J D Wetherspoon plc
Wetherspoon House, Central Park
Reeds Crescent, Watford, WD24 4QL
01923 477777
jdwetherspoon.com
J D Wetherspoon plc
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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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
Financial highlights
Chairman’s statement
2
14 Pre-IFRS 16 Income statement1
14 Reconciliation to statutory profit1
15 Pre-IFRS 16 Cash flow statement1
16 Pre-IFRS 16 Balance sheet1
17
Income statement
17 Statement of comprehensive income
18 Cash flow statement
19 Balance sheet
20 Statement of changes in equity
21 Notes to the financial statements
SECTION 2
54 Authorisation of financial statements and
statement of compliance with IFRSs
54 Accounting policies
62 Strategic report
66
Independent auditors’ report
74 Directors, officers and advisers
75 Directors’ report
78 Directors’ remuneration report
88 Corporate governance
94
Information for shareholders
95 Pubs opened and closed during the period
Financial calendar
Annual general meeting
17 December 2020
Interim report for 2021
March 2021
Year end
25 July 2021
Preliminary announcement for 2021
September 2021
View this report online:
jdwetherspoon.com/investors-home
1. In the period the company adopted IFRS 16 leases with effect from 29 July 2019 which replaced the previous applicable accounting standard, IAS 17 Leases. To
provide meaningful comparatives an income statement, cash flow and balance sheet under IAS 17 have been published on pages 14–16. These pages do not form part of
the audited financial statements and are prepared under the previous year’s accounting standards.
Untitled-3 1
06/11/2020 16:46
fdfdfds
FINANCIAL HIGHLIGHTS
SECTION 1
Like-for-like sales
-29.5%
Revenue £1,262.0m
(2019: £1,818.8m)
-30.6%
Free cash flow1 -£58.9m
(2019: £97.0m)
-160.7%
Free cash flow1 per share -54.2p
(2019: 92.0p)
-158.9%
Full-year dividend 0.0p
(2019: 12.0p)
-100.0%
Contribution to the economy:
taxes paid £560.9m (2019: £764.4m)
-26.6%
Before exceptional items
After exceptional items2
Operating profit4 £7.2m
(Post-IFRS 16: £17.0m)
(2019: £131.9m)
-94.6%
Operating (loss)/profit4 -£6.0m
(Post IFRS 16: £3.8m)
(2019: £131.9m)
-104.6%
(Loss)/profit before tax4 -£34.1m
(Post IFRS 16: -£44.7m)
(2019: £102.5m)
-133.3%
(Loss)/profit before tax4 -£94.8m
(Post IFRS 16: -£105.4m)
(2019: £95.4m)
-199.3%
Earnings per share4
(including shares held in trust) -27.6p
(Post IFRS 16: -35.5p)
(2019: 75.5p)
-136.6%
Earnings per share4
(including shares held in trust) -82.6p
(Post IFRS 16: -89.9p)
(2019: 69.0p)
-219.7%
Non-financial measures
Food hygiene rating3 4.96 out of 5
(2019: 4.97)
-0.2%
Pub manager length of service
12.9 years
(2019: 12.2 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.
4 Excluding impact of IFRS 16.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
1
CHAIRMAN’S STATEMENT
Financial performance
The company was founded in 1979 – and this is the 37th year since incorporation in 1983.
The table below outlines some key aspects of our performance during that period.
Summary accounts for the years ended July 1984 to 2020
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
2020
£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
1,262,048
Profit/(loss)
before tax and
exceptional items
£000
(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
(34,095)
Earnings
per share before
exceptional items
pence
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
(27.6)
Free cash flow
Free cash flow
£000
per share
pence
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
(58,852)
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
(54.2)
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
6. Financial year 2020 data is based on pre-IFRS 16 numbers.
2
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
Hygiene record and reopening preparations
For many years, Wetherspoon has emphasised the
importance of hygiene standards, an area under
close scrutiny today. Local authorities run a ‘scores
on the doors’ scheme in England, Wales and
Northern Ireland; this awards pubs from zero to five
stars, following inspections by environmental health
officers. Wetherspoon is rated the top large pub
company, averaging 4.96 out of a maximum of five,
with 758 pubs scoring a maximum of five.
Before pubs reopened after lockdown, the company,
after consultation with employees, local authorities,
the police and licensing officers, invested £13.1m to
ensure that its staff and customers were safe.
Since reopening, Wetherspoon has operated
comprehensive social distancing and hygiene
practices in all of its pubs. These include reduced
capacity levels, the spacing-out of tables, the
installation of floor screens between tables and the
addition of till-surround screens at the bar.
Staff conduct regular surface-cleaning, so that all
hand contact-points in our pubs are frequently
cleaned and sanitised throughout the day.
Numerous hand sanitisers have been installed in
each pub. All pubs are also thoroughly cleaned at
the end of every trading day.
The financial consequences of the UK
government’s Covid-19 policies
The financial effects of the closure of pubs by the
government in March, which lasted for
approximately three months, were severe. Pretax
profits* of £102m in the financial year ended July
2019 were followed by a loss of £34m* in the year of
the lockdown – the financial year ended July 2020.
In addition, exceptional costs of £29.1m were
incurred in respect of Covid-19-related matters in
FY20.
Wetherspoon and other pub and restaurant
companies have always generated far more in taxes
than is earned in profits. Wetherspoon generated
total taxes of £764m in FY19 (see table below). In
FY20, mainly as a result of the lockdown, total taxes
paid to the government declined by £327m to
£437m, net of furlough payments.
Taxes generated by Wetherspoon (including
staff and customers):
VAT
Alcohol duty
PAYE and NIC
Business rates
Corporation tax
Machine duty
Climate change levy
Carbon tax
Fuel duty
Stamp duty
Sugar tax
Premise licence and TV licences
TOTAL TAX
Tax per pub (£000)
Tax as % of sales
Furlough tax rebate
TOTAL TAX ADJUSTED FOR
FURLOUGH TAX REBATE
Tax per pub adjusted for
furlough tax rebate (£000)
2020
£m
244.3
124.2
106.6
39.5
21.5
9.0
6.1
0.0
1.7
4.9
2.0
1.1
560.9
677.6
2019
£m
357.9
174.4
121.4
57.3
19.9
11.6
10.4
1.9
2.2
3.7
2.9
0.8
764.4
871.4
44.4%
-124.2
42.0%
0
436.7
764.4
527.6
871.4
Mainly as a result of the lockdown, there have been
substantial further ‘knock-on’ effects on the sales
and profits of our third-party suppliers and
contractors, ranging from large international brewers
to architects, builders and small suppliers, such as
window cleaners. Their losses are difficult to
quantify, but we estimate that the total cost to the
UK economy – to Wetherspoon (decline in profits
equals £165.6m), the government (decline in tax
generated equals £327.7m) and third parties – of
closing Wetherspoon’s pubs for approximately three
months in the financial year was probably over
£500m.
The academic, medical and political worlds have
been split regarding the efficacy of lockdowns and
the extent to which they confer health benefits which
might justify these costs. SAGE members and the
government appear broadly to believe that
lockdowns improve health outcomes, whereas
Professors Gupta and Heneghan of Oxford
University, Professor Woolhouse of Edinburgh
University, Nobel Prize winner Professor Levitt of
Stanford University and many others broadly take
the opposite view.
* Before exceptional items
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
3
CHAIRMAN’S STATEMENT
In general, Wetherspoon supports the Swedish view
of Professor Johan Giesecke, Anders Tegnell and
others, which emphasises social distancing, hand-
washing and trusting the people, rather than
coercive measures such as lockdowns, curfews and
fines, favoured by the UK government and its
advisers. It seems to us that the Swedish approach
is working relatively well, with fewer fatalities per
million people than the UK, Spain and Italy, for
example, as well as materially less economic
damage.
Examples of important contributions to the debate
also include those of writer Mathew Parris, who has
argued that the view against lockdown is
‘mainstream’ and is under-represented in some
sections of the media, and former Supreme Court
judge Jonathan Sumption QC, who has argued that
the use of emergency powers has infringed basic
democratic rights and led to poor administrative
standards.
Covid-19- the risks associated with pubs
There have been approximately 46 million customer
visits to Wetherspoon’s UK pubs since 4 July. There
have been no instances reported to Wetherspoon
through the NHS test and trace system, or from
local health officials, of a transfer of the virus from
staff to customers or vice versa – or among
customers.
There has been one case in which enquiries by
Wetherspoon auditors and local authority health
officials concluded that insufficient social distancing
in staff areas, not accessible to customers, probably
resulted in four staff members testing positive.
Following this incident, further training and
information were provided to all Wetherspoon staff.
Many people presume that pubs are likely to be
centres of virus transmission – it’s
‘commonsensical’, as one government minister
recently said. However counterintuitive though it
may be, that does not appear to be the case. As
Professor Johan Giesecke said in April (see Sky
News interview, appendix 1): “If you don’t get too
close to other people, they won’t infect you.” The
pub industry generally has worked very hard to
maintain social distancing and Covid-safe
environments, with considerable success.
As Councillor Ian Ward, leader of Birmingham City
Council, has said:
“The data we have shows that the infection rate has
risen, mainly due to social interactions, particularly
private household gatherings. In shops and
hospitality venues there are strict measures in place
to ensure they are Covid-safe, whereas it is much
easier to inadvertently pass on the virus in
someone’s house, where people are more relaxed
and less vigilant.”
Following a significant increase in testing in the UK,
429 (1%) Wetherspoon employees have tested
positive for the virus since 4 July – from a total of
43,000 employees. In the UK as a whole, there
have been 603,716 (0.9%) positive tests (as at
Sunday 11 October, www.worldometers.info).
Comparative information is not widely available, but
Amazon, for example, recently reported 20,000
positive tests among its 1.37 million US employees
(1.5%). If pubs were, indeed, ‘centres of
transmission’, it might be expected that infection
rates would be higher among employees than those
of either the general population or companies like
Amazon.
Internal enquiries indicate that most Wetherspoon
employees who tested positive have had mild
symptoms or been asymptomatic.
Certainty is impossible, yet it appears that most
positive tests resulted from contacts outside of work.
670 pubs (77%) have had zero positive tests among
staff; 116 pubs (13%) have had one positive test; 85
pubs (10%) have had two or more positive tests.
Financial outcome
Total sales in the financial year were £1,262.0m, a
decrease of 30.6%. Like-for-like sales decreased by
29.5%, having increased by 5.9% in the first half.
Bar sales decreased by 29.3%, food sales by
30.1%, slot/fruit machine sales by 20.9% and hotel
room sales by 38.7%.
Pre-IFRS 16 operating profit, before exceptional
items decreased by 94.6% to £7.2m (2019:
£131.9m). The operating margin, before exceptional
items was 0.6% (2019: 7.3%).
Pre-IFRS 16 profit before tax and exceptional items
decreased by 133.3% to -£34.1m (2019: £102.5m),
including property losses of £0.6m (2019: £5.6m).
Earnings per share, including shares held in trust by
the employee share scheme, before exceptional
items, were -27.6p (2019: 75.5p).
Net interest was covered 0.3 times by operating
profit before interest, tax and exceptional items
(2019: 3.9 times).
Total capital investment was £171.6m in the period
(2019: £167.6m), almost all of which occurred, or
was contracted, before lockdown. £41.0m was
invested in new pubs and pub extensions (2019:
£35.2m), £32.1m in existing pubs and IT (2019:
£55.2m) and £98.5m in freehold reversions, where
Wetherspoon was already a tenant (2019: £77.2m).
Exceptional items totalled £60.7m (2019: £7.0m).
There was a £3.5m loss on disposal, an impairment
charge of £44.0m, expenditure in relation to Covid-
19 of £29.1m and a credit of £15.9m in respect of a
long-standing claim with HMRC for VAT on fruit/slot
machines.
4
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
The total cash effect of exceptional items was a net
cash outflow of £10.6m. There was an outflow
related to Covid-19 expenditure of £23.2m, while
beer and food stock losses, as a result of lockdown,
were £5.9m. An inflow resulted from a successful
HMRC fruit/slot machine VAT claim of £15.9m and
pub disposal receipts of £2.6m. Since the current
pub disposal programme started in 2015, it has
produced a net inflow of £23m from the disposal of
109 pubs.
Free cash flow, after capital payments of £44.3m for
existing pubs (2019: £54.3m), £11.1m for share
purchases for employees (2019: £16.0m) and
payments of tax and interest, decreased by
£155.9m to -£58.9m (2019: £97.0m). Free cash flow
per share was -54.2p (2019: 92.0p).
IFRS 16
On 29 July 2019, the company adopted the IFRS 16
leases standard. For the year ending 26 July 2020,
as a result of the new standard, EBITDA has
increased by £58.5m and operating profit by £9.8m.
Finance costs increased by £21.5m. There will be
no impact on cash flows, except in relation to tax
payments. As a result of this new accounting
standard, gross assets as at 26 July 2020 are
£521.1m higher than last year and net assets are
£8.0m lower.
Management actions
The company implemented an extensive set of
measures to safeguard the business when the
government closed pubs in March. These measures
included the cancellation of the dividend, the raising
of equity, a reduction in capital expenditure and the
introduction of the government furlough scheme for
employees.
Following a downturn of trade in the pub and
restaurant industry, the company took the difficult
decision to reduce the number of employees at its
head office by 108. It has also started a consultation
process to reduce staff numbers at airport pubs,
where sales are generally much lower and where a
high percentage is closed.
Dividends and return of capital
No interim dividend was paid in March 2020. The
board is not proposing a final dividend payment for
the year.
During the year, 419,741 shares (0.40% of the
share capital) were purchased by the company for
cancellation, at a cost of £6.5m, an average cost per
share of 1,523p.
Financing
As at 26 July 2020, the company’s total net debt,
excluding derivatives, was £817.0m (2019:
£737.0m), an increase of £80.0m.
Year-end net-debt-to-EBITDA ratio was 9.48 times
(2019: 3.36 times) – EBITDA was £133m lower and
net debt increased by £80m in 2020. The company
has a waiver agreement in place, against the
financial covenant tests, which extends to October
2021.
As at 26 July 2020, the company had £194.0m
(2019: £158.0m) of cash or cash equivalents. There
has been an increase in total facilities to £993.0m
(2019: £895.0m), following the addition of a US
private placement in August 2019.
In August 2020, the company raised an additional
£48.3m under the coronavirus large business
interruption loan scheme (CLBILS).
In order to try to avoid increased costs, the
company has fixed its LIBOR interest rates in
respect of £770m until March 2029. The weighted
average cost of the swaps is 2.42% for this financial
year (excluded the banks’ margin); this will reduce
to 1.61% at the end of July 2021.
The company has fully drawn down its revolving
credit facility. As previously stated, it is the
company’s intention that the maximum net-debt-to-
EBITDA ratio should be around 3.5 times, other
than in the short term. The ratio has risen mainly as
a result of the temporary closure of pubs. The
company intends to reduce the level in a timely
manner, as and when more normal trading
conditions resume. The company has previously
stated that debt levels of between 0 and 2 times
EBITDA are a sensible long-term benchmark,
although higher levels may be justified at times of
very low interest rates.
The company conducted a non-pre-emptive placing
of 15% of the company’s issued ordinary share
capital to raise £141m, with a good level of support
from institutional investors; directors and members
of the senior management team participated,
alongside the equity placing, to raise a further
£0.3m. The net proceeds were used to strengthen
the company’s balance sheet, working capital and
liquidity position.
Taxation
The current tax credit (ie the cash which the
company will receive from HMRC) for the period is
£2.6m (2019: £22.5m charge). The rate of
corporation tax recovered on current year losses is
4.5%. The ‘accounting’ tax credit, which appears in
the income statement, is £6.2m (2019: £22.8m).
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
5
CHAIRMAN’S STATEMENT
The company is awaiting an HMRC refund of excise
duty totalling £524k, in relation to goods sent to the
Republic of Ireland, when pubs first opened in the
country. The company has been charged excise
duty on the same goods twice, as they were
purchased in the UK, and excise duty was paid in
full, then Irish excise duty was also paid in full, when
the goods were sent to Ireland. To ensure that
taxpayers aren’t subject to ‘double taxation’, there
are provisions in place to allow the UK duty to be
reclaimed from HMRC (‘duty drawback’). However,
owing to alleged procedural omissions, the
company has been unable to reclaim this duty, even
though it is transparently clear that the duty has
been paid.
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 do supermarkets, 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, in these less affluent areas, there are
often fewer pubs, coffee shops and restaurants, with
less employment and increased high-street
dereliction.
Tax equality would also be in line with the principle
of fairness in applying taxes to different businesses.
On 8 July 2020, the chancellor, Rishi Sunak,
announced a temporary reduction in VAT to 5% in
respect of food and non-alcoholic drinks sales. As a
result, the company lowered its pricing on a wide
range of products, including food, soft drinks and
real ale. If the chancellor decides to make these
VAT reductions permanent, the company intends to
retain these lower prices indefinitely.
Corporate governance
The comments made in last year’s annual report are
just as relevant today and are repeated here:
“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…”
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.
6
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
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.
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, in April 2019, for all of
our main institutional shareholders, to further
explain our position, which the shareholder in
question failed to attend. I then arranged a further
meeting, in May 2019, with the shareholder at that
shareholder’s office.
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.
The company contacted all of its main shareholders
to inform them of this proposal. The shareholder in
question agreed. However, several other
shareholders expressed their discontent with the
proposed resignations.
The executive board and I feel strongly that these
sorts of board change 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.
This year’s annual general meeting will take place
on 17 December 2020.
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 781 pubs rated on the Food
Standards Agency’s website – the average score is
4.96, with 96.9% of the pubs achieving a top rating
of five stars and 2.3% 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 62 pubs have
passed.
We paid £33m in respect of bonuses and free
shares to employees in the year, of which 98% was
paid to staff below board level and 87% was paid to
staff working in our pubs.
The company has been recognised as a Top
Employer UK (2020) by The Top Employers Institute
for the 17th consecutive year.
Thanks to fantastic efforts by our employees and
customers, in association with the charity CLIC
Sargent, approximately £1.1m was raised, bringing
the total (since August 2002) to over £18.7m.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
7
CHAIRMAN’S STATEMENT
Property
The company opened two pubs during the year and
sold or closed nine, resulting in a trading estate of
872 pubs at the financial year end.
The average development cost for a new pub
(excluding the cost of freeholds) was £2.3m,
compared with £2.6m a year ago. The full-year
depreciation charge, excluding right-of-use assets,
was £79.3m (2019: £81.8m).
Ten years ago, the company’s freehold/leasehold
split was 41.3%/58.7%. As at 26 July 2020, as a
result of investment in freehold reversions (relating
to pubs where the company was previously a
tenant) and freehold pub openings, the split was
64.3%/35.7%. As at 26 July 2020, the net book
value of the property, plant and equipment of the
company was £1.4 billion, including £1.1 billion of
freehold and long-leasehold property. The
properties have not been revalued since 1999.
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.
Press corrections
Following lockdown, a large number of press reports
misrepresented Wetherspoon’s position in several
important areas. The company complained to the
media organisations concerned and obtained
apologies or corrections from the Times, the BBC,
Sky News, the Mirror, the Sun, the Daily Mail,
Forbes and several other publications. Please see
the article I wrote on this subject in appendix 2.
Current trading and outlook
Warren Buffett, chairman of Berkshire Hathaway,
commented in 1989 (below) on the dangers of what
he calls the ‘institutional imperative’ and how it
compels companies to stay on the same course,
even if it’s the wrong course – and how it compels
companies to imitate competitors. The institutional
imperative applies just as much to governments as it
does to boards of directors. Professor Johan
Giesecke, the Warren Buffett of epidemiology, is
obviously perplexed in an April TV interview
(appendix 1 below) as to how 100 countries all
reacted, almost overnight, in the same way to the
Covid-19 problem, based on the deeply flawed
analysis of Imperial College.
As Warren Buffett explains:
“My most surprising discovery: the overwhelming
importance in business of an unseen force that we
might call "the institutional imperative." In business
school, I was given no hint of the imperative's
existence and I did not intuitively understand it when
I entered the business world. I thought then that
decent, intelligent, and experienced managers
would automatically make rational business
decisions. But I learned over time that isn't
so. Instead, rationality frequently wilts when the
institutional imperative comes into play.
