholders’ consent,
to pay a final dividend of 8.0p (2018: 8.0p) per share,
on 28 November 2019, to those shareholders on the
register on 25 October 2019, giving a total dividend for
the year of 12.0p per share.
Return of capital
At the annual general meeting of the Company, held on
15 November 2018, the Company was given authority
to make market purchases of up to 15,825,155 of its
own shares. During the year to 28 July 2019, 402,899
shares were purchased, with a nominal value of
£8,000, for a total consideration of £5,399,000,
including stamp duty. This represented 0.38% of the
called-up share capital.
Directors’ interest in contracts
No director has any material interest in any contractual
agreement, other than an employment contract,
subsisting during or at the end of the year, which is
or may be significant to the Company.
Takeover directive disclosures
The Company has an authorised share capital
comprising 500,000,000 ordinary shares of 2p each.
As at 28 July 2019, the total issued share capital
comprised 105,098,136 fully paid-up shares of 2p
each. The rights to these shares are set out in the
Company’s articles of association. There are
no restrictions on the transfer of these shares
or their attached voting rights.
Details of significant shareholdings at year end
and as at 26 July 2019 are given on page 73.
No person holds shares with specific rights regarding
control of the Company.
The Company operates an employee share incentive
plan. However, no specific rights with respect to the
control of the Company are attached to these shares.
In addition, the Company operates a deferred
bonus scheme, whereby, should a takeover occur,
all shares held in trust would be transferred to the
employee immediately.
The Company is not aware of any agreements among
holders of securities known to the Company which may
result in restrictions on the transfer of securities or
voting rights.
The Company has the power to issue and buy back
shares as a result of resolutions passed at the
annual general meeting in 2018. It is the Company’s
intention to renew these powers; the resolutions
approving them are found in the notice of the
annual general meeting for 2019.
In the event of a change of control, the Company is
obliged to notify its main bank lenders. The lenders
shall not be obliged to fund any new borrowing
requests; facilities will lapse 10 days after the change
of control, if the terms on which they can continue have
not been agreed on. Any borrowings, including
accrued interest, will become immediately repayable
on such lapse.
There are no other significant agreements to which the
Company is party which may be subject to change-of-
control provisions.
There are no agreements with the Company’s directors
or employees which provide for compensation for loss
of office or employment which occurs because of a
takeover bid.
Statement of directors’ responsibilities
The directors are responsible for preparing the annual
report, the directors’ remuneration report and the
financial statements, in accordance with applicable law
and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law, the
directors have prepared the Company financial
statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the
European Union. Under company law, the directors
must not approve the financial statements, unless they
are satisfied that they give a true, fair and balanced
view of the state of affairs of the Company and
of the profit or loss of the Company for that period.
In preparing these financial statements, the directors
are required to:
select suitable accounting policies and
then apply them consistently
make judgements and accounting estimates
which are reasonable and prudent
state whether applicable IFRSs as adopted by the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements
prepare the financial statements on the going-
concern basis, unless it is inappropriate to presume
that the Company will continue in business
The directors are responsible for keeping adequate
accounting records, sufficient to show and explain the
Company’s transactions and which disclose, with
reasonable accuracy, the financial position of the
Company, at any time. The accounting records enable
the directors to ensure that the financial statements
and the directors’ remuneration report comply with the
Companies Act 2006 and that the Company’s financial
statements comply with article 4 of the IAS regulation.
The directors are also responsible for safeguarding
the assets of the Company and for taking reasonable
steps for the prevention and detection of fraud and
other irregularities.
56
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
The directors are responsible for the maintenance and
integrity of the Company’s website. Legislation in the
United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The directors consider that the annual report and
accounts, taken as a whole, are fair, balanced and
understandable and provide that information necessary
for shareholders to assess the Company’s
performance, business model and strategy.
Each of the directors, whose names and functions
are listed in the section headed ‘directors, officers
and advisers’, confirms, to the best of his or her
knowledge, that:
The Company’s financial statements, which have
been prepared in accordance with IFRSs as adopted
by the European Union, give a true and fair view of
the assets, liabilities, financial position and profit of
the Company
The strategic report includes a fair review of the
development and performance of the business and the
position of the Company, together with a description of
the principal risks and uncertainties which it faces
So far as he or she is aware, there is no
relevant audit information of which the Company’s
auditors are unaware
He or she has taken all steps which he or she ought
to have taken as a director, in order to make himself
or herself aware of any relevant audit information
and to establish that the Company’s auditors are
aware of that information
Directors’ indemnities
As permitted by the Articles of Association, the
directors have the benefit of an indemnity which is a
qualifying third-party indemnity provision, as defined by
section 234 of the Companies Act 2006. The indemnity
was in force throughout the last financial year and is
currently in force. The Company also purchased and
maintained, throughout the financial year, directors
and officers’ liability insurance, in respect of itself
and its directors.
Viability statement
In accordance with provision C.2.2 of the UK Corporate
Governance Code 2014, the directors confirm that they
have a reasonable expectation that the Company will
continue to operate and meet its liabilities, as they fall
due, for the next three years.
The directors have determined that a three-year
period is an appropriate period over which to assess
viability, as it aligns with the Company’s capital
investment plans and gives a greater certainty over the
forecasting assumptions used.
DIRECTORS’ REPORT
The directors’ assessment has been made with
reference to the Company’s current position, financial
plan and its principal risks and uncertainties set out
on pages 48 to 49, specifically economic,
regulatory, reputational and interest-rate risks.
To assess the impact of the Company’s principal risks
and uncertainties on its long term viability,
scenarios were applied to the Company’s financial
forecasts in the form of reduced like-for-like sales,
reduced margins and increased borrowing costs. It is
assumed that the Company’s financial plans would be
adjusted in response to each scenario.
In making this statement, the directors carried out
a robust assessment of the principal risks and
uncertainties facing the Company, including those
which would threaten its business model, future
performance, solvency or liquidity. Principal risks and
uncertainties set out on pages 48 to 49 are the
result of internal risk management and control
processes, with further details set out in the
audit committee’s report on pages 70 and 71.
Going concern
The directors have made enquiries into the adequacy
of the Company’s financial resources, through a review
of the Company’s budget and medium-term financial
plan, including capital expenditure plans and cash flow
forecasts; they have satisfied themselves that the
Company will continue in operational existence for the
foreseeable future. For this reason, they continue to
adopt the going-concern basis, in preparing the
Company’s financial statements.