“For example: (1) As if governed by Newton's First
Law of Motion, an institution will resist any change
in its current direction; (2) Just as work expands to
fill available time, corporate projects or acquisitions
will materialize to soak up available funds; (3) Any
business craving of the leader, however foolish, will
be quickly supported by detailed rate-of-return and
strategic studies prepared by his troops; and (4)
The behavior of peer companies, whether they are
expanding, acquiring, setting executive
compensation or whatever, will be mindlessly
imitated.
8
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
“Institutional dynamics, not venality or stupidity, set
businesses on these courses, which are too often
misguided. After making some expensive mistakes
because I ignored the power of the imperative, I
have tried to organize and manage Berkshire in
ways that minimize its influence. Furthermore,
Charlie and I have attempted to concentrate our
investments in companies that appear alert to the
problem.”
Since 100 governments adopted a lockdown
strategy, it was very difficult for any government to
adopt a different course. However, pubs eventually
reopened in England on 4 July and in the rest of the
UK shortly thereafter.
The lockdown was far longer than was necessary to
achieve its stated objective of ‘flattening the curve’
so as to assist the health service. Before pubs
reopened, a detailed and comprehensive operating
plan for the hospitality industry was nevertheless
agreed on among the government, parliamentary
committees, UK Hospitality, civil servants and other
interested parties.
The regulations and guidelines reflected in the plan
drastically reduced pub capacity, but were carefully
thought out and had the backing of the industry,
legislators, licensing officials, local authorities and
the public.
For the two months following reopening, it appeared
that the hospitality industry, in difficult
circumstances, was adapting to the new régime and
was getting ‘back on its feet’, albeit in survival
mode.
It appears that the government and its advisers
were clearly uncomfortable as the country emerged
from lockdown. They have introduced, without
consultation, under emergency powers, an ever-
changing raft of ill-thought-out regulations – these
are extraordinarily difficult for the public and
publicans to understand and to implement. None of
the new regulations appears to have any obvious
basis in science.
For example, a requirement for table service was
introduced – which is expensive to implement and
undermines the essential nature of pubs for many
people – pubs have now become like restaurants.
Customers can approach the till in a shop, but not in
a pub – which is, in no sense, ‘scientific’.
In addition, face-coverings, for which the health
benefits are debatable, need not be worn while
seated, yet must be worn to go to visit the bathroom
– another capricious regulation.
The most damaging regulation relates to the 10pm
curfew, which has few supporters outside of the
narrow cloisters of Downing Street and SAGE
meetings.
This has meant that many thousands of hospitality
industry employees, striving to maintain hygiene
and social-distancing standards, go off duty at
10pm, leaving people to socialise in homes and at
private events which are, in reality, impossible to
regulate.
In marked contrast to the consistency of the
comparatively successful Swedish approach, which
emphasises social distancing, hygiene and trust in
the people, the erratic UK government is jumping
from pillar to post and is both tightening and
tinkering with regulations, so we are now in quasi-
lockdown which is producing visibly worse outcomes
than those in Sweden, in respect of both health and
the economy.
Risk cannot be eliminated completely in pubs, but
sensible social-distancing and hygiene policies,
combined with continued assistance and co-
operation from the authorities, should minimise it.
Like-for-like sales in the first 11 weeks have been
15.0% below those of last year, with strong sales in
the first few weeks, followed by a marked slowdown
since the introduction of a curfew and other
regulations, some of which are referred to above.
The recent curfew and introduction of table service
only have been particularly damaging for trade,
depressing sales for customers who find it too much
‘faff’, at the same time as substantially increasing
costs.
As a result of recent changes in regulations, the
outlook for pubs over the remainder of the current
financial year is even more unpredictable than
hitherto.
The company has successfully adapted its
business, over the last 41 years, to cope with widely
different political and economic circumstances. We
now employ over 40,000 people, 10,000 of whom
are shareholders in the company, and are a major
contributor to national income, paying approximately
one pound in every thousand of treasury receipts in
2019 and in preceding years.
However, the company and the entire hospitality
industry need a more sensible and consistent
regulatory framework in which to operate – the
current environment of lockdowns, curfews and
constantly changing regulations and
announcements threatens not only pub companies,
but the entire economy. The most important lesson,
as Professor Mark Woolhouse of Edinburgh
University has said, is that “lockdown just defers the
problem; it doesn’t solve it”.
Tim Martin
Chairman
15 October 2020
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
9
Question: So…..you’re saying that at some point
pretty much everybody is going to get this disease
to some degree or another. Here in Australia we’ve
done an incredibly good job suppressing it. I’m
wondering do you think we’ve done too good a job,
is it possible to do too good a job suppressing it in
the early stages such that you won’t ever be able to
take the foot off the break on your restrictions to get
the disease just to a manageable flow of cases that
the health system, which we were told this was all
about preparing for that, be allowed to handle the
cases as they come through.
Johan: Yes… one point is to flatten the curve a bit
so that the health care isn’t overused. You may
succeed, and New Zealand may also succeed, but
I’ve been asking myself when New Zealand or
Australia has stamped out every case in the
country, what do you do for the next 30 years. Will
you close your borders completely? Quarantine
everyone who is going to Australia or New Zealand?
Because the disease will be out there. I don’t know
how you are going to handle that. That’s your
problem.
Question: You’ve said you think in most countries
regardless of the measures we take, eg. Taiwan has
been very successful and other countries like Italy
have been disaster cases, but you think at the end
of the day they’re all pretty much going to end up
with the same fatalities, the same results, the same
deaths regardless of what measures they took.
Explain that.
Johan: Yes. Basically I think it will be the same
because, like I said, the real epidemic is invisible
and it’s going on all the time around us. The other
thing with a lockdown is when you open it, you will
have more cases, so the countries who pride
themselves in having a few deaths now, will get
these deaths when they start lifting the lockdown.
Question: Tell us briefly about the Imperial College
results that sparked this worldwide panic. You
believe they were flawed, these were the initial
results that were coming out and the modelling that
was saying millions are gonna die. You thought that
was flawed, tell us why.
CHAIRMAN’S STATEMENT
Appendix 1 – Transcript of interview, former
Swedish chief epidemiologist Johan Giesecke,
SKY NEWS AUSTRALIA – 29th April 2020
“
Question: You’ve been a strong critic of the idea of
lockdowns, Sweden has avoided these sort of
lockdowns that we’re seeing here in Australia. Tell
us your thoughts - are lockdowns the correct way to
go?
Johan: You introduced me by saying that I would
say that you got it all wrong. I don’t think you go it
all wrong but you painted yourself into a corner and
I’m watching with interest how you and 100 other
countries will climb out of the lockdown, because I
don’t think any government that I know gave a
minute’s thought about how they would get out of
the different lockdowns that are installed. Take the
school closure for example, if you close the schools,
when are you going to open them, what’s the
criteria? I don’t think anyone thought about that
when the closure was decided on. Anyway, so
Sweden doesn’t have such a strict lockdown, there
are a few things that are forbidden – the crowd can’t
be more than 50 people, at restaurants that are
mostly open, there should be 5ft or 1.5 meters
between the tables, you have to sit down to eat,
there are a few things like that but rather mild
things… there are very few laws and ordinances
passed, you can go out without being stopped by
the police and fined or threatened with prison and
mostly we talk about trust… we trust the people -
people are not stupid. That’s… the basic line [in
Sweden]. If you tell people what’s good for them
and what’s good for their neighbours and other
people, they do that. You take a restriction that’s
sensible and understandable, people will follow it.
Question: You said that you think the results are
going to be similar across most countries regardless
of the approach they’ve taken, can you take us
through that?
Johan: There is a tsunami of a rather mild infection
spreading around the globe and I think that’s there’s
very little chance to stop it by any measure we take.
Most people will become infected by this and most
people won’t even notice. We have data now from
Sweden that shows between 98 and 99 percent of
the cases have had a very mild infection or didn’t
even realise they were infected. So we have this
spread of this mild disease around the globe and
most of it is happening where we don’t see it. It’s
among people that don’t get very sick, spread it to
someone else that doesn’t get very sick and what
we’re looking at is a thin layer at the top of people
who do develop the disease and even thinner layer
of people that go into intensive care and then even
thinner layer of people who die. But the real
outbreak is happening where we don’t see it.
10
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
Johan: Yes, and that’s the Swedish model. It has…
two pillars. One is only use measures that are
evidence-based. And there are two that are
evidence-based… one is washing hands… we’ve
known that for 150 years since Semmelweis in
Austria a long time ago. The other is social
distancing. If you don’t get too close to other
people, they won’t infect you. And the third may be
trust people. People are not stupid, if you tell them
what’s good for them they will do what you say.
You don’t need soldiers on the street - and police.
It’s unnecessary.
”
Johan: Yes, there are a few procedural things…
One is that the paper was never published which is
normal scientific behaviour. The second thing it
wasn’t peer-reviewed, which means it wasn’t looked
upon by other people, which is also normal scientific
procedure. So it was more like an internal
departmental communication, a memo. And then
the big mistake of the Imperial group was under-
estimating the proportion of the very mild cases that
would never be detected, that’s the main thing with
that prediction. And it’s fascinating how it changed
the policy of the world. The UK made a u-turn
overnight [upon] the publication of the paper which
is fascinating. So, yes, there were several other
mistakes with the paper but it gets very technical to
get into that.
Question: You mention that the overwhelming
majority of people that get this disease have no
symptoms or very minimal symptoms. Do we even
know the real fatality rate of the coronavirus?
Johan: No. Well it’s around 0.1%.
Question: We were told it was 3% initially, initially
2%, are you saying now that it’s 0.1%., that’s pretty
much the same fatality rate as the regular flu isn’t it?
Johan: I think it’s a bit higher actually. I said before
in Sweden that this is like a severe influenza. I don’t
think that’s completely true – it will be a bit more
severe than the influenza, maybe double but not
tenfold.
Question: With all of the health care systems
focusing on flattening the curve and being prepared
for these waves of infection, which aren’t
necessarily coming because of the very restrictive
measures, overall are we gonna see more people
dying, we talked a little bit about this before on the
show, of cancers, heart attacks, things like that,
simply because they’re too scared to go to the
hospital because they think they won’t get treated.
Is there going to be other deaths that are going to
be caused by our overweighting focus just on this
one particular disease?
Johan: Could well be. The emergency rooms here
in Stockholm have about 50% of the usual number
of patients coming in, and one reason is probably
that people are scared of contracting the disease
when they go into hospitals, and another is that, I
think, they say they can wait a bit until the thing is
over.
Question: You’ve said the best policy, the correct
policy, would be to simply protect the old and the
frail. Is that correct?
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
11
CHAIRMAN’S STATEMENT
Appendix 2 – Tim’s Viewpoint, Wetherspoon
News, Summer 2020
– with the proviso that, in the process, innocent
parties should not be unfairly damaged or duped.
“
The press plays a vital role – but don’t believe
everything you read
Some journalists apply more spin than a Shane
Warne googly and more venom than a Waqar
Younis Yorker
The press plays a vital role in a free society by shining
a light on privilege and power, including on those who
run businesses – and by informing and entertaining.
Hence, we have libel laws and controls over press
accuracy, including a ‘right of reply’ – to protect what
Shakespeare called the ‘bubble reputation’.
However, a vicious side of the press was revealed
after 20 March, when pubs and restaurants were
closed, without notice, by the government, throwing
Wetherspoon and almost
the entire pub and
restaurant industry into default on bank loans – with
hundreds of thousands out of work.
We blame the press for many sins, but there’s some
truth in the defence that it’s often just saying what we
like to read.
To understand what makes a press ‘story’, it’s useful
to hark back to 2003, when a customer wrote to
Wetherspoon News complaining about swearing in
one of our pubs.
I recorded an internal company video, less than 48
hours after pubs were closed, hoping to reassure
employees that they would be ‘furloughed’ and would
not lose their jobs – which was happening, on a large
scale, elsewhere in the economy.
The video said: “All our endeavours are going to be
on trying to make sure that you get your money.”
I replied in this magazine that I would ask customers
to ‘mind their language’.
Believe it or not, that workaday response to a
customer in our humble publication became one of
the biggest news stories in the world, for a few days.
It was a leading news headline on BBC and ITV and
featured in most local papers – as well as in
numerous publications in faraway India, Canada, the
US, Australia and elsewhere.
I was even phoned by a relative living in the Swedish
‘outback’, saying that the story was on the front page
of the village paper… but why did it go viral?
In truth, the story was given a ‘twist’ by a journalist
from a pub industry newspaper who said that
Wetherspoon might ‘punish’ customers for swearing.
This transformed the story from ‘true, but boring’ into
‘not quite true, but very interesting’.
Some people think that newspapers should always
stick to the truth, but, to be fair, the ‘Wetherspoon
bans swearing’ story was probably innocent fun – no
harm done
– and the public knew instinctively that it wasn’t
LITERALLY true.
Part (but only part) of the reason for buying a
newspaper is to be entertained – no one attending a
Billy Connolly or Kevin Bridges show expects them,
for example, to stick to the literal truth.
Artistic licence is permitted to embellish a comedian’s
monologue, and the same can be true of journalists
And an e-mail, which went out with the video, said
that “employees will be paid as normal on Friday 27
March”.
In fact, staff were paid on that Friday and have been
paid on every Friday since – thanks, above all, to the
lightning-quick creation of a furlough scheme and, in
our case at least, great flexibility from banks.
However, the press was looking for a ‘story’ with a
villain, and the truth was subject to malicious
distortion.
Times journalist Caitlin Moran, for example, with
more spin than a Shane Warne googly, said that
Wetherspoon employees “wouldn’t get paid until the
end of April for work they had done” which The Times
has now retracted through gritted teeth.
Fellow Times columnist Alistair Osborne referred to
me as a rat, while Caitlin Moran herself, with more
venom than a Waqar Younis yorker, called me the
worst word in the language, albeit with hyphens
replacing some letters – as did the Daily Mail.
Ben Marlow of The Daily Telegraph said that I was
“Britain’s worst ever boss” – and scores of press
stories made similar accusations.
Maybe the press can justify this hyperbole – it has
newspapers to sell in an Internet-ravaged industry.
However, the wackiest behaviour, during these mad
March days, was from two MPs, Rachel Reeves and
the
Jo Stevens, who, with Wetherspoon and
hospitality industry at their most vulnerable, tried to
turn the story to personal political advantage.
12
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
CHAIRMAN’S STATEMENT
Jo Stevens, MP for Cardiff Central, invented a story
on Twitter that I had appeared in front of a
parliamentary committee (the BEIS) then chaired by
Rachel Reeves, MP for Leeds West, and, as a result
of that appearance, had “u-turned on decision not to
pay 43,000 staff while pubs are shut”.
This was complete cobblers.
For democracy to work, the press itself, given its
huge power, has to be subject to regulation and
scrutiny.
If the press is the guardian of democracy, who guards
the guardians, as Lord Leveson famously asked in
his inquiry into the press, stemming from the phone-
hacking scandal.
I never appeared in front of the BEIS Committee, as
both Stevens and Reeves know, and Wetherspoon
had already undertaken to pay staff on 27 March.
themselves, over
Politicians
the years, have
championed the campaign to require the media to
correct inaccurate statements.
They must have been bonkers to have made up a
fictitious appearance in front of a parliamentary
committee – since that could so easily be disproved.
As the public realises, the press often, but not always,
bends the truth out of any recognisable shape, in
pursuit of a story.
Rachel Reeves added to Twitter ‘disinformation’ and
confusion (7, opposite) by saying that Wetherspoon
was at “first refusing to lock down altogether”.
It is disturbing, therefore, that MPs Jo Stevens and
Rachel Reeves have, themselves, resorted to blatant
fabrication – which, itself, was the source of much
media inaccuracy.
That’s a complete lie.
All Wetherspoon pubs shut, when requested, on
Friday 20 March – ask any of our staff or customers.
I wrote to Reeves on 2 April to complain, yet received
no reply.
response
Wetherspoon’s
torrent of
‘disinformation’ has been to wade through the press
articles, one by one, and to write to the various
publications to ask them to print a correction.
the
to
Bravo and thanks to publications like the Daily Mirror,
Sky News and local newspapers like the Herald
Express and the Loughborough Echo which cared
enough about the truth to publish a correction or a
Wetherspoon article in response.
Perhaps
contemporary, was right when he said:
Webster,
John
Shakespeare’s
“A politician is the devil’s quilted anvil; he fashions all
sins on him, and the blows are never heard.”
But just as a free society needs the press, it also
needs honest politicians.
Even in our murky and compromised world, the truth
will out – that’s why democracy works so well, despite
its trials and tribulations.
”
Tim Martin
Chairman
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
13
PRE-IFRS 16 INCOME STATEMENT for the 52 weeks ended 26 July 2020
J D Wetherspoon plc, company number: 1709784
Notes
Revenue
Operating costs
Operating profit/(loss)
Property (losses)/gains
Finance income
Finance costs
(Loss)/profit before tax
Income tax expense
(Loss)/profit for the period
Earnings per share (p)
– Basic1
– Diluted2
1
2
3
6
6
8
8
52 weeks
ended
26 July 2020
Before
exceptional
items
£000
1,262,048
(1,254,896)
7,152
(641)
161
(40,767)
(34,095)
52 weeks
ended
26 July 2020
Exceptional
items
£000
–
(13,201)
(13,201)
(47,476)
–
–
(60,677)
52 weeks
ended
26 July 2020
After
exceptional
items
£000
52 weeks
ended
28 July 2019
Before
exceptional
items
£000
1,262,048
1,818,793
(1,268,097)
(1,686,876)
(6,049)
131,917
(48,117)
161
(40,767)
(94,772)
5,599
41
(35,098)
102,459
(22,830)
52 weeks
ended
28 July 2019
Exceptional
items
(note 4)
£000
–
–
–
(7,040)
–
–
52 weeks
Ended
28 July 2019
After
exceptional
items
£000
1,818,793
(1,686,876)
131,917
(1,441)
41
(35,098)
(7,040)
95,419
188
(22,642)
4,158
1,004
5,162
(29,937)
(59,673)
(89,610)
79,629
(6,852)
72,777
(27.6)
(27.6)
(55.0)
(55.0)
(82.6)
(82.6)
77.2
75.5
(6.6)
(6.5)
70.6
69.0
RECONCILIATION TO STATUTORY PROFIT for the 52 weeks ended 26 July 2020
Notes
52 weeks
52 weeks
52 weeks
52 weeks
52 weeks
52 weeks
ended
ended
ended
ended
ended
ended
26 July 2020
26 July 2020
26 July 2020
28 July 2019
28 July 2019
28 July 2019
Before
Exceptional
After
Before
Exceptional
After
exceptional
items
exceptional
exceptional
items
exceptional
(Loss)/profit before IFRS 16
Operating costs
Amortisation and depreciation
Right-of-use assets
25
Lease premium
Disposal of leases
Impairment
Right-of-use assets
3
3
Property, plant and equipment
Onerous leases provision
Finance income
Finance costs
6
6
items
£000
(29,937)
58,503
(49,059)
368
1,125
–
–
–
451
(21,980)
£000
(59,673)
–
–
–
–
(4,722)
3,311
1,411
–
–
items
£000
(89,610)
58,503
(49,059)
368
1,125
(4,722)
3,311
1,411
451
(21,980)
Income tax expense
2,012
629
2,641
items
£000
(note 4)
£000
items
£000
79,629
(6,852)
72,777
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(Loss)/profit for the period
(38,517)
(59,044)
(97,561)
79,629
(6,852)
72,777
1 Calculated excluding shares held in trust.
2 Calculated using issued share capital which includes shares held in trust.
To provide meaningful comparatives the above statement has been presented under the previous year’s accounting standards and does not form part of the audited financial statements.
14
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
PRE-IFRS 16 CASH FLOW STATEMENT for the 52 weeks ended 26 July 2020
J D Wetherspoon plc, company number: 1709784
Notes
Cash flows from operating activities
Cash generated from operations
9
Interest received
Interest paid
Corporation tax paid
52 weeks
ended
26 Jul 2020
£000
38,718
59
(29,914)
(10,971)
Free cash
flow1
52 weeks
ended
26 Jul 2020
£000
52 weeks
ended
28 Jul 2019
£000
Free cash
flow1
52 weeks
ended
28 Jul 2019
£000
38,718
227,176
227,176
59
(29,914)
(10,971)
33
33
(33,957)
(33,957)
(19,661)
(19,661)
Net cash flow from operating activities
(2,108)
(2,108)
173,591
173,591
Cash flows from investing activities
Reinvestment in pubs
Reinvestment in business and IT projects
Investment in new pubs and pub extensions
Freehold reversions and investment properties
Lease premiums paid
Proceeds of sale of property, plant and equipment
(43,370)
(926)
(50,408)
(98,467)
–
4,810
(43,370)
(47,398)
(47,398)
(926)
(6,923)
(6,923)
(26,778)
(77,207)
(451)
9,319
Net cash flow from investing activities
(188,361)
(44,296)
(149,438)
(54,321)
Cash flows from financing activities
Equity dividends paid
Purchase of own shares for cancellation
Purchase of own shares for share-based payments
Loan issue cost
Advances under private placement
Advances under / (repayment of) bank loans
Advances under asset-financing
Issue of share capital
Asset-financing principal payments
Net cash flow 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 (p)
11
28
10
10
10
10
28
10
10
19
19
8
8
(8,371)
(6,456)
(11,125)
(1,323)
98,000
100,000
16,152
137,995
(2,902)
(12,652)
(5,399)
(11,125)
(16,004)
(16,004)
(1,323)
(6,268)
(6,268)
–
(13,865)
12,000
–
(2,106)
321,970
(12,448)
(44,294)
(22,272)
131,501
42,950
174,451
(20,141)
63,091
42,950
(58,852)
(54.2)
96,998
92.0
To provide meaningful comparatives the above statement has been presented under the previous year’s accounting standards and does not form part of the audited financial statements.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
15
PRE-IFRS 16 BALANCE SHEET as at 26 July 2020
J D Wetherspoon plc, company number: 1709784
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
Current assets
Assets held for sale
Inventories
Receivables
Current income tax receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Borrowings
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
Shareholders’ equity
Share capital
Share premium account
Capital redemption reserve
Hedging reserve
Currency translation reserve
Retained earnings
Total shareholders’ equity
Notes
26 Jul 2020
28 Jul 2019
£000
£000
12
14
23
7
18
16
19
1,439,467
1,384,971
8,895
11,527
7,520
–
15,617
23,070
5,531
7,888
321
8,342
1,483,026
1,430,123
–
23,095
36,387
7,672
174,451
241,605
3,146
23,717
21,903
–
42,950
91,716
1,724,631
1,521,839
21
(7,610)
(3,287)
(267,677)
(308,326)
–
(4,759)
(10,986)
(4,072)
(280,046)
(326,671)
21
23
7
28
(983,828)
(776,683)
(82,194)
(42,138)
(1,488)
(9,738)
(49,393)
(39,416)
(1,934)
(10,930)
(1,119,386)
(878,356)
325,199
316,812
2,408
280,975
2,337
(66,577)
7,089
98,967
325,199
2,102
143,294
2,329
(40,730)
5,370
204,447
316,812
To provide meaningful comparatives the above statement has been presented under the previous year’s accounting standards and does not form part of the audited financial statements.
16
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
INCOME STATEMENT for the 52 weeks ended 26 July 2020
J D Wetherspoon plc, company number: 1709784
Notes
1
2
3
6
6
7
8
8
Revenue
Operating costs
Operating profit/(loss)
Property (losses)/gains
Finance income
Finance costs
(Loss)/profit before tax
Income tax expense
(Loss)/profit for the period
Earnings per share (p)
– Basic1
– Diluted2
52 weeks
ended
26 July 2020
Before
exceptional
items
£000
1,262,048
(1,245,084)
16,964
484
612
(62,747)
(44,687)
52 weeks
ended
26 July 2020
Exceptional
items
(note 4)
£000
–
(13,201)
(13,201)
(47,476)
–
–
(60,677)
52 weeks
ended
26 July 2020
After
exceptional
items
£000
52 weeks
ended
28 July 2019
Before
exceptional
items
£000
52 weeks
ended
28 July 2019
Exceptional
items
(note 4)
£000
1,262,048
1,818,793
(1,258,285)
(1,686,876)
3,763
131,917
–
–
–
(46,992)
5,599
(7,040)
612
41
(62,747)
(35,098)
–
–
52 weeks
ended
28 July 2019
After
exceptional
items
£000
1,818,793
(1,686,876)
131,917
(1,441)
41
(35,098)
6,170
1,633
7,803
(105,364)
102,459
(22,830)
(7,040)
95,419
188
(22,642)
(38,517)
(59,044)
(97,561)
79,629
(6,852)
72,777
(35.5)
(35.5)
(54.4)
(54.4)
(89.9)
(89.9)
77.2
75.5
(6.6)
(6.5)
70.6
69.0
Operating profit/(loss) per share (p)
– Diluted2
8
15.8
(12.3)
3.4
125.1
–
125.1
STATEMENT OF COMPREHENSIVE INCOME for the 52 weeks ended 26 July 2020
Items which may be reclassified subsequently to profit or loss:
Interest-rate swaps: loss taken to other comprehensive income
Tax on items taken directly to other comprehensive income
Currency translation differences
Net loss recognised directly in other comprehensive income
(Loss)/profit for the period
Total comprehensive income for the period
Notes
23
7
52 weeks
ended
26 July 2020
£000
52 weeks
ended
28 July 2019
£000
(33,122)
(24,963)
7,275
1,293
(24,554)
(97,561)
(122,115)
4,243
181
(20,539)
72,777
52,238
1 Calculated excluding shares held in trust.
2 Calculated using issued share capital which includes shares held in trust.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
17
CASH FLOW STATEMENT for the 52 weeks ended 26 July 2019
J D Wetherspoon plc, company number: 1709784
Notes
Cash flows from operating activities
Cash generated from operations
9
Interest received
Interest paid
Corporation tax paid
Lease interest
52 weeks
ended
26 Jul 2020
£000
75,665
59
(29,914)
(10,971)
(18,080)
Free cash
flow1
52 weeks
ended
26 Jul 2020
£000
52 weeks
ended
28 Jul 2019
£000
Free cash
flow1
52 weeks
ended
28 Jul 2019
£000
75,665
227,176
227,176
59
33
33
(29,914)
(33,957)
(33,957)
(10,971)
(19,661)
(19,661)
(18,080)
–
–
Net cash flow from operating activities
16,759
16,759
173,591
173,591
Cash flows from investing activities
Reinvestment in pubs
Reinvestment in business and IT projects2
Investment in new pubs and pub extensions
Freehold reversions and investment properties
Lease premiums paid
Proceeds of sale of property, plant and equipment
(43,370)
(926)
(50,408)
(98,467)
–
4,810
(43,370)
(47,398)
(47,398)
(926)
(6,923)
(6,923)
(26,778)
(77,207)
(451)
9,319
Net cash flow from investing activities
(188,361)
(44,296)
(149,438)
(54,321)
Cash flows from financing activities
Equity dividends paid
Purchase of own shares for cancellation
Purchase of own shares for share-based payments
Loan issue cost
Advances under private placement
Advances under / (repayment of) bank loans
Advances under asset-financing
Lease principal payments
Issue of share capital
Asset-financing principal payments
Net cash flow 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 (p)
11
28
10
10
10
10
25
28
10
10
19
19
8
8
(8,371)
(6,456)
(11,125)
(1,323)
98,000
100,000
16,152
(18,867)
137,995
(2,902)
(12,652)
(5,399)
(11,125)
(16,004)
(16,004)
(1,323)
(6,268)
(6,268)
(18,867)
–
(13,865)
12,000
–
–
(2,106)
–
303,103
(31,315)
(44,294)
(22,272)
131,501
42,950
174,451
(20,141)
63,091
42,950
(58,852)
(54.2)
96,998
92.0
1Free cash flow is a measure not required by accounting standards; a definition is provided in our accounting policies.
2Within reinvestment in business and IT projects, all amounts were intangible assets (2019: £5,859,000, with the remaining balance being related equipment).
18
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
BALANCE SHEET as at 26 July 2020
J D Wetherspoon plc, company number: 1709784
Notes
26 Jul 2020
£000
28 Jul 2019
£000
Non-current assets
Property, plant and equipment
Intangible assets
Investment property
Other non-current assets
Right-of-use assets
Derivative financial instruments
Deferred tax assets
Lease assets
Total non-current assets
Current assets
Lease assets
Assets held for sale
Inventories
Receivables
Current income tax receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Borrowings
Trade and other payables
Current income tax liabilities
Provisions
Lease liabilities
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liabilities
Provisions
Other liabilities
Lease liabilities
Total non-current liabilities
Net assets
Shareholders’ equity
Share capital
Share premium account
Capital redemption reserve
Hedging reserve
Currency translation reserve
Retained earnings
Total shareholders’ equity
13
12
14
15
25
23
7
25
25
18
16
17
7
19
21
20
7
22
25
21
23
7
22
24
25
28
1,442,778
1,384,971
8,895
11,527
–
514,169
–
15,617
11,115
23,070
5,531
7,888
–
321
8,342
–
2,004,101
1,430,123
1,736
–
23,095
32,176
10,313
174,451
241,771
–
3,146
23,717
21,903
–
42,950
91,716
2,245,872
1,521,839
(7,610)
(255,085)
–
(3,038)
(65,343)
(331,076)
(983,828)
(82,194)
(42,138)
–
–
(489,388)
(1,597,548)
317,248
2,408
280,975
2,337
(66,577)
7,089
91,016
317,248
(3,287)
(308,326)
(10,986)
(4,072)
–
(326,671)
(776,683)
(49,393)
(39,416)
(1,934)
(10,930)
–
(878,356)
316,812
2,102
143,294
2,329
(40,730)
5,370
204,447
316,812
The financial statements, on pages 17–61, approved by the board of directors and authorised for issue
on 15 October 2020, are signed on its behalf by:
John Hutson
Director
Ben Whitley
Director
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
19
STATEMENT OF CHANGES IN EQUITY
J D Wetherspoon plc, company number: 1709784
Notes
At 29 July 2018
Total comprehensive income
Profit for the period
Interest-rate swaps: cash flow hedges
Tax on cash flow hedges
Currency translation differences
23
7
Purchase of own shares for cancellation
Share-based payment charges
Tax on share-based payments
Purchase of own shares for share-based payments
Dividends
At 28 July 2019
11
7
Total comprehensive income
Loss for the period
Interest-rate swaps: cash flow hedges
Tax on cash flow hedges
Currency translation differences
23
7
Issue of share capital
Purchase of own shares for cancellation
Share-based payment charges
Tax on share-based payments
Purchase of own shares for share-based payments
Dividends
At 26 July 2020
11
7
Share
capital
£000
Share
premium
account
£000
Capital
redemption
reserve
£000
Hedging
reserve
£000
Currency
translation
reserve
£000
Retained
earnings
Total
£000
£000
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
137,681
314
(8)
8
(25,847)
1,719
(33,122)
7,275
1,719
(97,987)
(97,561)
–
–
(426)
–
(6,456)
10,705
(197)
(11,125)
(8,371)
(122,115)
(97,561)
(33,122)
7,275
1,293
137,995
(6,456)
10,705
(197)
(11,125)
(8,371)
2,408
280,975
2,337
(66,577)
7,089
91,016
317,248
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 26 July 2020, the number of shares held in trust was 1,996,358 (2019: 2,259,401),
with a nominal value of £35,447 (2019: £45,188) and a market value of £16,961,227 (2019: £34,794,775); these are
included in retained earnings.
During the year, 419,741 shares were repurchased by the company for cancellation, representing approximately 0.40% of the
issued share capital, at a cost of £6.5m, including stamp duty, representing an average cost per share of 1,523p.
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 26 July 2020, the company had distributable reserves of £31.5m.
20
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
1. Revenue
Bar
Food
Slot/fruit machines
Hotel
Other
2. Operating profit/loss – analysis of costs by nature
This is stated after charging/(crediting):
Concession rental payments
Minimum operating lease payments
Variable concession rental payments
Short leases
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 right-of-use assets (note 25)
Amortisation of other non-current assets (note 15)
Auditor’s remuneration
Fees payable for the audit of the financial statements
– Standard audit fees
– Additional audit work
Fees payable for other services:
– Audit related services
Total auditor’s fees
Analysis of continuing operations
Revenue
Cost of sales
Gross profit
Administration costs
Operating profit after exceptional items
52 weeks
ended
26 July
2020
£000
52 weeks
ended
28 July
2019
£000
761,065
1,094,001
452,150
656,955
35,931
11,780
1,122
46,404
19,699
1,734
1,262,048
1,818,793
52 weeks
ended
26 July
2020
£000
–
–
4,609
204
75,861
(1,484)
10,705
75,386
3,806
79
49,059
–
52 weeks
Ended
26 July
2020
£000
171
–
27
198
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
26 July
2020
£000
52 weeks
ended
28 July
2019
£000
1,262,048
1,818,793
(1,217,521)
(1,639,378)
44,527
(40,764)
179,415
(47,498)
3,763
131,917
Included within cost of sales is £449.2m (2019: £640.5m) relating to cost of inventory recognised as expense.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
21
NOTES TO THE FINANCIAL STATEMENTS
3. Property gains and losses
52 weeks
ended
26 July
2020
52 weeks
ended
26 July
2020
Before Exceptional
items
(note 4)
£000
exceptional
items
£000
52 weeks
ended
26 July
2020
After
exceptional
items
£000
52 weeks
ended
28 July
2019
Before
exceptional
items
£000
52 weeks
ended
28 July
2019
Exceptional
items
(note 4)
£000
52 weeks
ended
28 July
2019
After
exceptional
items
£000
Disposals
Fixed assets
Leases
Additional costs of disposal
Impairments
Property, plant and equipment (note 13)
Intangible assets (note 12)
Right-of-use assets (note 25)
Other assets (note 15)
Other
Onerous lease provision (note 22)
Other property gains
1,002
(1,125)
258
135
–
–
–
–
–
–
(619)
(619)
2,769
–
684
3,453
28,602
10,699
4,722
–
44,023
–
–
–
3,771
(1,125)
942
3,588
28,602
10,699
4,722
–
44,023
–
(619)
(619)
(4,650)
1,015
(3,635)
–
230
–
568
–
798
(4,420)
1,583
(2,837)
–
–
–
–
–
–
–
(1,179)
(1,179)
3,550
3,550
–
–
145
3,695
–
1,762
–
1,762
–
–
145
3,695
–
1,762
(1,179)
583
Total property (gains)/losses
(484)
47,476
46,992
(5,599)
7,040
1,441
22
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
4. Exceptional items
Operating exceptional items
Covid-19
Stock losses
Equipment
Staff costs
Other
Gaming machine settlement
Total exceptional operating costs
Exceptional property losses
Disposal programme
Loss on disposal of pubs
Impairment of property plant and equipment
Impairment of other non-current assets
Onerous lease provision
Other property losses
Impairment of early stage development costs
Impairment of delayed projects
Impairment of trading pubs
Impairment of intangible assets
Onerous lease provision
NOTES TO THE FINANCIAL STATEMENTS
52 weeks
ended
26 July
2020
£000
52 weeks
ended
28 July
2019
£000
5,862
6,167
17,062
29,091
(15,890)
13,201
3,453
4,698
–
–
8,151
1,290
2,112
25,224
10,699
–
39,325
–
–
–
–
–
–
1,583
1,298
93
1,134
4,108
–
–
2,304
–
628
2,932
Total exceptional property losses
47,476
7,040
Exceptional tax
Impact of corporate tax rate change
Tax effect on exceptional items
Total exceptional items
4,252
(5,885)
(1,633)
–
(188)
(188)
59,044
6,852
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
23
NOTES TO THE FINANCIAL STATEMENTS
4. Exceptional items (continued)
Covid-19
The company had recognised an exceptional charge of £29,091,000 which included £5,862,000 for stock which perished,
£6,167,000 for personal protective equipment and hygiene products and £17,062,000 on pub-based staff costs during the
closure period. The payments made to staff during this period are amounts paid by the company to staff over and above the
furlough grants received and the costs of employing staff during preopening training and pub-cleaning.
Assuming that the company would have been trading in a similar manner in the second half of the year to that of the first,
the full impact of ‘lockdown’ on the company is estimated to be £0.5 billion in lost sales, £152 million in lost profits and a
£156-million reduction in free cash flow.1
Gaming machine settlement
The income of £15,890,000 related to a long-standing claim with HMRC, relating to VAT on gaming machines. HMRC first paid
the company these monies in April 2010; following an appeal by HMRC, the company paid back the original monies and an
interest charge of £997,000 in October 2013. During the financial year, HMRC agreed to settle this amount with the company.
The amount recognised is the settlement value including interest less professional fees paid by the company in support of
this case.
The company has requested that HMRC repay the interest of £997,000 charged to the company between April 2010 and
October 2013. As repayment of these monies is not certain, it has not been recognised in the financial year ended 26 July 2020.
Disposal programme
The company has offered several of its sites for sale. At the year end, a further eight (2019: eight) sites had been sold.
The company closed one pub in the year which fell outside of the disposal programme’s scope.
In the table above, the costs classified as loss on disposal are the losses on sold sites and associated costs to sale.
Other property losses
The company has reviewed its approach to capitalising costs in the early stages of a pub’s development. In future, some initial
costs will be expensed to the income statement. A property impairment charge of £1,290,000 relates to similar costs held on the
balance sheet at the start of the year. A further impairment charge for early stage project costs of £2,112,000 related to projects
being delayed as a result of the current economic environment following lockdown.
Property impairment relates to the situation in which, owing to poor trading performance, pubs are unlikely to generate sufficient
cash flows in the future to justify their current book value. In the year, an exceptional charge of £25,224,000 (2019: £2,304,000)
was incurred in respect of the impairment of assets as required under IAS 36. This comprises an impairment charge of
£25,224,000 (2019: £2,304,000), offset by impairment reversals of £Nil (2019: £Nil).
During the year, the company reviewed its accounting for the development and implementation of information technology
systems. As a result of this review, it is the company’s assessment that it will not achieve the future economic benefit from some
of these assets, which it had previously anticipated. The impairment charge of £9,540,000 reflects the company’s view of future
economic benefits which will be achieved. An additional impairment charge of £1,159,000 was made for the development and
implementation of information technology systems for projects which were delayed or cancelled.
The exceptional items listed above generated a net cash outflow of £10,575,000 (2019: outflow of £6,040,000).
Taxation
An exceptional tax credit of £5,885,000, relating to the exceptional operating items, the impairment of right-of-use assets
and a proportion of the impairment of intangible assets, has been recognised.
During the year, the UK government has announced that corporation tax rates will increase from 17% to 19%; this has resulted
in an increase in the company’s deferred tax liabilities of £4,252,000.
1 Information on the impact of Covid-19 on the full-year results is an estimate based on historic trends and does not form part of the required reporting
within these financial statements; consequently, a review of these numbers does not form part of the audit work completed by the company’s auditor.
24
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
5. Employee benefits expenses
Wages and salaries
Government grant
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
NOTES TO THE FINANCIAL STATEMENTS
52 weeks
ended
26 July
2020
£000
565,032
(131,539)
31,710
8,308
10,705
52 weeks
ended
28 July
2019
£000
568,758
–
35,783
6,912
11,558
484,216
623,011
2020
£000
1,547
173
165
1,885
2019
£000
1,858
515
162
2,535
Government grants disclosed above are amounts claimed by the company under the coronavirus job retention scheme.
For further details of directors’ emoluments, please see the directors’ remuneration report on pages 78–87.