Greenhouse gas (GHG) emissions
GMG Emissions
Unit
Quantity
Scope 1
Scope 2
Intensity
Tonnes CO2e
Tonnes CO2e
Tonnes CO2e /
£m revenue
2018
2019
47,064
50,725
93,436 115,315
77.2
98.0
Conversion factors are those published by the
Department for Environment, Food and Rural Affairs
Reported data is for the year ended 31 March 2019
Scope 1 – combustion of gas
Scope 2 – purchase of electricity
Refrigerant emissions from our pubs are
not reported, as they are immaterial
Overseas branches
The Company has an overseas branch
in the Republic of Ireland.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
57
DIRECTORS’ REPORT
Listing Rule 9.8.4 R
Information required to be disclosed by LR 9.8.4 R
(starting on page indicated, if applicable):
Details of long-term incentive schemes,
page 18 to 19
Provision of services by a controlling shareholder
page 59 to 67,
Agreements with controlling shareholders, page 38
Corporate governance (DTR 7.2.9 R),
pages 68 to 72
Events after the reporting period
The details of events after the reporting period
can be found in note 29 on page 39.
By order of the board
Nigel Connor
Company Secretary
12 September 2019
58
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
DIRECTORS’ REMUNERATION REPORT
Annual statement
Dear shareholder
This year the following salary increases and awards
were made to executive board members, in
accordance with the remuneration policy agreed on
shareholders at the Company’s AGM in
November 2017:
This additional 5% is available to all employees
with over 25 years’ service with the Company.
Pension
Under the current agreed Company policy, the
Company paid 12% pension contributions or a cash
equivalent to executive directors this year.
Salary
The salaries of the CEO and the personnel and legal
director have been increased by 3.0% this year.
This compares with a 4.1% increase for the
general workforce.
The CEO and the personnel and legal director will each
receive an additional award equivalent to 2% of their
salary, because of their length of service. This
additional 2% is available to all employees with over 25
years’ service with the Company.
Following consultation with several of the Company’s
top shareholders, the committee has exercised its
discretion in relation to the salary increase awarded
to the Finance Director, increasing his salary by 15.4%.
In 2015, the board decided to make an internal
appointment to the role of finance director. Following
this appointment, the remuneration committee decided
to increase the finance director’s salary, in stepped
levels, over several years, so that his salary would,
over time, increase towards market levels for a finance
director of a FTSE 250 company, while minimising the
upfront cost to the company.
Annual cash bonus
There will be no award to executive directors under the
profit element of the agreed annual cash bonus plan.
Executive directors will receive 5% of basic salary
under the quality-and-standards element. These
payments are made not just at board level – and reflect
the importance of operational standards throughout the
business, requiring a set number of calls on pubs to
monitor standards and communicate directly with pub
employees.
Deferred bonus scheme
Under the current agreed Deferred Bonus Scheme,
executive directors will receive 15% of their basic
salary in shares. The calculation for this award is
included underneath the bonus and incentives table on
page 64
Company Share Incentive Plan
Under the agreed Company SIP, executive directors
will receive an amount equivalent to 25% of their salary
in shares. The Company SIP is open to all employees
in the Company, at varying levels, according to each
individual’s seniority and length of service. SIP awards
are not subject to performance conditions. The aim is
for all employees to be able to accumulate shares
over time, in order to encourage long-term loyalty and
joint purpose.
The CEO and the personnel and legal director will
each receive an additional award equivalent to 5% of
their salary, because of their length of service.
In line with the revised Corporate Governance Code
2018, which will come into force in our next reported
financial year, the remuneration committee is reviewing
the base percentage to be paid to any new executive
directors, with a view to aligning this with the
percentage paid to the majority of the workforce. Any
change in policy will be brought to a shareholder vote
as part of the new remuneration policy to be presented
for approval in 2020.
Directors’ shareholding requirements
In addition to this, in line with the revised Corporate
Governance Code 2018, the committee is looking at
executive directors’ shareholding, both during and
post employment. This has not been a requirement at
the Company to date. Any change in policy will be
brought to shareholders as part of the new
remuneration policy vote in 2020.
Workforce engagement
Wider workforce policies and issues, including (but
not exclusively) remuneration, are a standing item
on board agendas. The personnel and legal director
provides the main liaison point between the workforce
and the remuneration committee, with individual
committee members also regularly meeting pub
employees.
In setting remuneration for the executive board, the
committee takes into account wider workforce
remuneration policies throughout the Company. Many
of the elements of executive board remuneration
outlined above extend throughout much of the
Company, at varying levels, according to seniority and
length of tenure.
Further details are set out below, with shareholders
invited to approve this report and proposals at the AGM
on 21 November 2019.
Debra van Gene
Chair of the Remuneration Committee
12 September 2019
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
59
DIRECTORS’ REMUNERATION REPORT
Remuneration policy
The committee reviews the executive directors’ remuneration packages at least annually.
The aim of the remuneration policy is to:
Provide attractive and fair remuneration for directors
Align directors’ long-term interests with those of shareholders, employees and the wider community
Incentivise directors to perform to a high level
In agreeing on remuneration, account is taken of the pay levels at Wetherspoon, as well as those in the hospitality
industry in general, along with other comparisons and reports. The committee aims to take a fair and commonsense
approach.
This policy came into force on the date of the AGM – 9 November 2017. The elements of the remuneration packages of
each executive director are as follows:
Component
Reason
Operation, maximum achievable and performance criteria
Base salary
Provide attractive
and fair
remuneration
for directors.
Salaries are reviewed at least annually, with any changes
normally taking effect from 1 October each year.
Salary increases are awarded at the discretion of the
remuneration committee.
Benefits
Pension
Provide attractive
and fair
remuneration
for directors.
Provide attractive
and fair
remuneration
for directors.
When considering salary levels and whether an increase should be offered,
the committee takes account of a variety of factors, including Company
performance, individual performance, experience and responsibilities, market
information and the level of increase being offered to other employees.
A range of taxable benefits is available to executive directors.
These benefits comprise principally the provision of a car allowance,
life assurance, private medical insurance and fuel expenses.
The cost of benefits provided changes in accordance with market conditions.
The committee monitors the overall cost of the package periodically.