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
2020
Number
2019
Number
4,696
20,952
25,648
2020
Number
4,792
38,427
43,219
4,442
21,035
25,477
2019
Number
4,541
37,358
41,899
For details of the Share Incentive Plan and the Deferred Bonus Scheme, refer to the directors’ remuneration report
on pages 78–87.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
25
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 (p)
Market value of shares vested during the year (£000)
Total obligation of the share-based payment 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 asset-financing
Interest payable on private placement
Finance costs, excluding lease interest
Interest payable on leases
Total finance costs
Bank interest receivable
Lease interest receivable
Total finance income
52 weeks
ended
26 July
2020
52 weeks
ended
28 July
2019
568,821
1,390,290
1,542
14,097
14,999
1,313
17,173
16,259
52 weeks
ended
26 July
2020
£000
52 weeks
ended
28 July
2019
£000
21,292
1,541
14,522
503
2,909
40,767
21,980
62,747
(161)
(451)
(612)
21,089
925
12,705
379
–
35,098
–
35,098
(41)
–
(41)
The finance costs in the income statement were covered 0.3 times by earnings before interest, tax and exceptional items.
On a pre-IFRS 16 basis, the finance costs in the income statement were covered 0.2 times (2019: 3.9 times) by earnings before
interest, tax and exceptional items.
26
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
7.
Income tax expense
(a) Tax on profit on ordinary activities
NOTES TO THE FINANCIAL STATEMENTS
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% (2019: 19.00%).
52 weeks
ended
26 July
2020
Before
exceptional
items
£000
52 weeks
ended
26 July
2020
Exceptional
items
(note 4)
£000
52 weeks
ended
26 July
2020
After
exceptional
items
£000
52 weeks
ended
28 July
2019
Before
exceptional
items
£000
52 weeks
ended
28 July
2019
Exceptional
items
(note 4)
£000
52 weeks
ended
28 July
2019
After
exceptional
items
£000
Taken through income statement
Current income tax:
Current income tax (credit)/charge
Previous period adjustment
Total current income tax
(2,827)
227
(2,600)
(7,502)
–
(7,502)
(10,329)
227
(10,102)
Deferred tax:
Temporary differences
Previous year deferred tax charge/(credit)
Impact of change in UK tax rate
Total deferred tax
(3,660)
90
–
(3,570)
1,617
–
4,252
5,869
(2,043)
90
4,252
2,299
23,406
(922)
22,484
2,174
(1,828)
–
346
(273)
23,133
–
(922)
(273)
22,211
85
–
–
85
2,259
(1,828)
–
431
Tax (credit)/charge
(6,170)
(1,633)
(7,803)
22,830
(188)
22,642
52 weeks
ended
26 July
2020
Before
exceptional
items
£000
52 weeks
ended
26 July
2020
Exceptional
items
(note 4)
£000
52 weeks
ended
26 July
2020
After
exceptional
items
£000
52 weeks
ended
28 July 2019
2019
Before
exceptional
items
£000
52 weeks
ended
28 July 2019
2019
Exceptional
items
(note 4)
£000
52 weeks
ended
28 July 2019
2019
After
exceptional
items
£000
(226)
423
197
52 weeks
ended
26 July
2020
Before
exceptional
items
£000
(5,720)
(1,555)
(7,275)
–
–
–
52 weeks
ended
26 July
2020
Exceptional
items
(note 4)
£000
(226)
423
197
52 weeks
ended
26 July
2020
After
exceptional
items
£000
–
–
–
(5,720)
(1,555)
(7,275)
(514)
5
(509)
52 weeks
ended
28 July
2019
Before
exceptional
items
£000
(4,243)
–
(4,243)
–
–
–
52 weeks
ended
28 July
2019
Exceptional
items
(note 4)
£000
–
–
–
(514)
5
(509)
52 weeks
ended
28 July
2019
After
exceptional
items
£000
(4,243)
–
(4,243)
Taken through equity
Current tax
Deferred tax
Tax charge/(credit)
Taken through comprehensive income
Deferred tax charge on swaps
Impact of change in UK tax rate
Tax credit
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
27
NOTES TO THE FINANCIAL STATEMENTS
7.
Income tax expense (continued)
(b) Reconciliation of the total tax charge
The taxation charge for the 52 weeks ended 26 July 2020 is based on the pre-exceptional loss before tax of £44.7m
and the estimated effective tax rate before exceptional items for the 52 weeks ended 26 July 2020 of 13.8% (2019: 22.3%).
This comprises a pre-exceptional current tax rate of 5.8% (2019: 22.0%) and a pre-exceptional deferred tax charge of
8.0% (2019: 0.3% charge).
The UK standard weighted average tax rate for the period is 19.0% (2019: 19.0%). 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.
52 weeks
ended
26 July
2020
Before
exceptional
items
£000
(44,687)
52 weeks
ended
26 July
2020
After
exceptional
items
£000
52 weeks
ended
28 July
2019
Before
exceptional
items
£000
52 weeks
ended
28 July
2019
After
exceptional
items
£000
(105,364)
102,459
95,419
(8,491)
(20,019)
19,467
18,130
(Loss)/profit before income tax
Profit multiplied by the UK standard rate of
corporation tax of 19.0% (2019: 19.0%)
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
Adjust current year deferred tax movement to 19.0%
Previous year adjustment – current tax
Previous year adjustment – deferred tax
6
86
(35)
603
83
622
(67)
706
–
–
227
90
6
216
(35)
603
5,122
622
(67)
1,180
–
4,252
227
90
Total tax expense reported in the income statement
(6,170)
(7,803)
(c) Reconciliation of the total tax charge
Current tax liability/(asset)
As at 29 July 2018
Charge to the income statement
Credited to equity
Paid
As at 28 July 2019
Credited to the income statement
Credited to equity
Paid
As at 26 July 2020
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
£000
8,950
22,211
(514)
(19,661)
10,986
(10,102)
(226)
(10,971)
(10,313)
28
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
7.
Income tax expense (continued)
(d) Deferred tax
The deferred tax in the balance sheet is as follows:
The Finance Act 2020 maintained the main rate of corporation tax rate at 19% from 1 April 2020, overriding the Finance Act
2017 which had reduced the main rate to 17% from that date. Deferred tax balances at the year end have been recognised
at a corporation tax rate of 19% (2019: 17%).
Deferred tax liabilities
Accelerated tax
depreciation
At 28 July 2019
Previous year movement posted to the income statement
Movement during year posted to the income statement
Impact of tax rate change posted to the income statement
At 26 July 2020
Deferred tax assets
At 28 July 2019
Movement during year posted to the income statement
Movement during year posted to comprehensive income
Movement during year posted to equity
Impact of change in tax rate posted to comprehensive income
At 26 July 2020
£000
36,799
683
(5,077)
3,812
36,217
Share
based
payments
£000
1,638
(397)
–
(423)
–
818
Other
temporary
differences
£000
4,255
(593)
2,637
440
6,739
Interest-rate
swaps
£000
8,342
–
5,720
–
1,555
Total
£000
41,054
90
(2,440)
4,252
42,956
Total
£000
9,980
(397)
5,720
(423)
1,555
15,617
16,435
The company has recognised deferred tax assets of £16.4m, which it expected to offset against future profits.
Deferred tax assets and liabilities have been offset as follows:
Other temporary differences of £6.7m include deferred tax of £2.5m on the gaming machine settlement and £4.2m of
rolled-over property gains.
Deferred tax liabilities
Offset against deferred tax assets
Deferred tax liabilities
Deferred tax assets
Offset against deferred tax liabilities
Deferred tax asset
2020
£000
42,956
(818)
42,138
16,435
(818)
15,617
2019
£000
41,054
(1,638)
39,416
9,980
(1,638)
8,342
As at 26 July 2020, the company had a potential deferred tax asset of £4.9m (2019: £3.6m), relating to capital losses.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
29
NOTES TO THE FINANCIAL STATEMENTS
8. Earnings and free cash flow per share
(a) Weighted average number of shares
Earnings per share (EPS) are based on the weighted average number of shares in issue of 108,550,647 (2019: 105,439,345),
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.
During a period where a company makes a loss, accounting standards require that ‘dilutive’ shares – for the company, those
held in trust in respect of employee share schemes – not be included in the earning per share calculation, because they will
reduce the reported loss per share; consequently, all per-share measures in the current period are based on the number of
shares in issue less shares held in trust of 106,554,289.
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
ended
26 July
2020
52 weeks
ended
28 July
2019
108,550,647
105,439,345
(1,996,358)
(2,313,464)
106,554,289
103,125,881
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 26 July 2020
Earnings (loss 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 26 July 2020 – pre IFRS 16
Earnings (loss after tax)
Exclude effect of exceptional items after tax
Earnings before exceptional items
Exclude effect of property losses
Underlying earnings before exceptional items
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
Profit
£000
(97,561)
59,044
(38,517)
(484)
(39,001)
Profit
£000
(89,610)
59,673
(29,937)
641
(29,296)
Profit
£000
72,777
6,852
79,629
(5,599)
74,030
Basic EPS
pence
Diluted EPS
pence
(89.9)
54.4
(35.5)
(0.4)
(35.9)
(89.9)
54.4
(35.5)
(0.4)
(35.9)
Basic EPS
pence
Diluted EPS
pence
(82.6)
55.0
(27.6)
0.6
(27.0)
(82.6)
55.0
(27.6)
0.6
(27.0)
Basic EPS
pence
Diluted EPS
pence
70.6
6.6
77.2
(5.4)
71.8
69.0
6.5
75.5
(5.3)
70.2
The diluted earnings per share before exceptional items have decreased by 138.5% (2019: decreased by 4.7%).
30
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
8.
Earnings and free cash flow per share (continued)
(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, lease principal
payments, loan issue costs, 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 26 July 2020
52 weeks ended 28 July 2019
Free cash
flow
£000
(58,852)
96,998
Basic free
cash flow
per share
pence
(54.2)
94.1
Diluted free
cash flow
per share
pence
(54.2)
92.0
(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 pre-IFRS 16 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 26 July 2020
Loss before tax and exceptional items (income statement) 1
Exclude depreciation and amortisation (note 2)
Exclude amortised on other fixed assets 2
Less reinvestment in current properties
Exclude property losses (note 3)
Less accelerated tax relief on leases 3
Less cash tax (note 7)
Owners’ earnings
52 weeks ended 28 July 2019
Profit before tax and exceptional items (income statement)
Exclude depreciation and amortisation (note 2)
Less reinvestment in current properties
Exclude property gains (note 3)
Less cash tax (note 7)
Owners’ earnings
Owners’
Earnings
£000
(34,095)
79,271
368
(32,062)
641
(2,012)
2,827
13,656
Owners’
Earnings
£000
102,459
81,811
(55,239)
(5,599)
(23,406)
100,026
Basic
Owners’ EPS
pence
Diluted
Owners’ EPS
pence
(32.0)
74.4
0.3
(29.5)
0.6
(1.9)
2.7
12.6
(31.4)
73.0
0.3
(30.1)
0.6
(1.9)
2.7
12.8
Basic
Owners’ EPS
pence
Diluted
Owners’ EPS
pence
99.4
79.3
(53.6)
(5.4)
(22.7)
97.0
97.2
77.6
(52.4)
(5.3)
(22.2)
94.9
The diluted owners’ earnings per share decreased by 86.5% (2019: increased by 6.0%).
As the company made an owners’ earnings profit in the period, the ‘diluted’ owners’-earnings-per-share calculation includes
shares held in trust, as their inclusion would not have an ‘antidilutive’ effect.
1 Loss pre-IFRS 16.
2 Being the amortisation of other fixed assets which would have been charged, if IFRS 16 were not adopted.
3 Being the accelerated tax relief received on leases as a result of the introduction of IFRS 16.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
31
NOTES TO THE FINANCIAL STATEMENTS
8. Earnings and free cash flow per share (continued)
Analysis of additions by type
Reinvestment in existing pubs
Investment in new pubs and pub extensions
Freehold reversions and investment properties
Analysis of additions by category
Property, plant and equipment (note 13)
Intangible assets (note 12)
Investment properties (note 14)
Other non-current assets (note 15)
(e) Operating profit per share
52 weeks
ended
26 July
2020
32,062
41,047
98,463
52 weeks
ended
28 July
2019
55,239
35,172
77,207
171,572
167,618
52 weeks
ended
26 July
2020
164,450
1,047
6,075
–
52 weeks
ended
28 July
2019
161,242
5,925
–
451
171,572
167,618
52 weeks ended 26 July 2020 before exceptional items
Impact of exceptional items
52 weeks ended 26 July 2020 after exceptional items
52 weeks ended 28 July 2019
Operating
profit
£000
16,964
(13,201)
3,763
131,917
Basic operating
profit per share
pence
Diluted operating
profit per share
pence
15.5
(12.3)
3.4
127.9
15.8
(12.3)
3.4
125.1
As the company made an operating profit in the period the ‘diluted’ operating profit per shares includes shares in held in trusts
as the inclusion of these share would not have an ‘anti-dilutive’ effect.
32
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
9. Cash generated from operations
(Loss)/profit for the period
Adjusted for:
Tax (note 7)
Share-based charges (note 2)
Loss/(gain) on disposal of property, plant and equipment (note 3)
Disposal of capitalised leases (note 3)
Net onerous lease provision (note 3)
Net impairment charge (note 3)
Interest receivable (note 6)
Interest payable (note 6)
Lease interest receivable (note 6)
Lease interest payable (note 6)
Amortisation of bank loan issue costs (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)
Aborted properties costs
Amortisation of right-of-use assets (note 25)
Change in inventories
Change in receivables
Change in payables
NOTES TO THE FINANCIAL STATEMENTS
52 weeks*
ended
26 July
2020
£000
(89,610)
52 weeks
ended
26 July
2020
£000
(97,561)
52 weeks
ended
28 July
2019
£000
72,777
(5,162)
10,705
3,771
–
1,411
42,612
(161)
39,226
–
–
1,541
75,386
3,806
79
368
33
–
84,005
622
(21,263)
(24,646)
(7,803)
10,705
3,771
(1,125)
–
44,023
(161)
39,226
(451)
21,980
1,541
75,386
3,806
79
–
33
49,059
22,642
11,558
(3,635)
–
1,762
3,695
(41)
34,173
–
–
925
73,779
7,634
55
343
430
–
142,508
226,097
622
(17,052)
(50,413)
(417)
1,228
268
Cash flow from operating activities
38,718
75,665
227,176
*This column shows the cash generated from operations as it would have been reported, before the introduction of IFRS 16.
The amount of £38,718,000 shown is presented at the start of the pre-IFRS 16 cash flow presented within the
primary statements.
The difference of £36,947,000 between the cash flow from operating activities of £75,665,000 and the pre-IFRS 16 number
of £38,718,000 is shown in the table below.
Cash flow from operating activities
Lease liability payments made (note 25)
Lease assets payments received (note 25)
Cash flow from operating activities – pre-IFRS 16
26 July
2020
£000
75,665
(38,330)
1,383
38,718
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
33
NOTES TO THE FINANCIAL STATEMENTS
10. Analysis of change in net debt
Borrowings
Cash and cash equivalents
Asset-financing creditor – due before one year
Current net borrowings
Bank loans – due after one year
Asset-financing creditor – due after one year
Private placement – due after one year
Non-current net borrowings
Net debt
Derivatives
Interest-rate swaps asset – due after one year
Interest-rate swaps liability – due after one year
Total derivatives
28 July
IFRS 16
2019 migration
£000
£000
Cash
Non-cash
flows movement
£000
£000
26 July
2020
£000
42,950
(3,287)
39,663
(770,076)
(6,607)
–
(776,683)
(737,020)
321
(49,393)
(49,072)
–
–
–
–
–
–
–
–
–
–
–
131,501
(13,250)
118,251
–
174,451
8,927
8,927
(7,610)
166,841
(98,998)
(1,498)
(870,572)
–
(8,927)
(15,534)
(97,679)
(43)
(97,722)
(196,677)
(10,468)
(983,828)
(78,426)
(1,541)
(816,987)
–
–
–
(321)
–
(32,801)
(82,194)
(33,122)
(82,194)
Net debt after derivatives
(786,092)
–
(78,426)
(34,663)
(899,181)
Leases
Lease assets – due before one year
Lease assets – due after one year
Lease obligations – due before one year
Lease obligations – due after one year
Net lease liabilities
–
–
–
–
–
1,583
(1,056)
11,853
–
1,209
(738)
1,736
11,115
(61,252)
19,923
(24,014)
(65,343)
(570,052)
–
80,664
(489,388)
(617,868)
18,867
57,121
(541,880)
Net debt after derivatives and lease liabilities
(786,092)
(617,868)
(59,559)
22,458
(1,441,061)
The cash movement on the private placement of £97,679,000 is disclosed in the cash flow statement as an advance under
private placement of £98,000,000 and a cash payment of loan issue costs of £321,000.
The cash movement on the bank loans of £98,998,000 is disclosed in the cash flow statement as an advance under bank loans
of £100,000,000 and a cash payment of loan issue costs of £1,002,000. Total loan issue costs of £1,323,000 are disclosed in
the cash flow statement.
The cash movement on asset-financing of £13,250,000 is disclosed in the cash flow statement as an advance
under asset-financing of £16,152,000 and principal payments of £2,902,000.
Non-cash movements
The non-cash movement in bank loans and the private placement relate to the amortisation of loan issue costs.
The amortised charge for the year of £1,541,000 is disclosed in note 6. These are upfront payments made to obtain new
borrowings. These costs are charged to the income statement over the expected life of the loan. The movement in interest-rate
swaps relates to the change in the ‘mark to market’ valuations for the year.
The migration movement of £617,868,000 is the recognition of the lease liability of £631,304,000 and the lease asset of
£13,436,000 on adoption of IFRS 16. These amounts are disclosed in note 25. The non-cash movement in lease liabilities is
analysed in the table below.
Non-cash movement in net lease liabilities
Recognition of new leases (note 25)
Remeasurements of existing leases liabilities (note 25)
Remeasurements of existing leases assets (note 25)
Disposal of lease (note 25)
Cancelled principal payments (note 25)
Exchange differences (note 25)
Non-cash movement in net lease liabilities
26 July
2020
£000
(27,361)
(7,207)
471
85,115
6,127
(24)
57,121
34
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
10. Analysis of change in net debt (continued)
The table below calculated a ratio between net debt, being borrowings less cash and cash equivalents, and earnings before
interest, tax and depreciation (EBITDA). The numbers in this table are all before the effect of IFRS 16.
Profit before tax (income statement)
Interest (note 6)
Depreciation
Earnings before interest, tax and depreciation (EBITDA)
52 weeks
ended
26 July
2020
£000
(34,095)
40,606
79,639
86,150
52 weeks
ended
28 July
2019
£000
102,459
35,057
81,811
219,327
Net debt/EBITDA
9.48
3.36
The depreciation charge in the table above of £79,639,000 comprises the non-lease depreciation and amortisation charges
disclosed in note 2 of £79,271,000 and the amortisation of £368,000 which would have been charged on other non-current
assets, had IFRS 16 not been implemented.
11. Dividends paid and proposed
Declared and paid during the year:
Dividends on ordinary shares:
– final for 2017/18: 8.0p (2016/17: 8.0p)
– interim for 2018/19: 4.0p (2017/18: 4.0p)
– final for 2018/19: 8.0p (2017/18: 8.0p)
Proposed for approval by shareholders at the AGM:
– final for 2019/20: 8.0p (2018/19: 8.0p)
Dividend per share (p)
Dividend cover
52 weeks
ended
26 July
2020
£000
52 weeks
ended
28 July
2019
£000
–
–
8,371
8,371
–
–
8
–
8,435
4,217
–
12,652
8,397
8,397
12
5.8
Dividend cover is calculated as profit after tax and exceptional items over dividend paid. Dividend cover has not been shown for
the current year, as the company reported a loss in the year.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
35
NOTES TO THE FINANCIAL STATEMENTS
12. Intangible assets
Cost:
At 29 July 2018
Additions
Transfers
Disposals
At 28 July 2019
Additions
Transfers
Disposals
At 26 July 2020
Accumulated amortisation:
At 29 July 2018
Provided during the period
Disposals
At 28 July 2019
Provided during the period
Impairment loss
Disposals
At 26 July 2020
Net book amount at 26 July 2020
Net book amount at 28 July 2019
Net book amount at 29 July 2018
Computer
software and
development
£000
Assets
under
construction
£000
Total
£000
68,743
5,925
–
(22)
74,646
1,047
–
1,799
4,192
(1,562)
–
4,429
581
(4,206)
–
(41,472)
804
34,221
–
–
–
–
–
–
–
–
804
4,429
1,799
(43,964)
(7,634)
22
(51,576)
(3,806)
(10,699)
40,755
(25,326)
8,895
23,070
24,779
66,944
1,733
1,562
(22)
70,217
466
4,206
(41,472)
33,417
(43,964)
(7,634)
22
(51,576)
(3,806)
(10,699)
40,755
(25,326)
8,091
18,641
22,980
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.