The Company does not operate any defined benefit pension schemes.
Contributions of 12% of executive directors’ base salary are made by the
Company to the Company’s stakeholder pension scheme.
After 25 years’ service, executive directors receive additional pension
payments of 2% of their salary. This rises by a further 2% after each
additional five years’ service. The increases which apply to directors after 25
years and after each additional five years apply to all other employees also.
Executive directors may receive a salary supplement in lieu of pension, at the
discretion of the remuneration committee.
Annual bonus plan
Incentivise directors
to perform to a
high level.
Annual bonus payments are paid in cash, at the discretion of the
remuneration committee.
The major part of the bonus is based on profit growth, multiplied by a factor
of 1.5 and paid to a maximum of 45% of salary. Profit growth is calculated
on profit before tax and exceptional items.
In addition, a further 5% is awarded for carrying out a set number of calls
on our pubs per month, in order to monitor service and other standards.
Provisions are in place which permit the Company to reclaim awards under
this scheme, in exceptional circumstances of misstatement or misconduct.
60
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
DIRECTORS’ REMUNERATION REPORT
Component
Reason
Operation, maximum achievable and performance criteria
Share Incentive
Plan (SIP)
Align directors’
long-term interests
with those of
shareholders,
employees and the
wider community.
Deferred
Bonus Scheme
Align directors’
long-term interests
with those of
shareholders,
employees and the
wider community.
The SIP allocates shares equivalent to 5% of salary to all Company
employees after an 18-month qualifying period. Shares do not vest for at
least three years under this plan – and tax-free returns are possible, if the
shares are held for five years or more.
The Company offers extra shares under this scheme to some employees:
pub managers receive an extra 5% annual award; head-office staff 10–15%;
directors, including executive board directors, 20%.
After 25 years’ service, executive directors receive additional SIPs of 5% of
their salary. This rises by a further 5% after each additional five years’
service. The increases which apply to directors after 25 years and after each
additional five years apply to all other employees also.
Awards under this scheme are not based on financial or other targets.
The Company believes that excessive use of financial targets can lead to
distortions in companies’ behaviour and that it is important for there to be
some share awards which can be accumulated gradually, the value of which
depends on the overall success of the Company.
Directors must be in office when the shares vest.
If changes are made to SIPs which apply to all employees in the schemes,
they may be applied to executive directors, at the discretion of the
remuneration committee.
The Deferred Bonus Scheme may award shares to all senior managers,
including executive directors. Bonus awards are made under the scheme,
annually, at the discretion of the remuneration committee.
Bonus awards are satisfied in shares. One-third of a participant’s shares will
vest to the participant on calculation of the amount of the award, one-third will
vest after one year and the remaining third will vest to the participant after two
years (in each case subject to the participant being employed at the release
date).
The current performance criteria are based on earnings per share and
owners’ earnings per share. The performance criteria for executive directors
are the same as those for senior managers who are eligible for the scheme.
Awards are made using a multiple based on an employee’s grade. The
maximum bonus to be earned under the scheme is 100% of annual salary.
Any changes made to the Deferred Bonus Scheme for eligible senior
managers may, at the discretion of the remuneration committee, be applied to
executive directors.
Provisions are in place which permit the Company to reclaim awards under
this scheme, in exceptional circumstances of misstatement or misconduct.
Non-executive
directors’ fees
Provide attractive
and fair
remuneration
for directors.
The fees paid to non-executive directors are determined by the executive
board, taking into account the level of fees for similar positions in the market
and the time commitment which each non-executive director makes.
The non-executive directors receive no other remuneration or benefits
from the Company.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
61
DIRECTORS’ REMUNERATION REPORT
Difference between the policy for
directors and that for employees
Members of the wider management team may
receive each of the components of remuneration
awarded to the executive directors, although the
amounts due for each component may vary,
depending on their level of seniority.
Non-executive directors are not entitled
to any component other than fees.
The wider employee population of the Company
will receive remuneration which is considered
to be appropriate to their level of responsibility
and performance.
Approach to recruitment remuneration
The aim, when agreeing on components of
a remuneration package, including any variable pay
for incoming directors, would be in accordance with
the table above.
Account is taken of the individual’s experience, the
nature of the role being offered and his or her existing
remuneration package. Relocation expenses or
allowances may be paid, as appropriate.
The committee may, at its discretion, offer cash
or share-based elements, as necessary, to secure
an appointment, although it does not normally do so.
Shareholders will be informed of any such payments
at the time of appointment.
Our main principle is that payments made to
prospective directors as compensation for loss of
benefits at a previous company are inherently unfair,
since it would be extremely rare for anyone below
board level to receive this sort of compensation.
Chairman and directors’ service contracts
The executive directors are employed on rolling
contracts, requiring the Company to give up to one
year’s notice of termination, while the director may give
six months’ notice. In the event of termination of
employment with the Company, without the requisite
period of notice, executive directors’ service contracts
provide for the payment of a sum equivalent to the net
value of salary and benefits to which the executive
would have been entitled during the notice period.
The executive is required to mitigate his or her loss and
such mitigation may be taken into account
in any payment made. The Company’s policies
on the duration of directors’ service contracts,
notice periods and termination payments are all
in accordance with best industry practice. The
commencement dates for executive directors’
service contracts were as follows:
Tim Martin – 20 October 1992
John Hutson – 2 February 1998
Su Cacioppo – 10 March 2008
Ben Whitley – 5 November 2015
All directors will be standing for re-election at the AGM.
Their current service contracts do not have an explicit
expiry date.
Non-executive directors
The non-executive directors hold their positions,
pursuant to letters of appointment dated 1 November
2018, with a term of 12 months.
If their appointment is terminated early, the non-
executive directors are entitled to the fees to which
they would have been entitled up to the end of their
term. They do not participate in the Company’s bonus
or share schemes. Their fees are determined by the
executive directors, following consultation with
professional advisers, as appropriate.
External appointments
Executive directors are not allowed to take
external appointments without the prior consent
of the Company. The Company has not released
any executive directors to serve as a non-executive
director elsewhere.
Illustration of the application of the
remuneration policy
The charts below set out the composition of the
chairman and executive directors’ remuneration
packages in £000, at a minimum, a reasonable
expectation target and as a possible maximum:
Tim Martin
Maximum
Expected
Minimum
100%
100%
100%
£324
£324
£324
£0
£100
£200
£300
John Hutson
Maximum
Expected
Minimum
40%
51%
80%
17%
43%
£1,883
7%
20%
42%
£949
£1,494
£0
£400
£800 £1,200 £1,600 £2,000
Ben Whitley
Maximum
Expected
Minimum
40%
51%
80%
18%
43%
£679
7%
20%
42%
£342
£539
£0
£200
£400
£600
£800
Su Cacioppo
Maximum
Expected
Minimum
40%
52%
81%
17%
43%
£1,067
6%
19%
42%
£543
£849
£0
Fixed
£300
£600
£900
£1,200
Annual Variable
Long-term Incentive
62
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
The fixed annual values include:
Fixed annual salary, benefits and allowances, in line
with those outlined in the policy section, and based on
the salaries applicable as at 28 July 2019
The annual variable values include the cash bonus
which may be achievable. In the case of the ‘expected’,
an average percentage achieved over the last five
years has been used as a basis.
The long-term incentive plan values include:
The fixed 25% awarded under the Company’s
Share Incentive Plan
An average achieved in respect of the
Deferred Bonus Scheme over the last five years
Payments for loss of office
The Company’s policy is that the period of notice for
executive directors will not exceed 12 months;
accordingly, the employment contracts of the executive
directors are terminable on 12 months’ notice by the
Company or six months’ notice by a director.
The Company may terminate a director’s employment
without notice or compensation, in the event of
gross misconduct.
In the event of a director’s departure, the Company’s
policy on termination payments is as follows:
The Company will seek to ensure that no more
is paid than is warranted in each individual case
DIRECTORS’ REMUNERATION REPORT
Salary payments will be limited to notice periods
There is no entitlement to bonus paid
(or associated deferred shares or SIPs) following
notice of termination
The committee’s normal policy is that, where the
individual is considered a ‘good leaver’, a prorated
bonus may be paid
The Company may enable the provision of
outplacement services to a departing director
Consideration of employment conditions
elsewhere in the Company
The committee receives information on salary
increases, bonus payments and other benefits
available at the Company. These are taken into
consideration when conducting the review of executive
remuneration, although no formal consultation with
employees is undertaken in this regard.
Consideration of shareholders’ views
Any views in respect of directors’ remuneration
expressed to the Company by shareholders have been,
and will be, taken into account in the formulation of the
directors’ remuneration policy.
Details of votes cast for and against the resolution to
approve last year’s remuneration report and any
matters discussed with shareholders during the year
are provided in the annual report on remuneration.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
63
DIRECTORS’ REMUNERATION REPORT
Annual report on remuneration
The table below sets out in a single figure the total amount of remuneration, including each element,
received by each director for the year ended 28 July 2019.
Single-figure table – audited
Executive directors
B Whitley
J Hutson
S Cacioppo
Non-executive
directors and chairman
T R Martin
E McMeikan
D van Gene
R Beckett
H Morley
Salary/fees
Taxable
benefits1
Performance
bonus2
2019
£000
2018
£000
2019
£000
2018
£000
2019
£000
2018
£000
Long-term
incentives
2019
2018
Pension
contributions3
2019
2018
£000
£000
£000
£000
Total
2019
£000
2018
£000
220
620
348
192
603
338
17
21
20
16
20
16
11
31
17
28
87
49
84
276
155
210
696
391
26
87
49
469
358
23
84 1,035 1,490
841
589
47
1,188 1,133
58
52
59
164
515 1,297
162
154 1,982 2,800
324
53
53
53
53
324
51
51
51
51
17
–
–
–
–
18
–
–
–
–
536
528
17
18
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
341
53
53
53
53
342
51
51
51
51
553
546
Total
1,724 1,661
75
70
59
164
515 1,297
162
154 2,535 3,346
1) Taxable benefits include car allowances and the provision of rail travel for Tim Martin, as well as
private health and fuel expenses for executive directors.
2) No bonus was awarded under the profit growth element of the bonus scheme, in line with policy.
5% was awarded in respect of the element for pub calls made to monitor standards, in line with the policy.
3) Executive directors receive either pension contributions, equivalent to 12% of salary, to the stakeholder pension plan
or salary in lieu of pension contributions. Additional pension payments are made, equivalent to 2% of salary for 25–29
years’ service, a further 2% for 30–34 years’ service and a further 2% at 35+ years’ service. Su Cacioppo, John Hutson
and Ben Whitley took a portion of their pension in salary.
Details of targets applicable during the year are disclosed in the directors’ remuneration policy statement. The resultant
percentages against each of the bonus measures achieved are shown below, with the percentage awarded for each
director being the same.
Pub calls
Profit growth
Total performance bonus
Employee share scheme
Employee share scheme – long service*
Deferred Bonus Scheme
Total long-term incentives
Total
Maximum
Awarded
B Whitley
J Hutson
S Cacioppo
5.0%
45.0%
50.0%
25.0%
5.0%
100.0%
130.0%
180.0%
5.0%
0.0%
5.0%
25.0%
5.0%
15.0%
45.0%
50.0%
11,000
30,989
17,397
–
–
–
11,000
30,989
17,397
51,223
152,640
–
33,000
30,528
92,966
84,223
276,134
95,223
307,123
85,682
17,137
52,191
155,010
172,407
*J Hutson and S Cacioppo received an additional 5%, as they have completed 25 years’ service with the Company.
There was no earnings-per-share growth this year. Awards under the Deferred Bonus Scheme are based on growth
in owners’ earnings per share of 6.0% and are multiplied by 2.5. Please see note 8 of our financial statements for the
calculations of the above growth numbers.
64
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
Long-term incentive awards – audited
DIRECTORS’ REMUNERATION REPORT
B Whitley
J Hutson
S Cacioppo
Number of shares
Face value in £
*Share
Incentive
Plan
3,901
13,956
7,834
25,691
Bonus
Scheme
12,496
39,293
22,059
73,848
**Deferred
Total
16,397
53,249
29,893
99,539
Share
Incentive
Plan
51,223
183,168
102,819
Deferred
Bonus
Scheme
164,447
517,096
290,296
Total
215,670
700,264
393,115
337,210
971,839
1,309,049
*Awarded at an average share price of £13.12, three days before grant, shares will vest three years after grant.