36
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
13. Property, plant and equipment
Cost:
At 29 July 2018
Additions
Transfers from investment property
Transfers
Exchange differences
Transfer to held for sale
Disposals
Reclassification
At 28 July 2019
Additions
Transfers
Exchange differences
Disposals
Reclassification
At 26 July 2020
NOTES TO THE FINANCIAL STATEMENTS
Freehold and
long-leasehold
property
£000
Short-
leasehold
property
£000
Equipment,
fixtures
and fittings
£000
Assets
under
construction
£000
Total
£000
1,110,875
356,160
617,800
54,202
2,139,037
2,429
38,214
45,052
161,242
75,547
1,984
23,689
226
(5,076)
(7,605)
29,532
97,419
11,804
685
(6,012)
30,038
–
–
1,984
5,316
(30,497)
–
632
(5,886)
(15,366)
–
294
–
–
–
(3,412)
(4,349)
(29,532)
–
–
1,492
22
–
2,464
1,675
39
90
(810)
9,412
120
1,229,172
327,159
656,261
69,051
2,281,643
24,608
39,959
164,450
(6,290)
(5,669)
(30,038)
–
(22,891)
505
–
–
–
1,349
(17,971)
–
1,363,106
295,009
684,732
86,624
2,429,471
Accumulated depreciation and impairment:
At 29 July 2018
(222,037)
(184,575)
(426,352)
Provided during the period
(18,271)
(11,733)
(43,775)
Transfers from investment property
Exchange differences
Impairment loss
Transfer to held for sale
Disposals
Reclassification
At 28 July 2019
Provided during the period
Exchange differences
Impairment loss
Disposals
Reclassification
At 26 July 2020
(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)
(19,675)
(10,826)
(44,885)
(47)
(17,631)
2,051
(18,170)
(77)
(4,122)
6,298
18,170
(162)
(6,849)
5,904
–
(307,297)
(167,009)
(512,387)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(832,964)
(73,779)
(76)
(180)
(3,550)
2,740
11,137
–
(896,672)
(75,386)
(286)
(28,602)
14,253
–
(986,693)
Net book amount at 26 July 2020
1,055,809
128,000
172,345
86,624
1,442,778
Net book amount at 28 July 2019
975,347
150,707
189,866
69,051
1,384,971
Net book amount at 29 July 2018
888,838
171,585
191,448
54,202
1,306,073
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 8% (2019: 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 £28,602,000 (2019: £3,550,000) was charged to property
losses in the income statement, as described in note 4. The assets impaired in the year had a recoverable value of
£24,700,000 at year end. In the period depreciation was £961,000 lower, owing to historic impairment charges. At the period
end, an impairment provision of £44,058,000 is carried in relation to property, plant and equipment.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
37
NOTES TO THE FINANCIAL STATEMENTS
14. Investment property
The company owns three (2019: one) freehold properties with existing tenants – and these assets have been classified
as investment properties. During this year, the company has purchased a further two investment properties.
Cost:
At 29 July 2018
Transfer to property, plant and equipment
At 28 July 2019
Additions
At 26 July 2020
Accumulated amortisation:
At 29 July 2018
Provided during the period
Transfer to property, plant and equipment
At 28 July 2019
Provided during the period
At 26 July 2020
Net book amount at 26 July 2020
Net book amount at 28 July 2019
Net book amount at 29 July 2018
Rental income received in the period from investment properties was £641,000 (2019: £310,000).
Operating costs, excluding depreciation, incurred in relation to these properties amounted to £38,000 (2019: £8,000).
In the opinion of the directors, the fair value of the investment properties is approximately £12,000,000.
15. Other non-current assets
Cost:
At 29 July 2018
Additions
Disposals
At 28 July 2019
Transfers to right-of-use asset
At 26 July 2020
Accumulated depreciation and impairment:
At 29 July 2018
Provided during the period
Impairment loss
Disposals
At 28 July 2019
Transfers to right-of-use asset
At 26 July 2020
Net book amount at 26 July 2020
Net book amount at 28 July 2019
Net book amount at 29 July 2018
£000
7,751
(1,984)
5,767
6,075
11,842
(257)
(55)
76
(236)
(79)
(315)
11,527
5,531
7,494
£000
12,727
451
(75)
13,103
(13,103)
–
(4,802)
(343)
(145)
75
(5,215)
5,215
–
–
7,888
7,925
38
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
16. Inventories
Bar, food and non-consumable stock held at our pubs and national distribution centre.
Goods for resale at cost
17. Receivables
NOTES TO THE FINANCIAL STATEMENTS
26 July
2020
£000
23,095
28 July
2019
£000
23,717
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
26 July
2020
£000
974
–
737
30,465
32,176
28 July
2019
£000
1,135
(8)
2,327
18,449
21,903
Accrued income relates to discounts which are calculated based on certain products delivered at an agreed rate per item.
Included in prepayments is £15.9m receivable for the gaming machine settlement (note 4) and £6.1m in government grants
receivable under the coronavirus job retention scheme.
Credit risk
Due from suppliers – not due
Due from suppliers – overdue
26 July
2020
£000
–
974
974
28 July
2019
£000
898
237
1,135
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 £Nil (2019: £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 26 July 2020, no sites were classified as held for sale (2019: two).
Property, plant and equipment
26 July
2020
£000
–
28 July
2019
£000
3,146
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
39
NOTES TO THE FINANCIAL STATEMENTS
19. Cash and cash equivalents
Cash and cash equivalents
Cash at bank earns interest at floating rates, based on daily bank deposit rates.
26 July
2020
£000
174,451
28 July
2019
£000
42,950
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)
Other
Asset-financing obligations
Total current borrowings
Non-current (due after one year)
Bank loans
Variable-rate facility
Unamortised bank loan issue costs
Private placement
Fixed-rate facility
Unamortised private placement issue costs
Other
Asset-financing obligations
Total non-current borrowings
26 July
2020
£000
28 July
2019
£000
104,145
162,070
27,260
54,135
69,545
18,056
62,081
66,119
255,085
308,326
26 July
2020
£000
28 July
2019
£000
7,610
7,610
3,287
3,287
875,000
(4,428)
870,572
98,000
(278)
97,722
775,000
(4,924)
770,076
–
–
–
15,534
6,607
983,828
776,683
40
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
22. Provisions
At 28 July 2019
Charged to the income statement:
– Transferred to right-of-use assets
– Additional charges
– Unused amounts reversed
– Used during year
At 26 July 2020
Current
Non-current
Total provisions
NOTES TO THE FINANCIAL STATEMENTS
Legal claims Onerous lease
£000
£000
3,523
2,483
Total
£000
6,006
–
(2,483)
(2,483)
1,971
(988)
(1,468)
3,038
–
–
–
–
26 July
2020
£000
3,038
–
3,038
1,971
(988)
(1,468)
3,038
28 July
2019
£000
4,072
1,934
6,006
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 were expected to be
utilised over a period of up to 22 years and are discounted to take into account the passage of time.
These amounts were transferred into the right-of-use assets created on migration to IFRS 16.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
41
NOTES TO THE FINANCIAL STATEMENTS
23. Financial instruments
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 26 July 2020
Bank loans
Private placement
Within
1 year
£000
1–2 years
£000
2–3 years
£000
3–4 years
£000
4–5 years
£000
More than
5 years
£000
Total
£000
21,809
17,013
17,013
177,340
723,693
–
956,868
3,288
2,920
2,920
2,920
2,920
102,381
117,349
Trade and other payables
200,950
–
–
–
–
–
200,950
Derivatives
Lease liabilities
18,171
12,044
11,959
8,280
8,061
34,381
92,896
65,343
51,253
49,921
49,249
47,710
471,596
735,072
Asset-financing obligations
7,610
7,610
5,145
4,324
–
–
24,689
Within
1 year
£000
1–2 years
£000
2–3 years
£000
3–4 years
£000
4–5 years
£000
More than
5 years
£000
Total
£000
At 28 July 2019
Bank loans
20,039
20,039
20,039
20,039
786,726
Trade and other payables
246,245
–
Derivatives
Asset-financing obligations
13,089
13,089
3,287
3,287
–
6,962
3,287
–
6,877
819
–
–
–
866,882
246,245
3,052
18,651
61,720
–
–
10,680
On 20 August 2019, the company authorised the issue and sale of £98m aggregate principal amount of its
senior secured notes due 20 August 2026; this extends its total facilities, excluding asset-financing obligations,
from £895m to £993m.
On 22 January, the company agreed on a one-year extension for £715m of its existing banking agreement.
On 7 August 2020, the company agreed to a three-year secured loan under the coronavirus large business interruption loan
scheme for £48,333,332. The loan has three participating lenders. The loan has an average fixed-interest charge in the first
year of 1.86% and 2.03% in the second and third year.
At the balance sheet date, the company had loan facilities of £993m (2019: £895m) as detailed below:
Secured revolving-loan facility of £875m
£160m matures January 2024
£715m matures January 2025
14 participating lenders
Secured private placement of £98m
Matures August 2026
The purchase of loan notes is split among five participants
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 2.42% (2019: 2.88%), fixed for a weighted average period of 4.2 years
(2019: 4.8 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, £875m (2019: £775m) was drawn down under the £875m secured-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.
42
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
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 9.48 times (2019: 3.36 times) at the year end.
Section 2, on page 65, discusses the financial risks associated with financial instruments, including credit risk and
liquidity risk.
Fair value of financial assets and liabilities
IFRS 13 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.
Analysis of interest-rate profile of financial liabilities
Bank loans
Floating rate due after one year
Fixed rate due after one year
Asset-financing obligations
Fixed rate due in one year
Fixed rate due after one year
Private placement
Fixed rate due after one year
26 July
2020
£000
–
100,572
770,000
870,572
7,610
15,534
23,144
97,722
97,722
28 July
2019
£000
–
76
770,000
770,076
3,287
6,607
9,894
–
–
991,438
779,970
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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
43
NOTES TO THE FINANCIAL STATEMENTS
23. Financial instruments (continued)
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.
Any differences between book value and fair value of financial instruments are set out in the following table.
Financial assets at amortised cost
Cash and cash equivalents
Receivables
Lease assets
Financial liabilities at amortised cost
Trade and other payables
Asset-financing obligations
Lease obligations
Private placement
Borrowings
Derivatives – cash flow hedges
Non-current derivative financial asset
Non-current derivative financial liability
26 July
2020
Book value
£000
174,451
974
12,851
188,276
26 July
2020
Fair value
£000
174,451
974
12,939
188,364
28 July
2019
Book value
£000
42,950
1,127
–
28 July
2019
Fair value
£000
42,950
1,127
–
44,077
44,077
(200,950)
(23,144)
(554,731)
(97,722)
(870,572)
(1,747,119)
(200,950)
(23,485)
(560,041)
(99,171)
(879,088)
(246,245)
(246,245)
(9,894)
(9,915)
–
–
–
–
(770,076)
(771,093)
(1,762,735)
(1,026,215)
(1,027,253)
–
(82,194)
(82,194)
–
(82,194)
(82,194)
321
(49,393)
(49,072)
321
(49,393)
(49,072)
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 asset-financing
The minimum payments under asset-financing fall due as follows:
Within one year
In the second to fifth year, inclusive
Less future finance charges
Present value of obligations
Less amount due for settlement within one year
Amount due for settlement during the second to fifth year, inclusive
All asset-financing obligations are in respect of various equipment used in the business.
No escalation clauses are included in the agreements.
26 July
2020
£000
7,610
17,079
24,689
(1,545)
23,144
(7,610)
15,534
28 July
2019
£000
3,287
7,393
10,680
(786)
9,894
(3,287)
6,607
44
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
23. Financial instruments (continued)
Interest-rate swaps
At 26 July 2020, 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 28 July 2019
Change in fair value posted to comprehensive income
Deferred tax posted to comprehensive income
As at 26 July 2020
Loss/(gain) on
interest-rate
swaps
£000
49,072
33,122
Deferred
tax
£000
(8,342)
–
–
(7,275)
82,194
(15,617)
Charged
to equity
£000
40,730
33,122
(7,275)
66,577
No ineffectiveness arose during the period (2019: £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 26 July 2020, 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 £258,000 and equity increased by £66,700,000. 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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
45
NOTES TO THE FINANCIAL STATEMENTS
24. Other liabilities
Operating lease incentives
26 July
28 July
2020
£000
2019
£000
–
10,930
Included in other liabilities were lease incentives on leases where the lessor retains substantially all of the risks and benefits of
ownership of the asset. The lease incentives were recognised as a reduction in rent over the lease term and shown as a liability
on the balance sheet. These amounts now form part of the right-of-use assets – please see note 25.
25. Leases
About 36% 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.
(a) Right-of-use assets
The table below shows the movements in the company’s right-of-use assets.
Cost:
Recognition of assets
Additions
Remeasurement
Exchange differences
Disposals and derecognised leases
At 26 July 2020
Accumulated depreciation and impairment:
Provided during the period
Exchange differences
Impairment loss
Disposals and derecognised leases
At 26 July 2020
Net book amount at 26 July 2020
£000
617,837
27,361
6,736
10
(89,151)
562,793
(49,059)
(3)
(4,722)
5,160
(48,624)
514,169
During the period, 21 leases were remeasured as a result of changes in the agreed payments under the lease contracts and
changes in the lease terms. In addition, two new lease contracts were agreed on.
Disposals and derecognised leases in the period represents the purchasing of 27 formerly leasehold properties, the disposal of
four leases altogether and also one lease where the fixed rent payments are now set to zero; consequently, future rental
payments are no longer capitalised.
46
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
25. Leases (continued)
(b) Lease maturity profile
NOTES TO THE FINANCIAL STATEMENTS
The tables below analyse the company’s lease liabilities and assets in relevant maturity groupings, based on the remaining
period at the balance sheet date to the end of the lease. The amounts disclosed in the table are the contractual undiscounted
cash flows. The impact of discounting reconciles these amounts to the values disclosed in the balance sheet.
Lease liabilities
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Lease commitments payable
Discounting lease liability
Lease liability
Lease assets
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Discounting lease asset
Lease asset
2020
£000
65,343
51,253
49,921
49,249
47,710
471,596
735,072
2019
£000
61,252
61,177
58,523
57,050
56,400
541,916
836,318
(180,341)
(205,014)
554,731
631,304
2020
£000
1,736
1,638
1,586
1,130
1,084
8,325
2019
£000
1,583
1,545
1,448
1,391
1,125
9,338
15,499
16,430
(2,648)
12,851
(2,994)
13,436
The comparative numbers disclosed above are those included in the migration note in the 2019 annual report.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
47
NOTES TO THE FINANCIAL STATEMENTS
26. Leases (continued)
(c) Lease liability
The tables below show the movements in the period of the lease liability and the lease asset.
Lease liability
At 28 July 2019
Recognition of liability
Additions
Remeasurements of leases
Cancelled principal payments
Disposals and derecognised leases
Exchange differences
Lease liabilities before payments
Interest due
Payments made
Net principal payments
At 26 July 2020
2020
£000
–
631,304
27,361
7,207
(6,127)
(85,115)
24
574,654
18,407
(38,330)
(19,923)
554,731
The company has applied the practical expedience in the May 2020 amendment to IFRS 16 – an amendment which
allows reductions in rent payments made before June 2021 to be credited to the profit and loss account, rather than requiring
the remeasuring of the lease and spreading rent reduction received in this period over the term of the lease.
The application of this amendment results in principal payments of £6,127,000 being credited to the profit and loss account and
a reduction in associated interest charges of £1,833,000, resulting in a total credit to the profit and loss account of £7,960,000.
Future rental payments, up to the end of the lease, are capitalised, including any agreed increases. Future rent payments
could change as a result of open-market rent reviews or options being exercised to terminate a lease early. Any changes in the
minimum unavoidable lease payments will be included as a remeasurement of the lease liability.
Leases with lease terms of less than one year are not capitalised.
Lease assets
At 28 July 2019
Recognition of asset
Remeasurements of leases
Lease assets before payments
Interest due
Payments received
Net principal payments
At 26 July 2020
2020
£000
–
13,436
471
13,907
327
(1,383)
(1,056)
12,851
The company has sublet several of its leases which have been capitalised above, with lease assets being the capitalised
future rent receivables from sublet sites. The company monitors the receipts of rental charges on sublet sites and will take the
appropriates steps where any amounts remain unpaid. It is the company’s view that there are no significant credit losses on
the sublease assets.
The interest payable and receivable shown in the tables above is the interest element of the payments made and received
in the period. These amounts differ from the lease interest charged/credited to the income statement in the period – see note 6.
The amounts charged/credited to the income statement in the period will also include amounts due, but not paid, in the period.
The incremental borrowing rate applied to lease liabilities and assets was 2.7–3.9%, depending on the lease’s length.
48
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
27. Leases (continued)
(d)
IFRS 16 migration
NOTES TO THE FINANCIAL STATEMENTS
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 became effective, the company recognised, 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.
Lessor accounting remains similar to the previous 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 were classified as finance leases under the new standard, as the risks and rewards of ownership of the
IFRS 16 right-of-use asset was 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 single 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, 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.
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 its later years. The expense will be recognised as a depreciation and interest charge replacing the
operating expenses under IAS 17.
In the 2019 annual report, the company estimated that, for the year ending 26 July 2020, EBITDA would increase 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.
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 current
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 its later years.
The company expects a small increase in the effective tax rate. This is due to disallowable expenses, which will remain
unchanged, being a larger proportion of reduced profits.
Cash flow statement
On the application of IFRS 16, there will be no impact on cash flows, except in relation to tax payments. The presentation of
cash flows will change. Cash flows from operating activities will increase, yet will be offset exactly by an increase in interest and
lease principal payments.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
49
NOTES TO THE FINANCIAL STATEMENTS
28. Leases (continued)
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 assets
Total non-current assets
Other current assets
Lease assets
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 2019
£000
1,422,235
IFRS 16
£000
Restated
£000
–
1,422,235
7,888
(7,888)
–
–
–
617,837
617,837
11,853
11,853
1,430,123
621,802
2,051,925
69,813
–
–
1,583
21,903
(5,693)
69,813
1,583
16,210
1,521,839
617,692
2,139,531
(326,671)
748
(325,923)
–
(61,252)
(61,252)
(326,671)
(60,504)
(387,175)
(865,492)
–
(865,492)
–
(570,052)
(570,052)
(1,934)
1,934
(10,930)
10,930
–
–
(1,205,027)
(617,692)
(1,822,719)
316,812
316,812
–
–
316,812
316,812
Reconciliation to lease commitments
The table below shows a reconciliation between the operating lease commitments (as disclosed in the 2019 annual report
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
50
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
NOTES TO THE FINANCIAL STATEMENTS
29. Leases (continued)
Recognition of right-of-use assets
The table below shows how the value of the right-of-use assets was calculated on migration.
26 July
2020
£000
(13,436)
631,304
7,888
5,693
(199)
(549)
(10,930)
(1,934)
617,837
Recognition of leases
Lease assets (note 25)
Lease liabilities (note 25)
Non-current assets
Other non-current assets (note 15)
Current assets
Rent prepayments (note 17)
Current liabilities
Rent payables (note 20)
Onerous lease creditor less than one year (note 22)
Non-current liabilities
Other non-current liabilities (note 24)
Onerous lease creditor more than one year (note 22)
Right-of-use assets
Determining the right-of-use assets
Lease liabilities and assets were calculated by discounting future unavoidable rental payments and rents receivable
for any of those sites which had been sublet. To the value of the lease liabilities and assets were added all balance
sheet items held in relation to these leases. These included lease premiums paid, disclosed as other non-current
assets, prepaid and accrued rental charges, the onerous lease provision and lease incentives, disclosed as other
non-current liabilities.