**Awarded at an average share price of £13.16, five days before grant, shares vest in three equal tranches,
in September of each of 2018, 2019 and 2020.
All awards have no further performance conditions attached, except to be employed by the Company at the vesting date.
Directors and connected persons’ interests in shares: audited
The interests of the directors in the shares of the Company, as at 28 July 2019, were as follows:
Ordinary shares of 2p each, held beneficially
T R Martin*
B Whitley
J Hutson
S Cacioppo
E McMeikan
D van Gene
R Beckett
H Morley
Shares
33,466,934
5,680
111,461
25,368
1,000
1,000
2,000
2,000
Share
Incentive
Plan
Deferred
Bonus
Scheme
2019
Shares
Share
Incentive
Plan
Deferred
Bonus
Scheme
2018
11,648
45,671
25,637
–
–
–
–
33,466,934 33,466,934
3,079
101,632
24,734
1,000
1,000
2,000
2000
30,276
199,148
74,593
1,000
1,000
2,000
2,000
12,948
42,016
23,588
–
–
–
–
–
11,949
51,696
27,954
–
–
–
–
– 33,466,934
27,279
197,263
77,167
1,000
1,000
2,000
2000
12,251
43,935
24,479
–
–
–
–
*In last year’s accounts some shares were incorrectly included within Tim Martin’s holding. The comparative numbers
in this year’s accounts have been corrected.
The Company does not enforce any specific requirements as to directors’ shareholdings. With the exception of
partnership shares, there have been no changes to these interests since 28 July 2019.
Partnership shares
John Hutson, Su Cacioppo and Ben Whitley are participants of the partnership share scheme and acquired
141 shares each in the year. The market price of the shares purchased ranged from 1,087.9 to 1,516.0p.
Since 28 July 2019, John Hutson, Su Cacioppo and Ben Whitley acquired 10 shares each under the share
partnership scheme.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
65
DIRECTORS’ REMUNERATION REPORT
Performance graph – non-audited information
This graph shows the total shareholder return (with dividends reinvested) of a holding of the Company’s shares against
a hypothetical holding of shares in the FTSE All-Share Travel & Leisure sector index. The directors selected this index,
as it contains most of the Company’s competitors and is considered to be the most appropriate index for the Company.
Growth in the value of a hypothetical £100 holding since July 2008, based on 30-trading-day average values
.
66
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
60.0140.0220.0300.0380.0460.0540.0620.0700.0Jul-08Jul-09Jul-10Jul-11Jul-12Jul-13Jul-14Jul-15Jul-16Jul-17Jul-18Jul-19Value of hypothetical £100 holding (£)J D WetherspoonFTSE All-Share Travel & Leisure
DIRECTORS’ REMUNERATION REPORT
Remuneration committee
The remuneration committee comprises the following
independent directors: Debra van Gene (chair),
Elizabeth McMeikan, Sir Richard Beckett and
Harry Morley.
The committee meets regularly and considers
executive directors’ remuneration annually.
It approves all contractual and compensation
arrangements for the executive directors, including
performance-related payments.
Shareholders’ vote on 2018 directors’
remuneration report
The table below shows the voting outcomes
at the 15 November 2018 AGM for the directors’
remuneration report.
For
Against
Abstentions
Total Cast
Number of
votes
77,743,889
13,473,995
24,781
91,242,665
% of
votes
85.20%
14.77%
0.03%
100.00%
Shareholders’ vote on 2017 directors’
remuneration policy.
The table below shows the voting outcomes
at the 9 November 2017 AGM for the directors’
remuneration policy.
Number of
votes
86,183,895
4,477,466
213,196
% of
votes
94.84%
4.93%
0.23%
90,874,557
100.00%
For
Against
Abstentions
Total Cast
By order of the board
Nigel Connor
Company Secretary
12 September 2019
fdfdfds
Chief executive officer’s remuneration
Single figure
of total
remuneration
Performance
bonus
payment
achieved
against
maximum
possible
Long-term
incentives
scheme
shares
vesting
against
maximum
possible*
£000
1,035
1,490
1,698
1,187
1,202
741
1,079
847
628
656
%
10
29
85
21
10
19
43
34
24
44
%
100
100
100
100
100
100
100
100
100
100
John Hutson
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
*As long-term incentive scheme shares issued have
no further performance criteria attached, all shares
previously awarded vest in full when the vesting date
is reached.
The following table compares the change in
remuneration of the chief executive with that
of all employees.
John Hutson
Salary
Taxable benefits
Performance bonus
2019
2018 Change
Total
employees
£000
£000
%
620
21
31
672
603
2.8
(5.0)
20
87 (64.4)
(5.4)
710
%
4.1
26.5
6.9
10.3
Change in total employees’ salary is calculated
based on the amounts paid to all employees adjusted
for redundancy and employer’s National Insurance
payments, divided by the number of hours
worked by employees.
Comparison of increases in remuneration,
dividends and share buy-backs
Dividends
Share buy-backs
2019
£000
2018 Change
£000
%
12,652
5,399
12,655
(0.02)
36,205 (85.09)
Total employee remuneration 623,011 551,599 12.95
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
67
CORPORATE GOVERNANCE
Statement of compliance
The Company is committed to high standards of
corporate governance. The board believes that
the Company has been compliant with the Code
throughout the 52 weeks ended 28 July 2019,
except as described below.
B.1.1 – Non-executive director independence
Elizabeth McMeikan, Debra van Gene and Sir Richard
Beckett have served more than nine years on the
board and so may not be considered independent
under the Code. The board considers that their
performance as non-executive directors continues to
be effective. They contribute significantly as directors
through their individual skills, considerable knowledge
and experience of the Company. They also continue to
demonstrate strong independence in the manner in
which they discharge their responsibilities as directors.
Consequently, the board has concluded that,
despite their length of tenure, there is no association
with management which could compromise
their independence.
B.4.2 – Development
The chairman does not formally sit down with individual
directors and identify specific training and development
needs for them. The chairman and executive directors
hold a series of weekly meetings, with head-office and
pub managers, to try to identify areas of improvement
for the business. Minutes are taken of these meetings
and action points identified for a range of participants.
In the opinion of the board, this process is effective
in identifying problems and solutions and assists in
training and developing directors on an informal,
yet effective, basis.