Lease terminology
Before the introduction of IFRS 16, leases in a lessee’s accounts were defined as finance leases and operating leases.
Finance leases are disclosed as asset-financing obligations and former operating leases as lease assets and liabilities.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
51
NOTES TO THE FINANCIAL STATEMENTS
26. Capital commitments
At 26 July 2020, the company had £7.1m (2019: £37.9m) of capital commitments, relating to the purchase of eight (2019: 16)
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.
27. Related-party disclosures
During the year, no 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
Country of incorporation
Scotland
Ownership
Wholly owned
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
England
England
England
England
England
England
Wales
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.
The registered office of all of the above companies is the same as that of J D Wetherspoon plc, as disclosed on the final page
of these accounts.
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
2020
£000
2,310
263
285
2,858
2019
£000
2,796
263
848
3,907
Key management comprises the executive directors, non-executive directors and management board, as detailed on page 74.
For additional information about directors’ emoluments, please refer to the directors’ remuneration report on pages 78–87.
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 78–87 which forms part of these financial statements.
52
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
28. Share capital
At 29 July 2018
Repurchase of shares
At 28 July 2019
Repurchase of shares
Issue of shares
At 26 July 2020
NOTES TO THE FINANCIAL STATEMENTS
Number of
shares
000s
105,501
(403)
105,098
(420)
15,702
Share
capital
£000
2,110
(8)
2,102
(8)
314
120,380
2,408
The total authorised number of 2p ordinary shares is 500,000,000 (2019: 500,000,000). All issued shares are fully paid.
During the year, 419,741 shares were repurchased by the company for cancellation, representing approximately 0.40%
of the issued share capital, at a cost of £6.5m, including stamp duty, representing an average cost per share of 1,523p.
On 29 April 2020, 15,701,760 shares were issued by the company, representing approximately 15.00% of the issued share
capital, at a value of £138.0m, after fees, representing an average cost per share of 900p.
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 4 August 2020, the company announced a restructure of its head office, with expected redundancies of approximately
108 people, at cost of around £5m.
On 7 August 2020, the company agreed on a three-year secured loan, under the coronavirus large business interruption loan
scheme, for £48,333,332.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
53
SECTION 2
In addition, the directors have noted the range of
possible additional liquidity options available to the
Company, should they be required.
Material uncertainty, which may cast significant doubt
over the Company’s ability to trade as a going concern,
has resulted from the impact of the Covid-19 virus on
the economy and the hospitality industry. It is not clear
when the current operating restrictions, such as social
distancing measures and reduced pub opening times,
will return to ‘normal’ preCovid levels.
The Company has agreed with its lenders to replace
existing financial covenant tests with a minimum
liquidity covenant for the period up to and including July
2021. There is material uncertainty beyond this date as
to whether financial covenant tests will be satisfied or
whether further waivers will be agreed on by lenders.
The Company will remain in regular dialogue with its
lenders throughout the period.
As a result, the directors have satisfied themselves
that the Company will continue in operational existence
for the foreseeable future. For this reason, the
Company continues to adopt the going-concern basis
in preparing its financial statements.
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 highly
probable future borrowings or interest rates may result
in all or part of the gain or loss, which was originally
reported in comprehensive income, 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.
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 26 July 2020
were authorised for issue by the board of directors on
15 October 2020, 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 54–61.
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 26 July 2020.
These policies have been consistently applied to
all of the years presented, unless otherwise stated.
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.
The Company has modelled a range of scenarios, with
the base forecast being one in which, over the next 12
months, sales recover gradually to preCovid levels. In
addition, the directors have considered several
‘downside’ scenarios, including adjustments to the
base forecast, a period of significantly lower like-for-like
sales, regional pub closures for a prolonged time
period and the possibility of another national temporary
closure (‘lockdown’) of all of its pubs.
The directors are satisfied that the Company has
sufficient liquidity to withstand adjustments to the base
forecast, as well as the downside scenarios. The length
of the liquidity period, in relation to each outcome,
depends on those actions which the Company chooses
to take (eg the extent to which cash expenditure is
reduced) and also on the level of government financial
support (eg reduced business rates) which the
Company might receive.
54
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
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.
In the period, the Company recognised costs related
to the Covid-19 closure as exceptional. The Company
treated as exceptional those costs which were incurred
directly as a result of the pubs’ closure and reopening.
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 that 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 8%. Pubs with right-of-use assets
will use a weighted average discount rate of between
8% and the Company’s incremental borrowing rate
appropriate for the length of the lease. The 8%
and incremental borrowing rate will be assigned a
weighting, based on the book value of the
pub’s property, plant and equipment and its
right-of-use assets.
Management make 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 and government
interventions in relation to Covid-19 management. In all
of these areas different estimates could be made. A
reduction of 25% in next year’s future cash flows in
relation to those pubs which have indicators of
impairment and are thus included in managements
impairment review process, would increase the
impairment charge by £2.7m. An increase of 1% in the
discount rate on the same pubs would increase the
impairment charge by £10m. However, both of these
amounts are theoretical – and the Company would
respond to an event which caused a reduction in future
cash flows. In addition, an increase in discount rates
would normally imply an increase in expected future
inflation. To the extent that the increased discount rate
would be offset by inflation, the increase impairment
loss would be mitigated.
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 would generate.
ACCOUNTING POLICIES
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.
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
charges and reversals of fixed assets 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, along with the 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. The
Company does not consider these costs to be
operating in nature.
Fixed assets
Fixed assets include property, plant and equipment,
intangible assets and investment property. 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 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, is depreciated over
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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
55
ACCOUNTING POLICIES
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.
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 with the corresponding
revenue of the previous year.
Government grants
Monetary and non-monetary resources transferred to
the Company by government, government agencies or
similar bodies are recognised at fair value, when the
Company is certain that the grant will be received.
Grants will be recognised net in the profit and loss
account, on a systematic basis, over the same period
during which the expenses, for which the grant was
intended to compensate, are recognised.
Grants are disclosed in the notes to the accounts.
Leases
Lessee accounting
On completion of a contract (the point at which a
contract becomes legally binding), the Company
assesses whether the contract is or contains a lease.
A lease is present where the contract conveys, over a
period of time, the right to control the use of an
identified asset in exchange for a consideration.
The lease liability is initially measured at the present
value of unavoidable lease payments discounted at the
Company’s incremental borrowing rate. Where a lease
is identified, the Company recognises a right-of-use
asset and a corresponding lease liability. The
lease assets are presented as a separate line in
the balance sheet.
Lessor accounting
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.
Leases where the lessor transfers substantially all of
the asset’s risks and benefits of ownership are
classified as lease assets. This occurs when the
Company sublets a leasehold site. The lease asset is
initially measured at the present value of lease
receipts, discounted at the Company’s incremental
borrowing rate. The lease assets are presented as a
separate line in the balance sheet.
Remeasurement
When the Company agrees to a term extension or a
change to the minimum payments made under a lease,
the lease liability or asset will be remeasured on that
date; the resulting increase or decrease to the asset or
liability will be accounted for with an offsetting
adjustment to the right-of-use asset. Any
remeasurement adjustment which reduces the right-of-
use asset below zero will be credited to the profit and
loss account.
56
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
Right-of-use asset
The right-of-use asset comprises the initial
measurement of the corresponding lease liability, any
initial direct costs and the cost of any obligation to
restore the site at the end of the lease. They are
subsequently measured at cost less accumulated
depreciation and impairment losses. Right-of-use
assets are depreciated over the term of the lease.
Termination of leases
Where the Company agrees with the landlord to end a
lease early or purchases the freehold of a leasehold
site, the value of the lease liability and the right-of-use
asset will be charged to the profit and loss account as
a property gain or loss.
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 cash flow
reporting, interest paid and received is considered
to be 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.
ACCOUNTING POLICIES
Free cash flow
The calculation of free cash flow is based on the
net cash generated by business activities after
funding interest, corporation tax, lease principal
payments, 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 cost
Financial assets held at amortised cost 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.
Other receivables
Other receivables are recognised initially at transaction
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.
Financial liabilities
The Company classifies its financial liabilities as other
financial liabilities. These are measured at fair value on
initial recognition and subsequently measured at
amortised cost, using the effective-interest method.
Trade and other payables
These are recognised initially at fair value
and subsequently at amortised cost, using the
effective-interest method.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
57
ACCOUNTING POLICIES
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 purchased is transferred from share capital to
the capital redemption reserve.
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 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 and one-off items. They are
calculated as pre-IFRS 16 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.
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
These are both the cash and non-cash movements
of the year, including movements in asset-financing ,
borrowings, cash and cash equivalents.
58
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
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
At the date of authorisation of these financial
statements, certain new standards and amendments to
existing standards have been published which are not
yet effective and have not been adopted early by the
Company. Information on those expected to be
relevant to the financial statements is provided below:
Conceptual Framework for Financial Reporting
Definition of a Business (Amendments to IFRS 3)
Definition of Material
(Amendments to IAS 1 and IAS 8)
IFRS 17 Insurance Contracts
Amendments to IFRS 9, IAS 39 and IFRS 7
Interest Rate Benchmark Reform
The Company has several interest-rate swaps which
swap floating interest rates paid for a fixed interest rate.
The floating interest rates are based on an index called
the London Interbank Offer Rate (LIBOR). Reforms are
currently under way which plan to replace sterling
LIBOR with an index called Sterling Overnight Indexed
Average (SONIA).
Under existing accounting rules, this change of
reference index in the Company interest-rate swap
contract could result in the discontinuation of hedge
accounting. The Company has elected to early adopt
the Amendments to IFRS 9, IAS 39 and IFRS 7 Interest
Rate Benchmark Reform issued in September 2019
and mandatory for accounting periods starting after
1 January 2020. The amendments have been
adopted retrospectively to hedging relationships which
existed at the start of the reporting period or were
designated thereafter.
ACCOUNTING POLICIES
The amendments provide temporary relief from
applying specific hedge accounting requirements to
hedging relationships directly affected by Interbank
Offer Rate (IBOR) reform. Therefore, IBOR reform
should not generally cause hedge accounting to
terminate; however, hedges will still be measured for
effectiveness, with any ineffectiveness being charged
in the profit and loss account.
The Company has £770m of LIBOR interest-rate
swaps which are in place until 29 March 2029.
For the purpose of assessing whether a hedge is
expected to be highly effective on a forward-looking
basis, it is assumed that the GBP LIBOR interest rate
on which the cash flows of the interest-rate swap
(which hedges fixed-rate debt) are based is not altered
by IBOR reform.
The Company is working with its banking partners on
the implementation of this change.
The 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:
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 Amendment, 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 became effective, the
Company recognised, 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.
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
have been classified as finance leases under the new
standard, as the risks and rewards of ownership of the
IFRS 16 right-of-use asset 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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
59
ACCOUNTING POLICIES
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 single discount rate to a portfolio
of leases with reasonably similar characteristics
The use of existing onerous lease provisions,
rather than performing 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, relating 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 26 July 2020, 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.
The table below shows the transition
adjustments applied to the opening balance sheet
for the year ending 28 July 2019.
Other
Other non-current assets
Right-of-use assets
Lease assets
Total non-current assets
Other current assets
Lease assets
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 2019
£m
1,422
8
–
–
1,430
70
–
22
1,522
(326)
–
(326)
(866)
–
(2)
(11)
(1,205)
317
317
IFRS 16 Restated
£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 its later years. The expense will be recognised
as a depreciation and interest charge, replacing the
operating expenses under IAS 17.
For the year ended 26 July 2020, EBITDA has
increased by £58.5m and operating profit by £9.8m.
Finance costs increased by £21.5m, resulting
in a decrease in loss before tax of £10.6m.
60
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
ACCOUNTING POLICIES
Tax impact on changes to the income statement
The IFRS 16 depreciation and interest expense will be
deducted when calculating current tax. In the financial
year, the current tax charge, excluding exceptional
items, was reduced by £2m. The reduction in tax
payments in the early years of a lease will be offset by
higher tax payments in its later years.
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 on 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
of the 2019 financial statements, 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
Amendment to IFRS 16 Covid-19-Related
Rent Concessions
This amendment has been adopted by the Company
and its impact disclosed in note 25.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
61
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.
Employees receive training in this area, along with an
energy guide which provides employees, among other
things, with information about when equipment should
be turned off or on.
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
those 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, 7.3 tonnes of food waste
was recycled (2019: 11.6 tonnes)
Used cooking oil is converted to biodiesel
for agricultural use
Energy consumption
The Company sets annual targets to reduce electricity,
gas and water consumption through a combination of
operational initiatives and the introduction of energy-
efficient technology. Reduced consumption will reduce
our annual CO2 emissions.
The Company has an Energy Steering Group, chaired
by a board director. Each pub has an energy
champion, responsible for reducing consumption
at his or her pub and communicating top tips and
initiatives to staff.
Each pub receives a monthly report, detailing the
amount of electricity and gas consumed, including tips
on how this can be reduced.
In the year ended 31 March 2020, the Company
achieved a consumption saving of 5.2%.
Several pieces of energy-saving technology are
now installed as standard in any new pub and
have been retro-fitted in many pubs across the estate.
These include:
Cheetah extraction management systems
Free-air cellar-cooling systems
Sensor lighting
LED lighting
Heat-recovery systems
The Company trials new ideas and energy-saving
technology to reduce consumption and CO2 emissions,
such as:
Solar panels
Rainwater-harvesting systems
Ground-source-heat pumps
Adiabatic cooling systems
Wind turbines
Light tubes
Building energy management systems
Voltage optimisation
The Company is a member of the Carbon Statement
forum – a group which provides energy-saving
technology and shares best practice with other
companies in the hospitality sector.
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.
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
programme, documented processes and procedures
and a supply chain audit programme.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
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STRATEGIC REPORT
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 completing
regular visits to pubs – and pub employees regularly
visiting head office
Weekly e-mail from the chief executive
to all employees
Employee-related measures being
part of the pub bonus scheme
Head-office staff completing 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
731
19,661
Female
2
454
21,837
Section 172 statement
All directors of the Company have acted in good faith
in a manner most likely to achieve the long-term
success of the business for its shareholders,
employees, customers, suppliers and the wider
community in which the Company operates.
Wherever practical, the directors consult widely
among the Company’s employees, regarding decisions
to be made about the Company. The directors believe
that wide consultation and a management team with
extensive industry experience are most likely to make
the best long-term decisions.
Details of the Company’s employment policy
are disclosed on page 93. Information on employee
engagement can be found above.
Where possible, the Company forms long-term
relationships with suppliers, so that the Company and
its suppliers have a more certain environment in which
to operate. The Company’s responsible retailing policy
is published on its website.
The Company aims to provide customers with
good-quality food and drinks, served by well-trained
and friendly staff, at reasonable prices.
The Company communicates with its customers
through its website and Wetherspoon News.
Most of the Company’s employees are also
customers. The Company encourages its employees
to feed back their views and the views of their friends
and families.
Information on human rights, environmental and
social matters, food safety, cyber security and
reputational matters is provided in this strategic report,
while further information is published on the
Company’s website.
Information on relations with shareholders is
provided in the corporate governance report.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
63
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
Widespread pub closures
This is where an external event leads either
directly or through government action to widespread
pub closures, an example of this risk being the
closures during 20 March–4 July 2020, owing to the
coronavirus pandemic.
The impact of such an event will depend on the nature
of the event and the reaction to that event by the
government and the public. The impact of the
coronavirus pandemic on the 2019/20 accounts is
disclosed on page 24.
The primary concern of the Company will be the health
and safety of its staff and customers, ensuring that the
pubs are safe places to eat and drink. Mitigating
actions taken by the Company will depend on the
nature of the event, how much foresight the Company
had of the event and the reaction of the government,
business and the public.
Recruitment and retention
Ensuring that our pubs are sufficiently staffed is crucial
to their successful operation.
To attract and retain employees, the Company offers
bonuses, free shares, long-service 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.
There have been limitations on the Company’s
food-hygiene-monitoring, owing to restrictions
implemented to control the coronavirus pandemic.
It is the Company’s intension to reintroduce all
monitoring activities as soon as that can safely be
done. While restrictions have been in place, the
Company has maintained food-hygiene-monitoring,
wherever possible.
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 taken by
the Company, including a comprehensive disaster-
recovery plan, seeking to minimise the impact of
any such incidents.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
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STRATEGIC REPORT
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 £1.0m, of which £1.0m 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.
Liquidity risk
The Company regularly monitors cash flow forecasts
and endeavours to ensure that there are enough funds,
including committed bank and asset-financing
obligations, 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
15 October 2020
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.
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 26 July 2020, 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 £258,000 and
equity increased by £66,700,000. 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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
65
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF J D WETHERSPOON PLC
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
26 July 2020, 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. 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 26 July 2020 and of its loss for
the 52 week period then ended;
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.
Material uncertainty related to going concern
We draw attention to the going concern narrative on
page 54 in the financial statements, which highlights
the risks to the Company’s ability to continue to trade
as a going concern due to the impact of the Covid-19
virus on the economy and the hospitality industry and
the ongoing uncertainty surrounding current operating
restrictions, such as social distancing measures and
reduced pub opening times. The Company has agreed
replacement covenant tests up to and including 25 July
2021 but beyond this date, there is material uncertainty
as to whether financial covenant tests will be satisfied,
or whether further waivers will be agreed by lenders.
As stated on page 54, these events or conditions,
along with the other matters as set out on page 54,
indicate that a material uncertainty exists that may cast
significant doubt on the Company’s ability to continue
as a going concern. Our audit opinion is not modified in
respect of this matter.
In responding to the risks relating to going concern and
evaluating whether a material uncertainty exists, our
procedures evaluated management’s assessment of
the impact of Covid-19 on the company’s business
model, working capital and covenant compliance by
undertaking the following work:
obtained management’s base case forecast for a
period of 15 months from the anticipated date of
approval of the financial statements, together with
supporting evidence for all key trading, working capital
and cash flow assumptions;
obtained management’s three downside scenarios,
which reflect management’s assessment of further
uncertainties, and which management consider to be
severe but plausible. We evaluated the assumptions
regarding the forecast period of closure and reduced
trading levels under each of these scenarios. We
considered whether assumptions are consistent with
our understanding of the business obtained during the
course of the audit and the changing external
circumstances arising from government Covid-19
interventions;
robustly challenged the process that management
has undertaken to conclude on the appropriateness of
the going concern basis of preparation, including
challenging and applying sensitivities to the key
assumptions made by management in preparing the
forecasts;
tested the robustness of forecasts prepared by
comparison to forecasts made in prior periods,
including assessing managements historic ability to
forecast, and in light of our understanding of the
Company’s operations;
obtained correspondence in relation to covenant
waivers and amendments and confirmed that the terms
and conditions therein were consistent with those
applied by management in their base case and
downside scenario forecasts, including the period over
which the bank has confirmed that these waivers and
amendments are in place;
considered the reasonableness of any further
mitigating actions identified by management, which
included an assessment of the feasibility and
quantification of such mitigative measures available to
management; and
reviewed the disclosures made within the financial
statements for consistency with management’s
assessment of going concern and in line with the
accounting standards.
Conclusions relating to principal risks, going
concern and viability statement
We draw attention to the Viability Statement in the
Annual Report at page 76 which indicates that in
making the viability statement the Board considered the
material uncertainty related to going concern, as a
result of the coronavirus pandemic, and the potential
impact on the viability of the Company over the
assessment period.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
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INDEPENDENT AUDITORS’ REPORT
Aside from the impact of the matter disclosed above
and in the material uncertainty related to going concern
section, 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
64, 65 and 91 that describe the principal risks,
procedures to identify emerging risks and an
explanation of how they are being managed or
mitigated;
the directors’ confirmation, set out on pages 64, 65
and 91 of the annual report that they have completed a
robust assessment of the principal and emerging risks
facing the company, including those that would
threaten its business model, future performance,
solvency or liquidity;
whether the directors’ statements relating to going
concern and the prospects of the company required
under the Listing Rules in accordance with Listing Rule
9.8.6R(3) are materially inconsistent with our
knowledge obtained in the audit; or
the directors’ explanation, set out on page 76 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: £4,500,000, which represents
4.7% of the company’s preliminary 3-year average
profit / (loss) before taxation;
Key audit matters were identified as the impairment
of property, plant and equipment and right of use
assets, the impact of the new Financial Reporting
Standard – IFRS 16 ‘Leases’, management override of
controls – the presentation of exceptional items and
matters giving rise to material uncertainty related to
going concern;
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.
In addition to the matter described in the ‘Material
uncertainty related to going concern’ section, we have
determined the matters described below to be the key
audit matters to be communicated in our report.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
67
INDEPENDENT AUDITORS’ REPORT
Key Audit Matters
How the matter was addressed in the audit
Impairment of property, plant and equipment
and right of use assets
Property, plant and equipment represents the
largest balance on the balance sheet (26 July
2020: £1.4bn). Further to this, there is the new
‘Right of Use’ asset recognised following the
adoption of IFRS 16 from the start of the year.
At 26 July 2020 the carrying value was £514m.
The Directors consider each individual pub to be
a separate cash generating unit for impairment
purposes and as explained in note 13 to the
financial statements, the Directors are required
to undertake an impairment assessment where
events indicate that the carrying value of the
cash generating unit may not be recoverable.
The uncertainties inherent within the current
economic environment caused by the
Coronavirus pandemic, including the recent
closure of all pubs in the UK and the
government’s ongoing response to the virus,
have been included within management’s
consideration of qualitative and qualitative
impairment indicators.
The process for measuring and recognising
impairment under IAS 36: ‘Impairment of
Assets’ is complex and requires significant
judgement, including assumptions on
management’s assessment of the impact of the
Coronavirus on the future trading activity for
each pub, the determination of the appropriate
discount rate to be applied to those cashflows,
as well as the valuation of properties.
We therefore identified the assessment of
impairment of property, plant and equipment
and right of use asset 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 the design effectiveness of controls, including the
methodology applied by management to identify indicators of
impairment and when performing their impairment test for each of the
relevant pubs;
Testing the arithmetical accuracy and integrity of management’s
impairment model, by checking the internal consistency of the
formulae;
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, including assessment of
the impact of Coronavirus on both short-term trading and the longer-
term growth rate;
Comparing management’s assumptions against external economic
forecasts reflecting the uncertainties inherent within the current
economic environment;
Obtaining corroborative evidence to support management’s
judgements used for those pubs with indicators of impairment;
Using our valuation experts to assess the reasonableness of the
discount rate applied to cash flows, which included benchmarking to
comparator companies and other market information;
Performing sensitivity analysis on the various assumptions used in
the model and the risks and uncertainties surrounding Coronavirus;
Testing whether any impairment charges have been appropriately
reflected in the Company’s accounting records;
Considering the accounting policy for compliance with IAS 36 and
that the application by the Company is consistent with the stated
policy; and
Assessing whether disclosures in respect of the accounting policy
and disclosures made in the financial statements relating to
impairment are appropriate.
The Company’s accounting policy on impairments is shown on page
55 and related disclosures are included in respect of impairment in
Note 13.
The Audit Committee identified the provision for impairment of fixed
assets as a significant financial reporting item in its report on page 91,
where the Audit Committee also described the action that it has taken
to address this issue.
Key observations
Management concluded that additional impairments were required
having considered our audit findings in relation to the impairment of
property, plant and equipment and related right of use assets.
There are no further material misstatements identified from our audit
work which have not been adjusted by management.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
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INDEPENDENT AUDITORS’ REPORT
Key Audit Matters
How the matter was addressed in the audit
Our audit work included, but was not restricted to:
Assessing the design effectiveness of controls for determining lease
accounting under IFRS 16, including the identification of leases,
reassessments and modifications, and reconciliations performed to
ensure the data is appropriately captured;
Testing the arithmetical accuracy and integrity of the underlying
data, by checking the consistency of the formulae and ageing inputs
to supporting documentation including lease agreements and lease
modification documentation;
Testing the completeness of the leases identified to known leases
and lease payments made in the period;
Validating a sample of new leases and lease modifications to verify
the accuracy of the underlying lease data and validate the inputs used
in the calculation;
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; and
Assessing the accounting policy and disclosures for compliance
with IFRS as adopted by the EU, including updated guidance in
relation the practical expedient to provide relief for lessees from lease
modification accounting for rent concessions related to Covid-19.
The Company's accounting policy on IFRS 16 is shown on pages 56–
57 to the financial statements and related disclosures are included in
Note 25.
Key observations
Management concluded that amendments were required to their IFRS
16 accounting having considered our audit findings in relation to their
application of the Covid-19 related rent concession practical
expedient.
There are no further material misstatements identified from our audit
work which have not been adjusted by management.
Impact of the new International Financial
Reporting Standard (IFRS) 16 ‘Leases’
IFRS 16 ‘Leases’ is applicable to financial
statements with accounting periods
commencing on or after 1 January 2019 and
requires lessees to account for leases on
balance sheet by recognising a right of use
asset and a lease liability.
At 26 July 2020 the right of use asset totalled
£514m, with a corresponding lease liability of
£555m.
The process for measuring the impact of IFRS
16 is complex and requires significant
judgement, including:
Determination of the discount rate applied in
calculating lease liabilities, specifically in
assessing the Company’s Incremental
Borrowing Rate (IBR);
Lease term including break clauses,
termination and extension options; and
Use of practical expedients on transition
including judgements made around low value or
short-term leases.
Due to the impact of Covid-19 the International
Accounting Standards Board (“IASB”) has
issued a practical expedient to provide relief for
lessees from lease modification accounting for
rent concessions related to Covid-19. The
amendment is applicable for reporting periods
beginning on or after 1 June 2020 and
management have early adopted this practical
expedient. Management must make an
assessment of each change in lease payment
terms to ensure it meets the requirements of the
practical expedient.
We have therefore identified the impact of the
new International Financial Reporting Standard
– IFRS 16, as a significant risk, which was one
of the most significant assessed risks of
material misstatements.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
69
INDEPENDENT AUDITORS’ REPORT
Key Audit Matters
How the matter was addressed in the audit
Management override of controls - the
presentation of exceptional items
The risk of management override of controls
arises in the judgemental areas within the
financial statements. The key judgements are
highlighted on page 54 of the annual report and
exceptional items is flagged as one of those
areas.
Exceptional items are presented separately in
the income statement and further detailed in
Note 4 of the financial statements, and total
£59.0m (FY19 - £6.9m). This includes costs
associated with Covid-19 of £29.1m, the gaming
machine settlement credit of £15.9m, exceptional
property losses of £47.5m, and the exceptional
tax credit of £1.6m.
There are a number of key management
judgements around which items should be
presented as exceptional.
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 the prior period, including gains and losses in relation to
the continuing pub disposal programme and other property losses;
Challenging management around the appropriateness of costs
associated with the closure of pubs due to Covid-19 being presented
as exceptional;
Testing a sample of items classified as exceptional to agree to
supporting documentation, including completion statements and
invoices; and
Checking that disclosures 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 55 and related disclosures are included in Note 4.
The Audit Committee identified exceptional items presentation as a
significant financial reporting item in its report on page 91, where the
Audit Committee also described the action that it has taken to address
this issue.
Given the high levels of judgement included
within this classification and the risk of
inappropriate presentation of pre-exceptional
results, we therefore identified the presentation
of exceptional items as a significant risk, which
was one of the most significant assessed risks of
material misstatement
Key observations
As a result of audit procedures performed, we have not identified any
material misstatement with respect to management’s classification of
exceptional items.
70
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
INDEPENDENT AUDITORS’ REPORT
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
the 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 enquiries of management, those
responsible for legal and compliance procedures and
the company secretary. Our findings were corroborated
by review of the 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:
Obtaining an understanding of 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, with a
focus on entries made with unusual
accounting combinations;
Assessing matters reported through the
group’s whistleblowing programme and the
results of management’s investigation of such
matters; and
Identifying and assessing the design
effectiveness of controls management has in
place to prevent and detect fraud.
We did not identify any key audit matters relating to
irregularities, including fraud.
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.
fdfdfds
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 work and in evaluating
the results of that work.
We determined materiality for the audit of the financial
statements as a whole to be £4,500,000 which
represents 4.7% of the company’s preliminary 3 year
average profit / (loss) before taxation. This benchmark
is considered the most appropriate because of the
unprecedented impact of Covid-19 on the Company’s
results and annual report.
Materiality for the current period is lower than the level
that we determined for the period ended 28 July 2019
to reflect the increased risk in light of Covid-19.
We use a different level of materiality, performance
materiality, to drive the extent of our testing and this
was set at 75% of financial statement materiality.
We also determine a lower level of specific materiality
for certain areas such as directors’ remuneration and
related party transactions.
We determined the threshold at which we will
communicate misstatements to the audit committee to
be £225,000. In addition, we will communicate
misstatements below that threshold that, in our view,
warrant reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was a 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 which was updated to reflect the
additional risks and uncertainties associated with
Covid-19.
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).
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
71
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.
In our opinion, based on the work undertaken in the
course of the audit:
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
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.
INDEPENDENT AUDITORS’ REPORT
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
this 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
75 – 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 company’s performance,
business model and strategy, is materially inconsistent
with our knowledge obtained in the audit; or
Audit committee reporting set out on pages 91 and
92 – 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 88 – the
parts of the directors’ statement required under the
Listing Rules relating to the company’s 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.
72
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
Matters 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;
we have not received all the information and
explanations we require for our audit; or
a corporate governance statement has not been
prepared by the company.
Responsibilities of directors for the financial
statements
As explained more fully in the directors’ responsibilities
statement set out on page 75 and 76, 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.
INDEPENDENT AUDITORS’ REPORT
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
The period of total uninterrupted engagement including
previous renewals and reappointments of the firm is
between 2 and 3 periods of 52 weeks. The non-audit
services prohibited by the FRC’s Ethical Standard were
not provided to the company 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 21.
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.
Marc Summers BSc (Hons) FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
16 October 2020
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
73
DIRECTORS, OFFICERS AND ADVISERS
Tim Martin Chairman, aged 65
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 55
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 42
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 53
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 51
Joined in 2009 and was appointed Company Secretary in 2014.
He is a graduate of Newcastle University and qualified as a solicitor in 1997.
Debra van Gene Non-Executive Director, Remuneration Committee Chair, aged 65
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.
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
Sir Richard Beckett Non-Executive Director, Nomination Committee Chair, aged 76
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.
Solicitors
Macfarlanes LLP
20 Cursitor Street
London
EC4A 1LT
Harry Morley Non-Executive Director, Audit Committee Chair, aged 55
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, TheWorks.co.uk plc and of
Cadogan Group and its related subsidiary companies. 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 59
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 51
Joined in 1994, having previously worked for Safeway plc. He worked in several
operational roles, before being appointed as operations director in 2004.
James Ullman, Audit Director, aged 49
Joined in 1994. He was appointed to the management board in 2019. He is a graduate of
Brighton University and Birmingham City University and became a chartered auditor in
2011.
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
74
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
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 74.
Dividends
No dividend will be paid for the year.
Return of capital
At the annual general meeting of the Company, held on
21 November 2019, the Company was given authority
to make market purchases of up to 15,701,759 of its
own shares. During the year to 26 July 2020, 419,741
shares were purchased, with a nominal value of
£8,000, for a total consideration of £6,455,000,
including stamp duty. This represented 0.40% of the
called-up share capital.
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.
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.
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.
Takeover directive disclosures
The Company has an authorised share capital
comprising 500,000,000 ordinary shares of 2p each.
As at 26 July 2020, the total issued share capital
comprised 120,380,155 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 2020 are given on page 94.
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 2019. 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 2020.
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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
75
DIRECTORS’ REPORT
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
Business relations
Information on the Company’s relations with customers
and suppliers is disclosed in the strategic report on
page 63.
Employment policies
Information on the Company’s employment policies
is disclosed in the corporate governance report on
page 93.
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 31 of the UK Corporate
Governance Code 2018, 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.
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 48–57, 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, the
closure of some or all of its pubs 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 64–65 are the
result of internal risk management and control
processes, with further details set out in the
audit committee’s report on pages 91 and 92.
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.
The Company has modelled a range of scenarios, with
the base forecast being one in which, over the next 12
months, sales recover gradually to preCovid levels. In
addition, the directors have considered several
‘downside’ scenarios, including adjustments to the
base forecast, a period of significantly lower like-for-like
sales, regional pub closures for a prolonged time
period and the possibility of another national temporary
closure (‘lockdown’) of all of its pubs.
The directors are satisfied that the Company has
sufficient liquidity to withstand adjustments to the base
forecast, as well as the downside scenarios. The length
of the liquidity period, in relation to each outcome,
depends on those actions which the Company chooses
to take (eg the extent to which cash expenditure is
reduced) and also on the level of government financial
support (eg reduced business rates) which the
Company might receive.
76
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
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DIRECTORS’ REPORT
In addition, the directors have noted the range of
possible additional liquidity options available to the
Company, should they be required.
The comparative numbers for greenhouse gas
emissions have been updated to include the Republic
of Ireland.
Overseas branches
The Company has an overseas branch
in the Republic of Ireland
Listing Rule 9.8.4 R
Information required by this rule to be disclosed
(starting on page indicated, if applicable):
Details of long-term incentive schemes,
page 25 to 26
Provision of services by a controlling shareholder
page 78 to 87,
Agreements with controlling shareholders, page 52
Corporate governance (DTR 7.2.9 R),
pages 88 to 93
Events after the reporting period
The details of events after the reporting period
can be found in note 29 on page 53.
By order of the board
Nigel Connor
Company Secretary
15 October 2020
Material uncertainty, which may cast significant doubt
over the Company’s ability to trade as a going concern,
has resulted from the impact of the Covid-19 virus on
the economy and the hospitality industry. It is not clear
when the current operating restrictions, such as social
distancing measures and reduced pub opening times,
will return to ‘normal’ preCovid levels.
The Company has agreed with its lenders to replace
existing financial covenant tests with a minimum
liquidity covenant for the period up to and including July
2021. There is material uncertainty beyond this date as
to whether financial covenant tests will be satisfied or
whether further waivers will be agreed on by lenders.
The Company will remain in regular dialogue with its
lenders throughout the period.
As a result, the directors have satisfied themselves
that the Company will continue in operational existence
for the foreseeable future. For this reason, the
Company continues to adopt the going-concern basis
in preparing its financial statements.
Greenhouse gas (GHG) emissions
GHG Emissions
Unit
Scope 1
Scope 2
Fuel (car)
Intensity
Tonnes CO2e
Tonnes CO2e
Tonnes CO2e
Tonnes CO2e /
£m revenue
Quantity
2020
45,012
68,297
745
2019
47,358
94,016
1,034
63.1
79.9
Consumption (kWh)
Scope 1
Scope 2
Fuel (car)
Total
2020
244,801,679
292,946,271
3,138,550
540,886,500
2019
257,589,099
308,430,989
4,277,561
570,297,649
The data in the above tables is calculated by taking
consumption data and converting it using conversion
factors published by the Department for Business,
Energy & Industrial Strategy.
Reported data is for the year ended 31 March 2020
Scope 1 – combustion of gas
Scope 2 – purchase of electricity
Refrigerant emissions from our pubs are
not reported, as they are immaterial
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
77
DIRECTORS’ REMUNERATION REPORT
Annual statement
Dear shareholder
This year, the Company’s remuneration policy is due
for renewal. The remuneration committee is proposing
a revised policy which varies from the existing policy in
the areas of executive directors’ pensions and
shareholding requirements, following new provisions in
the revised Corporate Governance Code 2018 (see
page 88). The policy will be presented for approval by
shareholders at the AGM on 17 December 2020.
The following salary increases and awards were
made to executive board members this year,
in accordance with the remuneration policy agreed
on by shareholders at the Company’s AGM in
November 2017:
Salary
The salaries of the CEO and the personnel and legal
director were increased by 2.5% at the beginning of
this financial year. This compares with a 3% increase
for the general salaried workforce.
Following consultation with several of the Company’s
top shareholders in 2019, in which it was agreed that
the finance director’s salary would be increased, over
time, towards market levels for a finance director of a
FTSE 250 company. The remuneration committee
increased the finance director’s salary by 11%.
With the subsequent advent of coronavirus, the
chairman and CEO voluntarily reduced their salaries by
50% during 24 March–31 July 2020. The personnel
and legal director and the finance director voluntarily
reduced their salaries by 41.6% and 38.0%,
respectively, over the same period. All non-executive
directors also voluntarily reduced their fees by
50% for this period.
Annual cash bonus
There will be no annual cash bonus award to executive
directors this year.
An award of 3.3% of salary was made for
predominantly out-of-hours pub calls carried out in the
year up until March, to maintain quality and standards.
This element of the annual bonus extends beyond
board level. It was suspended in March.
Deferred bonus scheme
There will be no deferred bonus award to executive
directors this year.
Company Share Incentive Plan (SIP)
These awards are made twice yearly throughout
the Company. The SIP award took place in September
2019 as normal, but not in March 2020.
The effect of this is that executive directors received
an amount equivalent to 12.5% (normally 25%) of their
salary in shares.
The CEO and the personnel and legal director
each received an additional award equivalent to 2.5%
(normally 5%) of their salary, because of their
length of service. This additional award 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.
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.
Please see details for pension provisions proposed
under the revised Corporate Governance Code 2018 in
the remuneration policy on page 79 to be presented for
approval by shareholders on 17 December 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 policy proposals at
the AGM on 17 December 2020.
Debra van Gene
Chair of the Remuneration Committee
15 October 2020
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
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DIRECTORS’ REMUNERATION REPORT
Remuneration policy
The revised policy was prepared in compliance with Part 4 of Schedule 8 to the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2013, as amended. The key changes in the new policy are
summarised in the Chair’s annual statement on page 78.
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 statement of our remuneration policy will apply from the company’s next AGM on 17 December 2020, subject to
shareholders’ approval at that meeting. The statement of our policy will replace the one approved in November 2017.
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.
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.
Benefits
Provide attractive
and fair
remuneration
for directors.
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.
Pension
Provide attractive
and fair
remuneration
for directors.
In addition, an allowance equivalent to 5% of salary is paid for a set number of
calls to monitor service and standards in pubs, predominantly in the evening
and at weekends. This is paid quarterly.
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.
Newly appointed executive directors will receive a pension contribution of 6%
which is aligned with that made on average to the wider workforce at the date
of this policy. For the basis of this, please see the table on page 84.
Existing executive directors will continue to receive 12% of base salary,
on the basis that this has never been excessive, is lower than the average for
FTSE250 firms and is not disproportionate with that of the wider workforce.
After 25 years’ service, all employees in the Company, including executive
directors receive additional pension payments of 2% of their salary. This rises
by a further 2% after each additional five years’ service.
Executive directors may receive a salary supplement in lieu of pension, at the
discretion of the remuneration committee.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
79
DIRECTORS’ REMUNERATION REPORT
Component
Annual bonus
plan
Reason
Incentivise
directors
to perform to a
high level.
Share Incentive
Plan (SIP)
Align directors’
interests with
those of
shareholders,
employees and
the wider
community.
Operation, maximum achievable and performance criteria
Annual bonus payments are paid in cash, at the discretion of the
remuneration committee.
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, property gains/losses and exceptional items.
Provisions are in place which permit the Company to reclaim awards under
this scheme as set out on page 82.
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. The aim is for all
employees to be able to accumulate shares over time, to encourage loyalty
and joint purpose.
Awards are made twice yearly throughout 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.
80
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
DIRECTORS’ REMUNERATION REPORT
Component
Reason
Operation, maximum achievable and performance criteria
Deferred
Bonus Scheme
Align directors’
interests with those
of shareholders,
employees and the
wider community.
The Company does not operate a shareholding scheme with a minimum
vesting period of five years.
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 as set out on page 82.
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 2020
81
DIRECTORS’ REMUNERATION REPORT
Shareholdings
Executive directors are required to maintain a minimum
shareholding. Minimum holding requirements are set
by the remuneration committee for each director and
are reviewed every three years, when the remuneration
policy is reviewed. Minimum holding requirements
include awarded shares which have not yet vested.
In the event of serious misstatement or misconduct,
the remuneration committee can stop bonuses from
being paid and prevent share awards from vesting.