B.6.2 – External board evaluation
A requirement of corporate governance is a
recommendation for a third party to evaluate the
functioning of the board. Delegation of a key task of the
chairman and of the directors of the board itself to a
third party, often with little or no connection with the
Company’s business and with a very limited knowledge
of the directors, may be a dangerous step for a board
to take. It is the function of the board itself to evaluate
its own performance – and that performance is most
evident from the results of the underlying business.
For this reason, it is believed best for the Company to
continue with its current system of ‘self-evaluation’.
E.1.1 – Dialogue with shareholders
The Code indicates that the chairman should discuss
governance and strategy with major shareholders. The
chairman has had many discussions with shareholders
since the Company’s flotation in 1992, although
corporate governance has rarely been raised. The
majority of discussions with major shareholders now
takes place among the CEO, finance director and
shareholders. The chairman is available for discussion
with major shareholders, when requested.
A full version of the Code is available on the official
website of the Financial Reporting Council:
frc.org.uk
Directors’ conflicts of interest
The board expects the directors to declare any
conflicts of interest and does not believe that any
material conflicts of interest exist.
The board of directors
The board comprises the following members:
Tim Martin, chairman
John Hutson, chief executive officer
Ben Whitley, finance director
Su Cacioppo, personnel and legal director
Elizabeth McMeikan, senior independent director
Debra van Gene, non-executive director
Sir Richard Beckett, non-executive director
Harry Morley, non-executive director
The board considers each of Elizabeth McMeikan,
Debra van Gene, Sir Richard Beckett and Harry Morley
to be independent.
Biographies of all non-executive and executive
directors are provided on page 55 and can be viewed
on the Company’s website: jdwetherspoon.com
The chairman regularly meets the non-executive
directors and evaluates the performance of the board,
its committees and its individual directors.
It is not advantageous, in a company like Wetherspoon,
for there to be high barriers or exaggerated distinctions
between the role of chairman and that of chief
executive officer. However, some general distinctions
are outlined overleaf.
68
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
J D WETHERSPOON PLC
fdfdfds
CORPORATE GOVERNANCE
Chairman’s responsibility
Chief executive officer’s responsibility
The chairman is responsible for the smooth running of
the board and ensuring that all directors are fully
informed of matters relevant to their roles
Delegated responsibility of authority from the Company
to exchange contracts for new pubs and to sign all
contracts with suppliers
The chief executive officer is responsible for the
smooth daily running of the business
Developing and maintaining effective management
controls, planning and performance measurements
Providing support, advice and feedback to the
chief executive officer
Maintaining and developing an effective
organisational structure
Supporting the Company’s strategy and encouraging the
chief executive officer with development of that strategy
External and internal communications, in conjunction
with the chairman, on any issues facing the Company
Chairing general meetings, board meetings,
operational meetings and agreeing on board agendas and
ensuring that adequate time is available for discussion of
agenda items
Management of the chief executive officer’s contract,
appraisal and remuneration, by way of making
recommendations to the remuneration committee
Providing support to executive directors and
senior managers of the Company
Helping to provide the ‘ethos’ and ‘vision’ of the Company,
after discussions and debates with employees of all levels,
customers, shareholders and including organisations
such as CAMRA
Implementing and monitoring compliance
with board policies
Timely and accurate reporting of the above to the board
Recruiting and managing senior managers in the business
Developing and maintaining effective risk-management
and regulatory controls
Helping to provide information on customers and
employees’ views by calling on pubs
Maintaining primary relationships with shareholders
and investors
Helping to make directors aware of shareholders’ concerns
Chairing the management board responsible for
implementing the Company’s strategy
Helping to ensure that a culture of openness and debate
exists in the Company
Ensuring compliance with the London Stock Exchange and
legal and regulatory requirements, in consultation with the
board and the Company’s external advisers
The board has several established committees as set out below. The board met eight times during the
year ending 28 July 2019; attendance of the directors and non-executives, where appropriate, is shown below.
Number of meetings held in the year
Board
8
Audit
4
Remuneration
3
Nomination
1
Tim Martin
John Hutson
Su Cacioppo
Ben Whitley
Elizabeth McMeikan
Debra van Gene
Sir Richard Beckett
Harry Morley
Nigel Connor
6
8
8
8
8
8
7
8
8
N/A
N/A
4
4
3
4
3
4
4
N/A
N/A
N/A
N/A
3
3
2
3
N/A
N/A
N/A
1
1
1
1
1
1
N/A
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
69
CORPORATE GOVERNANCE
Matters reserved for the board
The following matters are reserved for the board:
Board and management
Structure and senior
management responsibilities
Nomination of directors
Appointment and removal of
chairman and company secretary
Strategic matters
Strategic, financing or adoption of
new business plans, in respect of any
material aspect of the Company
Business control
Agreement of code of ethics and
business practice
Internal audit
Authority limits for heads of department
Operating budgets
Approval of a budget for investments
and capital projects
Changes in major supply contracts
Finance
Raising new capital and confirmation
of major facilities
The entry into finance leases
Specific risk-management policies, including
insurance, hedging and borrowing limits
Final approval of annual and interim accounts
and accounting policies
Appointment of external auditors
Legal matters
Consideration of regular reports on
material issues relating to any litigation
affecting the Company
Institution of legal proceedings,
where costs exceed certain values
Secretarial
Call of all shareholders’ meetings
Delegation of board powers
Disclosure of directors’ interests
General
Board framework of executive
remuneration and costs
Any other matters not within the terms of
reference of any committee of the board
Any other matter as determined from
time to time by the board
Board committees
Audit committee
The committee is chaired by Harry Morley and
comprises, Elizabeth McMeikan, Debra van Gene and
Sir Richard Beckett.
Representatives of the Company’s external auditors,
Grant Thornton UK LLP, and the Company’s internal
audit director, finance director and personnel and
legal director are invited to attend each audit
committee meeting.
The committee’s primary role is to assist the board in
the provision of effective governance over the
Company’s financial reporting, risk management and
internal control and, in particular, it performs the
following activities:
Assumes direct responsibility for the appointment,
compensation, resignation and dismissal of the
external auditors, including review of the external audit,
its cost and effectiveness
Reviews the independence of the external auditors,
including consideration of the level of non-audit work
carried out by them
Reviews the scope and nature of the work
to be performed by the external auditors,
before audit commences
Reviews the half-year and annual
financial statements
Ensures compliance with accounting standards and
monitors the integrity of the financial statements and
formal announcements relating to the financial
performance of the Company and supports the board in
its responsibility to ensure that the annual financial
statements are fair, balanced and understandable
Reviews the internal audit plan, which is updated to
reflect the changing needs of the business and the
concerns of management and the audit committee
Reviews and raises questions on all internal audit
reports and requests management to adjust the
prioritisation of mitigating actions, as needed. Areas
reviewed this year included supply chain and
distribution centre, operations, system security & IT,
cyber-crime, succession planning and payroll systems
failure
Reviews, with the support of specialists as required,
controls over access to the IT systems used around the
business and agrees with management on the timing of
any mitigating actions to be carried out
Reviews and monitors procedures in relation to the
Company’s whistle-blowing policy
Reviews and questions the effectiveness of all
risk-management and internal control systems
Reviews the audit director’s statement on
internal controls on completed audits
Considers the overall impact on the business of the
matters arisen from the various reviews described
above and any other matters which the auditors,
internal or external, may bring to the attention
of the committee
Ensures that all matters, where appropriate, are
raised and brought to the attention of the board
Significant financial reporting items
The accounting policies of the Company and the
estimates and judgements made by management are
assessed by the committee for their suitability. The
following areas are those considered to be the most
significant by the committee:
The provision for the impairment of fixed assets and
the onerous leases – several judgements are used in
making this calculation, primarily on expected future
sales and profits. The committee received reports and
questioned management on the calculations made and
the assumptions used
70
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
J D WETHERSPOON PLC
fdfdfds
Significant one-off items of expense or income are
reported as exceptional on the face of the income
statement. All exceptional items are reviewed
by the committee
The committee reviewed and raised questions
on the calculations made by the Company in relation
to the effectiveness and hedge accounting for
interest-rate swaps
The committee is satisfied that the judgements made
by management are reasonable and that appropriate
disclosures have been included in the accounts.
Non-audit services
During the year, the Company made no use of
specialist teams from Grant Thornton UK LLP, relating
to accounting or tax services. The fees paid to Grant
Thornton UK LLP for non-audit services were £Nil
(2018: £37,500). The use of Grant Thornton UK LLP for
non-audit work is monitored regularly, to achieve the
necessary independence and objectivity of the
auditors. In addition, the chair of the audit committee is
consulted before awarding to the external auditors
any non-audit services in excess of £20,000.
Where the auditors provide non-audit services,
their objectivity and independence are safeguarded
by the use of different teams. See note 2 on page 16,
for a breakdown of auditors’ remuneration for audit
and non-audit services.
External auditors
The audit committee is responsible for making
recommendations to appoint, reappoint or remove
external auditors. Following a review by the audit
committee, the board agreed, in September 2019,
to recommend to shareholders, at the annual general
meeting, the appointment of Grant Thornton UK LLP as
external auditors for a period of one year, following the
external audit tender during the last financial year.
Audit-tendering and rotation
The audit committee keeps under review the
requirements on audit-tendering and rotation from
the European Union and the Competition and Markets
Authority. The Company will be required to change its
audit firm for the year ending 25 July 2038,
at the latest.
Effectiveness of external auditors
The audit committee assesses the ongoing
effectiveness of the external auditors and audit
process, on the basis of meetings and internal reviews
with finance and other senior executives.
In reviewing the independence of the external auditors,
the audit committee considers several factors. These
include the standing, experience and tenure of the
external auditors, the nature and level of services
provided and confirmation from the external auditors
that they have complied with relevant UK
independence standards.
The terms of reference of the audit committee are
available on the Company’s website.
CORPORATE GOVERNANCE
Remuneration committee
The committee is chaired by Debra van Gene and
comprises Elizabeth McMeikan, Sir Richard Beckett
and Harry Morley. The directors’ report on
remuneration is set out on pages 59 to 67.
The terms of reference of the remuneration committee
are available on the Company’s website.
Nomination committee
The committee is chaired by Sir Richard Beckett and
comprises Elizabeth McMeikan, Debra van Gene and
Harry Morley. The committee meets at least annually
and considers, among other matters, board
appointments and the re-election of directors.
No director is involved in any decision about his or her
own reappointment. In carrying out these activities,
the non-executive directors follow the guidelines of the
Institute of Chartered Secretaries and Administrators
(ICSA) and comply with the Code.
The terms of reference of the nomination committee
are available on the Company’s website.
Employment policies
Staff are encouraged to make a commitment to the
Company’s success and to progress to more senior
roles as they develop.
In selecting, training and promoting staff, the Company
has to take account of the physically demanding nature
of much of its work. The Company is committed to
equality of opportunity and to the elimination of
discrimination in employment.
The Company aims to create and maintain a working
environment, terms and conditions of employment and
personnel and management practices which ensure
that no individual receives less favourable treatment
on the grounds of his or her race, religion or belief,
nationality, ethnic origin, age, disability, gender
(including gender reassignment), sexual orientation,
part-time status or marital status.
Employees who become disabled will be retained,
where possible, and retrained, where necessary.
The Company has established a range of policies,
covering issues such as diversity, employees’ well-
being and equal opportunities, aimed at ensuring that
all employees are treated fairly and consistently.
Internal communications seek to ensure that staff are
well informed about the Company’s progress, through
the use of regular newsletters, the Company’s intranet
and staff liaison discussion, at which employees’
views are discussed and taken into account.
All pub staff participate in bonus schemes related
to sales, profits, stocks and service standards.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
71
CORPORATE GOVERNANCE
Relations with shareholders
The board takes measures to ensure that all board
members are kept aware of both the views of major
shareholders and changes in the major shareholdings
of the Company. Efforts made to accomplish effective
communication include:
absolute, assurance against material misstatement or
loss. Ongoing reviews, assessments and management
of significant risks took place throughout the year under
review and up to the date of the approval of the annual
report and accord with the Turnbull Guidance
(Guidance on Internal Control).
Annual general meeting, considered to be
an important forum for shareholders to raise
questions with the board
Regular feedback from the Company’s stockbrokers
Interim, full and ongoing announcements circulated
to shareholders
Any significant changes in shareholder movement
being notified to the board by the company secretary,
when necessary
The company secretary maintaining procedures and
agreements for all announcements to the Stock Market
A programme of regular meetings between investors
and directors of the Company
Risk management
The board is responsible for the Company’s
risk-management process.