The remuneration committee will make reasonable
judgement, based on the facts at hand. Any
actions taken will be at the discretion of the
remuneration committee.
To the extent that any executive director holds less
than the required number of shares, they have a five-
year period to meet this requirement from the date on
which the requirement is set. During this period, at
least 50% of any vested share awards must be
retained, until the required shareholding is attained.
On ceasing to be an executive director, a minimum
holding of 50% of the previous requirement must be
maintained for a minimum period of 12 months.
This guideline applies to shares which vest following
the adoption of this guideline. Any shares purchased by
executives would not be subject to the guideline.
The application of the minimum shareholding
requirement is at the discretion of the remuneration
committee.
The current minimum shareholding requirements are
200% of base salary, calculated on a £15.71 share
price at 29 July 2019, which was the share price at the
start of the financial year:
B Whitley
J Hutson
S Cacioppo
T Martin
Number of shares
Minimum
Requirement
Shares held
as 26 July 2020
28,000
76,000
44,000
41,000
24,577
191,137
55,653
32,976,209
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
appropriate to their level of responsibility
and performance.
Withholding and recovery of awards
Awards made under the bonus scheme and
the deferred bonus scheme may be reclaimed,
in exceptional circumstances of misstatement
or misconduct.
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, share-
based elements or additional pension contributions, 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.
82
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
Non-executive directors
The non-executive directors hold their positions,
pursuant to letters of appointment dated 1 November
2019, with a term of 12 months.
If their appointment is terminated early, 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
39%
56%
80%
17%
44%
£1,896
7%
20%
37%
£939
£1,352
£0
£400
£800 £1,200 £1,600 £2,000
Ben Whitley
Maximum
Expected
Minimum
38%
55%
79%
17%
8%
21%
37%
£358
£733
45%
£520
£0
£200
£400
£600
£800
Su Cacioppo
Maximum
Expected
Minimum
39%
56%
80%
17%
7%
20%
37%
£533
44%
£765
£1,071
£0
Fixed
£300
£600
£900
£1,200
Annual variable
Long-term incentive
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 26 July 2020
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.
DIRECTORS’ REMUNERATION REPORT
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
The maximum values provided for the long-term
incentive plan would not increase as a result of a
hypothetical 50% share price appreciation.
Consequently, no additional maximum values have
been provided for this scenario.
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
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
Retirement policy
The Company does not have a mandatory retirement
age. Employees wishing to retire should be aged at
least 55 years at the date of leaving (the minimum age
a person can access a workplace pension) and serve
their contractual notice period. Retiring employees are
permitted to retain any unvested shares held in any
Company scheme.
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 2020
83
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 26 July 2020.
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
2020
£000
2019
£000
Taxable
benefits1
2020
2019
£000
£000
Performance
bonus2
2020
£000
2019
£000
Long-term
incentives
2020
2019
Pension
contributions3
2020
2019
£000
£000
£000
£000
Total
2020
£000
2019
£000
212
522
304
220
620
348
16
19
17
17
21
20
7
17
10
11
31
17
28
93
52
84
276
155
29
87
49
26
87
49
358
292
738 1,035
589
432
1,038 1,188
52
58
34
59
173
515
165
162 1,462 1,982
267
9
45
45
45
324
53
53
53
53
12
–
–
–
–
17
–
–
–
–
411
536
12
17
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
279
9
45
45
45
341
53
53
53
53
423
553
Total
1,449 1,724
64
75
34
59
173
515
165
162 1,885 2,535
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. In respect of the
element for pub calls made to monitor standards, 3.3% was awarded, in line with 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, in salary, the portion of their company pension contribution which was above the
annual cap.
The final amount received by executive directors for long-term incentive awards will be affected by future changes in the
Company’s share price. A 50% increase in the share price between the award date and the vesting date will increase the
value of the award by 50%. Conversely, a 50% reduction will reduce the value of the award by 50%.
Company pension contributions for any newly appointed executive directors will be 6%. This aligns with contributions in
the wider workforce. The average employer contribution across all levels (pubs and head office) for the stakeholder plan
is 5.4%. The average employer contribution across all levels (head office only) for the stakeholder plan is 6.2%.
Covid-19 remuneration reductions
During 24 March–31 July 2020 (the closure period), the directors volunteered salary reductions as follows:
Ben Whitley:
John Hutson:
Su Cacioppo:
Tim Martin:
Debra van Gene:
Harry Morley:
Richard Beckett:
-£33,454
-£112,400
-£52,537
-£57,128
-£7,923
-£7,923
-£7,923
No pub call allowance was paid during the closure period.
There was no SIPS award in March 2020.
84
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
DIRECTORS’ REMUNERATION REPORT
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.
Maximum
Awarded
B Whitley
J Hutson
S Cacioppo
Pub calls
Profit growth
Total performance bonus
Employee share scheme
Employee share scheme – long service*
Deferred Bonus Scheme
Total long-term incentives
Total
5.0%
45.0%
50.0%
25.0%
5.0%
100.0%
130.0%
180.0%
3.3%
0.0%
3.3%
7,067
17,404
10,128
–
–
–
7,067
17,404
10,128
12.5%
28,113
2.5%
0.0%
15.0%
18.3%
77,858
15,571
–
–
–
28,113
93,429
35,180
110,833
43,706
8,741
–
52,447
62,575
*J Hutson and S Cacioppo received an additional 2.5% (normally 5%), as they have completed 25 years’ service
with the Company.
There was no earnings-per-share and no owners’-earnings-per-share growth this year.
Long-term incentive awards – audited
B Whitley
J Hutson
S Cacioppo
Number of shares
*Share **Deferred
Bonus
Scheme
2,168
Incentive
Plan
1,822
6,055
3,399
6,108
3,429
Total
3,990
12,163
6,828
Face value in £
Share
Incentive
Plan
28,113
93,429
52,447
Deferred
Bonus
Scheme
32,997
Total
61,110
92,964
186,393
52,189
104,636
11,276
11,705
22,981
173,989
178,150
352,139
*Awarded at an average share price of £15.43, three days before grant; shares will vest three years after grant.
**Awarded at an average share price of £15.22, five days before grant; shares vest in three equal tranches,
in September of each of 2019, 2020 and 2021.
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 26 July 2020, were as follows:
Ordinary shares of 2p each, held beneficially
Shares
Share
Incentive
Plan
Deferred
Bonus
Scheme
2020
Shares
Share
Incentive
Plan
Deferred
Bonus
Scheme
2019
32,976,209
32,976,209 33,466,934
9,670
9,296
5,611
24,577
5,680
11,648
33,466,934
30,276
12,948
140,039
33,928
17,170
191,137
111,461
45,671
42,016
199,148
26,969
19,045
9,639
55,653
25,368
25,637
23,588
74,593
–
3,777
2,000
3,111
–
–
–
–
–
–
–
–
–
3,777
2,000
3,111
1,000
1,000
2,000
2000
–
–
–
–
–
–
–
–
1,000
1,000
2,000
2000
T R Martin
B Whitley
J Hutson
S Cacioppo
E McMeikan
D van Gene
R Beckett
H Morley
With the exception of partnership shares, there have been no changes to these interests since 26 July 2020.
Partnership shares
John Hutson and Ben Whitley are participants of the partnership share scheme and acquired 108 shares each
in the year. Su Cacioppo is a participant in the partnership share scheme and acquired 109 shares in the year.
The market price of the shares purchased ranged 663.7–1,704.0p.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
85
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
700.0
620.0
540.0
460.0
380.0
300.0
220.0
140.0
60.0
i
l
)
£
(
g
n
d
o
h
0
0
1
£
l
a
c
i
t
e
h
t
o
p
y
h
f
o
e
u
l
a
V
Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20
J D Wetherspoon
FTSE All-Share Travel &
Leisure
.
86
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
DIRECTORS’ REMUNERATION REPORT
Chief executive officer’s remuneration
Comparison of increases in remuneration,
dividends and share buy-backs
Single figure
of total
remuneration
Performance
bonus
payment
achieved
against
maximum
possible
Long-term
incentives
scheme
shares
vesting
against
maximum
possible*
£000
738
1,035
1,490
1,698
1,187
1,202
741
1,079
847
628
%
7
10
29
85
21
10
19
43
34
24
%
100
100
100
100
100
100
100
100
100
100
John Hutson
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
*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
2020
2019 Change
Total
employees
£000
£000
%
%
522
19
17
558
620 (15.8)
21
(9.5)
31 (45.2)
672 (17.0)
(0.7)
14.0
(29.0)
(2.5)
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.
Chief executive pay ratios
The table below shows the chief executive’s total
remuneration, as disclosed in the single-figure table,
compared with that of full-time equivalent employees’
median (50th), 25th and 75th percentiles.
Pay ratios table
Year
2020
2019
Method
Option B
Option B
25th
50:1
47:1
50th
32:1
44:7
75th
27:1
38:1
The Company has used the same data used for gender
pay reporting to determine the median, 25th and 75th
percentile employees. This method is called option B in
The Companies (Miscellaneous Reporting) Regulation
2018. It is believed that using a constant methodology
with gender pay reporting will produce the most
understandable ratios.
Dividends
Share buy-backs
2020
£000
2019 Change
%
£000
8,371
6,456
12,652 (33.84)
5,399 19.58
Total employee remuneration 467,886 623,011 (24.90)
Remuneration committee
The remuneration committee comprises the following
independent directors: Debra van Gene (chair),
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 2019 directors’
remuneration report
The table below shows the voting outcomes
at the 21 November 2019 AGM for the directors’
remuneration report.
For
Against
Abstentions
Total cast
Number of
votes
82,541,118
5,684,207
41,357
% of
votes
93.51%
6.44%
0.05%
88,266,682
100.00%
All votes at the AGM were passed with at least
80% of the cast votes.
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.
For
Against
Abstentions
Total cast
Number of
votes
86,183,895
4,477,466
213,196
% of
votes
94.84%
4.93%
0.23%
90,874,557
100.00%
The Corporate Governance Code requires companies
to provide a summary of actions taken in relation to any
agenda items being voted on and receiving less than
80% of votes. All votes at the AGM received more than
the 80% threshold.
By order of the board
Nigel Connor
Company Secretary
15 October 2020
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
87
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 26 July 2020,
except as described below.
3 – 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. These discussions are relayed to, and
considered by, the board. The chairman is available for
discussion with major shareholders, when requested.
10 – Non-executive directors’ independence
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.
12 – Senior independent director
During the year the Company’s senior independent
director, Elizabeth McMeikan resigned. The Company
is in the process of recruiting a replacement, however,
at the year-end, the Company did not have a senior
independent director in place.
19 – Chairman’s term
Tim Martin has served more than nine years as
chairman of the board. The board considers that his
considerable knowledge and experience from founding
the Company and leading it for over 40 years have had
a positive effect on the Company’s performance.
The board believes that it is in the interest of the
Company and its shareholders for Tim Martin to remain
as chairman.
21 – 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’.
30 – Long-term shareholdings
To promote long-term shareholdings by executive
directors and align their interests with shareholders,
the Code requires that any share awards given to
executive directors should have a minimum vesting
period of five years. The executive directors receive
shares under schemes which are open to other
employees and have vesting periods of less than five
years. The Company has disclosed details of the share
award schemes in the remuneration policy on pages
80–81. To promote long-term shareholding by
executive directors, the Company requires directors to
hold a minimum number of shares as disclosed on
page 82. Restrictions are in place on the sale of
shares, if directors have not achieved the minimum
holding.
A full version of the Code is available on the official
website of the Financial Reporting Council:
frc.org.uk
88
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
CORPORATE GOVERNANCE
Board leadership and Company purpose
Matters reserved for the board
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
Debra van Gene, non-executive director
Sir Richard Beckett, non-executive director
Harry Morley, non-executive director
The board considers each of Debra van Gene, Sir
Richard Beckett and Harry Morley to be independent.
Biographies of all non-executive and executive
directors are provided on page 74 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.
The Company’s purpose and how it establishes
its values and culture through engagement with
employees are disclosed on page 63.
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.
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:
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
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 asset-financing transactions
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
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
Division of responsibilities
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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
89
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 physically four times during the
year ending 26 July 2020. During lockdown, the board met weekly via conference call. Attendance of the directors
and non-executives, where appropriate, is shown below.
Number of meetings held in the year
Tim Martin
John Hutson
Su Cacioppo
Ben Whitley
Debra van Gene
Sir Richard Beckett
Harry Morley
Nigel Connor
Board
18
14
18
18
18
17
18
18
18
Audit
4
N/A
N/A
4
4
4
4
4
4
Remuneration
4
Nomination
1
N/A
N/A
N/A
N/A
4
4
4
N/A
N/A
N/A
N/A
N/A
1
1
1
N/A
90
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
Audit, risk and internal control
Audit committee
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; 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, pub closures, system security, IT,
cyber-crime, changes in business environment, decline
in like-for-like sales volume and escalating costs of
labour
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 whistleblowing 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
CORPORATE GOVERNANCE
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 –
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
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 implementation of IFRS 16 and its presentation
within the financial statements
The committee reviewed the financial plans,
modelled scenarios and assumptions made by the
Company in support of the presentation of the financial
statements on a going concern basis
The committee reviewed and raised questions
on the calculations made by the Company in relation to
the hedge accounting and effectiveness 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
(2019: £Nil). 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 21,
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 October 2020,
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.
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
91
CORPORATE GOVERNANCE
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. The audit was last tendered in 2018
– and Grant Thornton UK LLP has been in place as the
Company’s auditor for three years.
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.
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.
No significant failings of internal control were identified
during these reviews.
A summary of the financial risks and treasury policies
can be found on page 65, together with other risks
and uncertainties.
Emerging risks
The Company monitors emerging risks through the
receipt of advice and feedback from head office and
pub staff, customers, suppliers, and several external
advisers and by maintaining an awareness of the wider
economic, political and social environment.
Any potential risks identified will be discussed in the
relevant internal meetings, where any potential impact
on the business will be considered. Any significant risks
identified will be added to the Company’s risk register.
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
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.
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.
92
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
Remuneration and nomination
Remuneration committee
The committee is responsible for determining the
remuneration received by executive directors and
senior managers. When setting levels of remuneration,
the committee seeks to ensure that they are sufficient
to attract and retain people with the necessary skills
and experience. The committee seeks to ensure that
remuneration is not excessive and is in line with
amounts paid by comparable companies. In setting
executive directors’ remuneration, the committee takes
into account wider workforce remuneration policies
throughout the Company, with many elements
extending throughout much of the Company at varying
levels according to seniority and length of service.
The remuneration policy operated as intended during
the year – no changes were made and no discretion
has been applied.
The committee has taken on board feedback from
shareholders. During the remuneration policy’s
updating in the year, it has sought to make clearer how
elements of the policy are applied. The proposed new
policy incorporates changes relating to company
pension contributions and shareholding requirements,
following the Revised Corporate Governance
Code 2018.
The directors’ report on remuneration is set out on
pages 78–87.
Directors’ remunerations are clearly presented in the
accounts. The remuneration policy is clearly stated,
and the calculation of performance measures is
explained. The remuneration policy does not overly rely
on target-based incentives, with share awards given
based on profit, earnings per share and owners’
earnings growth, as well as some shares awarded
without performance targets as part of a
companywide scheme.
Awards made are predictable and within a range
of values. The remuneration committee can apply
discretion in the application of awards.
The terms of reference of the remuneration committee
are available on the Company’s website.
Nomination committee
The committee meets at least annually and:
reviews the board structure, size, diversity (including
gender), composition and successional needs, keeping
under review the balance of membership between
executive and non-executive and the required blend
of skills, experience, knowledge and independence
on the board.
formally proposes any new executive or non-
executive directors for the approval of the whole
board, following a reasonable process for such
an appointment.
reviews the leadership and successional needs of
the organisation, with a view to ensuring the long-term
success of the Company.
CORPORATE GOVERNANCE
ensures that all directors offer themselves for
annual re-election by shareholders.
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.
The Company has not appointed a director for the
workforce, set up a workforce advisory panel or
designated a non-executive director as being
responsible for the workforce. The Company believes
that workforce engagement is the responsibility of all
directors. Examples of steps taken to foster workforce
engagement are disclosed in the strategic report
on page 63.
Approved by order of the board
Nigel Connor
Company Secretary
15 October 2020
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
93
INFORMATION FOR SHAREHOLDERS
Ordinary shareholdings at 24 July 2020
Shares of 2p each
Number of
shareholders
% of total
shareholders
Number
% of total shares
held
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
3,829
258
202
25
16
14
1,661,827
88.1
5.9
1,232,602
4.7 13,130,043
0.6
8,799,680
0.4 11,863,271
0.3 83,692,732
1.4
1.0
10.9
7.3
9.9
69.5
4,344
100.0 120,380,155
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 2020:
Tim Martin
Columbia Threadneedle Investments
Immersion Capital
Phoenix Asset Management Partners
Norges Bank Investment Mgt
J D Wetherspoon plc Company Share Plan*
Aberdeen Standard Investments (Standard Life)
BlackRock Investment Mgt - Index
Number of
ordinary shares
% of share
capital
32,976,209
17,512,634
6,573,354
3,578,490
3,400,223
3,395,910
3,183,925
2,722,968
27.4
14.6
5.5
3.0
2.8
2.8
2.6
2.3
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 pages 80–81. This includes vested shares held by employees.
Share prices
28 July 2019
Low
High
26 July 2020
1,540p
559p
1,734p
892p
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
94
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
J D WETHERSPOON PLC
fdfdfds
PUBS OPENED DURING THE FINANCIAL YEAR
Name
The Railway
Address
113 Station Road
Town
Rainham
Postcode Country
England
ME8 7SF
Charles Henry Roe
39/41 Austhorpe Road
Cross Gates
LS15 8BA
England
PUBS CLOSED DURING THE FINANCIAL YEAR
Name
The Last Plantagenet
Address
107 Granby Street
Town
Leicester
Postcode Country
England
LE1 6FD
The Baron of Hinckley
5–7 Regent Street
Hinckley
LE10 0AZ
England
The Penny Black
14–18 Bull Ring
Kidderminster
DY10 2AZ
England
The Rhinoceros
35–37 Bridgegate
Rotherham
S60 1PL
England
The Brun Lea (Lloyds)
31–39 Manchester Road
Burnley
BB11 1HG
England
The Isaac Merritt
54–58 Torquay Road
Paignton
TQ3 3AA
England
The Time Piece
11–15a Northgate
Dewsbury
WF13 1DS
England
The Lord Moon of the Mall
16–18 Whitehall
London
SW1A 2DY
England
The Standard Bearer
1 The Plaza
Stevenage
SG1 1PF
England
J D WETHERSPOON PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
95
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
Financial highlights
Chairman’s statement
2
14 Pre-IFRS 16 Income statement1
14 Reconciliation to statutory profit1
15 Pre-IFRS 16 Cash flow statement1
16 Pre-IFRS 16 Balance sheet1
17
Income statement
17 Statement of comprehensive income
18 Cash flow statement
19 Balance sheet
20 Statement of changes in equity
21 Notes to the financial statements
SECTION 2
54 Authorisation of financial statements and
statement of compliance with IFRSs
54 Accounting policies
62 Strategic report
66
Independent auditors’ report
74 Directors, officers and advisers
75 Directors’ report
78 Directors’ remuneration report
88 Corporate governance
94
Information for shareholders
95 Pubs opened and closed during the period
Financial calendar
Annual general meeting
17 December 2020
Interim report for 2021
March 2021
Year end
25 July 2021
Preliminary announcement for 2021
September 2021
View this report online:
jdwetherspoon.com/investors-home
1. In the period the company adopted IFRS 16 leases with effect from 29 July 2019 which replaced the previous applicable accounting standard, IAS 17 Leases. To
provide meaningful comparatives an income statement, cash flow and balance sheet under IAS 17 have been published on pages 14–16. These pages do not form part of
the audited financial statements and are prepared under the previous year’s accounting standards.
Untitled-3 1
06/11/2020 16:46
J D Wetherspoon plc
Wetherspoon House, Central Park
Reeds Crescent, Watford, WD24 4QL
01923 477777
jdwetherspoon.com
J D Wetherspoon plc
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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