The internal audit department, in conjunction with
feedback from senior management of the business
functions, produces a risk register annually.
The identified risks are assessed, based on the
likelihood of a risk occurring and the potential impact
to the business, should the risk materialise.
The audit director determines and reviews the risk-
assessment process and will communicate the
timetable annually.
The risk register is presented to the audit committee
and management board annually, with a schedule of
audit work agreed on, on a rolling basis. The purpose
of this work is to review, on behalf of the Company and
the board, those key risks and the systems of control
necessary to manage such risks.
Where recommendations are made for changes in
systems or processes to reduce risk, internal audit will
follow up regularly to ensure that the recommendations
are implemented.
A summary of the financial risks and treasury policies
can be found on page 49, together with other risks
and uncertainties.
Internal control
During the year, the Company provided an internal
audit and risk-management function. The creation of
a system of internal control and risk mitigation is a key
part of the Company’s operations and culture. The
board is responsible for maintaining a sound system of
internal control and reviewing its effectiveness. The
function can only manage, rather than entirely
eliminate, the risk of failure to achieve business
objectives. It can provide only reasonable, and not
The Company has an internal audit function
which is discharged as follows:
Regular audits of the Company’s stock
Unannounced visits to pub sites
Monitoring systems which control
the Company’s cash
Health & safety visits, ensuring compliance
with Company procedures
Reviewing and assessing the impact of
legislative and regulatory change
Risk-management process, identifying key risks
facing the business
The Company has key controls, as follows:
Authority limits and controls over cash-handling,
purchasing commitments and capital expenditure
A budgeting process, with a detailed 12-month
operating plan and a mid-term financial plan,
both approved by the board
Business results reported weekly, with a report
compared with budget and the previous year
Forecasts prepared regularly throughout the year,
for review by the board
Complex treasury instruments are not used. The
Company, from time to time, as stated in our report and
accounts, enters into swap arrangements which fix
interest rates at certain levels for a number of years
and enters into supply arrangements with fixed prices
for electricity and gas, for example, which run for
between one and three years
An annual review of the amount of external
insurance which it obtains, bearing in mind the
availability of such cover, its costs and the likelihood of
the risks involved
Regular evaluation of processes and controls,
in relation to the Company’s financial
reporting requirements
The directors confirm that they have reviewed the
effectiveness of the system of internal control.
Approved by order of the board
Nigel Connor
Company Secretary
12 September 2019
72
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
J D WETHERSPOON PLC
fdfdfds
INFORMATION FOR SHAREHOLDERS
Ordinary shareholdings at 28 July 2019
Shares of 2p each
Up to 2,500
2,501–10,000
10,001–250,000
250,001–500,000
500,001–1,000,000
Over 1,000,000
Number of
shareholders
% of total
shareholders
Number
% of total
shares held
3,772
230
183
20
6
16
4,227
1,646,360
89.3
5.4
1,083,846
4.3 10,160,261
6,729,477
0.5
0.1
4,231,121
0.4 81,247,071
100.0 105,098,136
1.6
1.0
9.7
6.4
4.0
77.3
100.0
Source: Computershare Investor Services plc
Substantial shareholdings
The Company has been notified of the following substantial holdings in its share capital at 24 July 2019:
Tim Martin
Columbia Threadneedle Investments
Immersion Capital
Phoenix Asset Management Partners
Norges Bank Investment Mgt
J D Wetherspoon plc Company Share Plan*
Setanta Asset Mgt
Aberdeen Standard Investments (SWIP)
Number of
ordinary shares
% of share
capital
33,466,934
17,276,010
5,630,272
4,107,378
3,518,738
3,465,054
2,485,199
2,098,084
31.8
16.4
5.4
3.9
3.4
3.3
2.4
2.0
Source: Investec Bank plc. This schedule shows the consolidated shareholdings of individuals and companies,
whereas the first table shows shareholdings by individual holding.
*This represents shares which have been purchased by the Company for the benefit of employees under the SIP.
Please see page 61. This includes vested shares held by employees.
Share prices
29 July 2018
Low
High
28 July 2019
1,219p
1,066p
1,581p
1,540p
Shareholders’ enquiries
If you have a query about your shareholding, please contact the Company’s registrars directly:
Computershare Investor Services plc: uk.computershare.com/investor
0370 707 1091
Annual report
Paper copies of this annual report are available from the company secretary, at the registered office.
E-mail: investorqueries@jdwetherspoon.co.uk
This annual report is available on the Company’s website: jdwetherspoon.com/investors-home
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2019
73
PUBS OPENED DURING THE FINANCIAL YEAR
Name
Palladium Electric
The Barrel Vault
Address
110 High Street
Unit 23 St Pancras
International Station,
Pancras Road
Town
Postcode Country
Midsomer Norton,
BA3 2DA
England
London
N1C 4QP
England
The Tullow Gate
7 Tullow Street
Carlow
Republic of
Ireland
The Captain Alexander
Victoria House, James Street
Liverpool
L2 7NX
England
The Silver Penny
12a/12c Abbey Street Lower
Dublin
Republic of
Ireland
PUBS CLOSED DURING THE FINANCIAL YEAR
Name
Stick or Twist
The Grapes
Address
The Podium Site, Merrion Way
198 High Street
The Gold Balance
6–10 Newton Gardens
Town
Leeds
Sutton
Kirkby
Postcode Country
LS2 8PD
England
SM1 1NR
England
L32 8RR
England
The White Lion of Mortimer
223 London Road
Mitcham
CR4 2JD
England
The Moon Under Water
194 Balham High Road
Balham
SW12 9BP
England
The Green Ayre
(Lloyds)
63 North Road
Lancaster
LA1 1LU
England
The Crown and Sceptre
2a Streatham Hill
Streatham
SW2 4AH
England
The Baron Cadogan
22-24 Prospect Street
Caversham
RG4 8JG
England
The King John’s Tavern
1 South Road
Hartlepool
TS26 9HD
England
74
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
J D WETHERSPOON PLC
PUBS OPENED DURING THE FINANCIAL YEAR
J D Wetherspoon plc
Wetherspoon House, Central Park
Reeds Crescent, Watford, WD24 4QL
01923 477777
jdwetherspoon.com
76
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
J D WETHERSPOON PLC