J.D. Wetherspoon PLC

Earnings Release • Mar 18, 2022

National Storage Mechanism | Additional information RNS Number : 2096F Wetherspoon (JD) PLC 18 March 2022 18 March 2022 J D WETHERSPOON PLC PRELIMINARY RESULTS (For the 26 weeks ended 23 January 2022) FINANCIAL HIGHLIGHTS - All Comparisons against FY20 �� Revenue ��807.4m (2020: ��933.0m) -13.5% �� Like-for-like sales -11.8% Before exceptional items (pre-IFRS 16): �� Loss before tax -��21.3m (2020: profit ��57.9m) �� Operating profit ��0.5m (2020: profit ��76.6m) �� Earnings per share -16.0p (2020: 44.3p) Before exceptional items (post-IFRS 16): �� Loss before tax -��26.1m (2020: profit ��51.6m) �� Operating profit ��1.6m (2020: profit ��80.8m) �� Earnings per share -19.7p (2020: 39.3p) After exceptional items (pre-IFRS 16): �� Loss before tax -��8.2m (2020: profit ��42.0m) �� Operating profit ��0.8m (2020: profit ��76.6m) �� Earnings per share -7.8p (2020: 30.5p) After exceptional items (post-IFRS 16): �� Loss before tax -��13.0m (2020: profit ��35.7m) �� Operating profit ��1.9m (2020: profit ��80.8m) �� Earnings per share -9.0p (2020: 25.5p) Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc, said: "Following a traumatic two years for many businesses and people, the ending of Covid restrictions has brought a return to more normal trading patterns in recent weeks. As indicated above, trade for the last three weeks was 2.6% below the equivalent period in 2019, reflecting an improving trend. "Contrary to some reports, the company has a full complement of staff and is fully stocked, with some minor exceptions. "Inflationary pressures in the economy have been widely publicised. Nearly 70% of the company's properties are freehold, with interest rates fixed for the next decade. Most of the company's leasehold pubs have rent reviews which are fixed at levels below the current level of inflation. There is pressure on input costs from food, drink and energy suppliers, mitigated to an extent, by a number of long-term contracts. Overall, the company expects the increase in input prices to be slightly less than the level of inflation. "The government is reported to have spent over ��400 billion on Covid measures, around nine times the annual defence budget. The expenditure has been financed by the creation of "new money" by the Bank of England, which has led to significant inflation and higher taxes. "Draconian restrictions, which amount to a lockdown-by-stealth, are, of course, kryptonite for hospitality, travel, leisure and many other businesses. The company is confident of a strong future if restrictions are avoided. The readiness of the leaders of all the UK's main political parties to resort to lockdowns, and extreme restrictions, which were not contemplated in the UK's 2019 plans for pandemics, is the main threat to the future of the hospitality industry, but also to the economy." Enquiries: John Hutson Chief Executive Officer 01923 477777 Ben Whitley Finance Director 01923 477777 Eddie Gershon Company spokesman 07956 392234 Photographs are available at: newscast.co.uk Notes to editors 1. J D Wetherspoon owns and operates pubs throughout the UK and Ireland. The Company aims to provide customers with good-quality food and drink, 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. 2. Visit our website jdwetherspoon.com 3. This announcement has been prepared solely to provide additional information to the shareholders of J D Wetherspoon, in order to meet the requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied on by any other party, for other purposes. Forward-looking statements have been made by the directors in good faith using information available up until the date that they approved this statement. Forward-looking statements should be regarded with caution because of inherent uncertainties in economic trends and business risks. 4. The annual report and financial statements 2021 has been published on the Company's website on 7 October 2021. 5. The current financial year comprises 53 trading weeks to 31 July 2022. 6. The next trading update will be issued on 4 May 2022 CHAIRMAN'S STATEMENT Financial performance The company was founded in 1979 - and this is the 39th year since incorporation in 1983. The table below outlines some key aspects of our performance during that period. Summary accounts for the years 1984-2022 Financial year Total number of Pubs (Sites) Total sales (Loss)/profit (Loss)/Profit Earnings Earnings Free cash flow Free cash flow before tax and exceptional items (Pre-IFRS16) before tax and exceptional items (Post-IFRS16) per share before exceptional items (Pre-IFRS16) per share before exceptional items (Post-IFRS16) per share ��000 ��000 ��000 pence pence ��000 pence 1984 1 818 (7) - 0 - 1985 2 1,890 185 - 0.2 - 1986 2 2,197 219 - 0.2 - 1987 5 3,357 382 - 0.3 - 1988 6 3,709 248 - 0.3 - 1989 9 5,584 789 - 0.6 - 915 0.4 1990 19 7,047 603 - 0.4 - 732 0.4 1991 31 13,192 1,098 - 0.8 - 1,236 0.6 1992 45 21,380 2,020 - 1.9 - 3,563 2.1 1993 67 30,800 4,171 - 3.3 - 5,079 3.9 1994 87 46,600 6,477 - 3.6 - 5,837 3.6 1995 110 68,536 9,713 - 4.9 - 13,495 7.4 1996 146 100,480 15,200 - 7.8 - 20,968 11.2 1997 194 139,444 17,566 - 8.7 - 28,027 14.4 1998 252 188,515 20,165 - 9.9 - 28,448 14.5 1999 327 269,699 26,214 - 12.9 - 40,088 20.3 2000 428 369,628 36,052 - 11.8 - 49,296 24.2 2001 522 483,968 44,317 - 14.2 - 61,197 29.1 2002 608 601,295 53,568 - 16.6 - 71,370 33.5 2003 635 730,913 56,139 - 17.0 - 83,097 38.8 2004 643 787,126 54,074 - 17.7 - 73,477 36.7 2005 655 809,861 47,177 - 16.9 - 68,774 37.1 2006 657 847,516 58,388 - 24.1 - 69,712 42.1 2007 671 888,473 62,024 - 28.1 - 52,379 35.6 2008 694 907,500 58,228 - 27.6 - 71,411 50.6 2009 731 955,119 66,155 - 32.6 - 99,494 71.7 2010 775 996,327 71,015 - 36.0 - 71,344 52.9 2011 823 1,072,014 66,781 - 34.1 - 78,818 57.7 2012 860 1,197,129 72,363 - 39.8 - 91,542 70.4 2013 886 1,280,929 76,943 - 44.8 - 65,349 51.8 2014 927 1,409,333 79,362 - 47.0 - 92,850 74.1 2015 951 1,513,923 77,798 - 47.0 - 109,778 89.8 2016 926 1,595,197 80,610 - 48.3 - 90,485 76.7 2017 895 1,660,750 102,830 - 69.2 - 107,936 97.0 2018 883 1,693,818 107,249 - 79.2 - 93,357 88.4 2019 879 1,818,793 102,459 - 75.5 - 96,998 92.0 2020 872 1,262,048 (34,095) (44,687) (27.6) (35.5) (58,852) (54.2) 2021 861 772,555 (154,676) (167,166) (110.3) (119.2) (83,284) (67.8) 2022 859 807,395 (21,255) (26,064) (16.0) (19.7) (34,509) (27.2) 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. From financial year 2020 data is based on both pre-IFRS16 numbers and post-IFRS16 numbers following the transition from IAS17 to IFRS16. 7. 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. 8. 2022 results are for the 6 month period ended 23 January 2022. Background As previously reported, in the first half of the financial year, which ended on 23 January 2022, sales were adversely affected by Covid-19 restrictions, and labour costs were high, due mainly to Covid-related absences. Like-for-like sales were -11.8%, compared to the six-month period ended 26 January 2020, before the pandemic, and were -12.4% for the first four weeks of the second half of the financial year, ending 20 February 2022, compared to the same period in FY20. Since sales were affected by Covid from about February/March 2020, culminating in a pub closure on 20 March 2020, sales from 21 February 2022 are compared with sales from a similar period in 2019. In the most recent three-week period, to 13 March 2022, sales improved, being 2.6% lower than the equivalent period in 2019. Cash sales per week during this three-week period have been approximately 10% above the depressed levels of December 2021, our busiest month of the year, indicating an improving trend. Detailed comparisons with 'normal' trading periods, before Covid, maybe of limited value. We have, even so, compared sales, profits and margins, below, with the first half of FY20, before the pandemic. Total sales were ��807.4m, a decrease of 13.5%, compared to the 26 weeks ended 26 January 2020. Like-for-like sales, as indicated above, decreased by 11.8%. Like-for-like bar sales decreased by 12.7%, food sales by 11.1% and slot/fruit machine sales by 9.8%. Hotel room sales increased by 6.6%. The unaudited pre-IFRS16 operating profit, before exceptional items, was ��0.5m (2020: ��76.6m). The operating margin, before exceptional items, was 0.1% (2020: 8.2%). The unaudited pre-IFRS16 loss before tax and exceptional items was ��21.3m (2020: ��57.9m profit). This included property losses of ��1.8m (2020: ��0.2m). Property losses arose from the disposal of four pubs and the closure of two pubs. The disposals resulted in a cash inflow of ��2.1m. Losses per share, including shares held in trust by the employee share scheme, before exceptional items, were 16.0p (2020: earnings per share of 43.3p). Total capital investment was ��64.7m (2020: ��128.5m). ��26.6m was invested in new pubs and pub extensions (2020: ��23.7m), ��18.9m in existing pubs and IT (2020: ��34.1m) and ��19.2m in freehold reversions of properties where Wetherspoon was the tenant (2020: ��70.7m). The company increased investment levels, which are still substantially below the pre-pandemic period, on the basis that the adverse effects of Covid-19 were likely to diminish in the near future. Exceptional items There was a pre-tax exceptional gain of ��13.0m (2020: ��15.9m loss). ��12.7m of the gain related to interest rate swaps. The company has interest rate swaps in place for approximately the next 10 years at an average rate of 1.24%, excluding the banks' margin. Free Cash Flow There was a free cash outflow of ��16.6m (2020: ��49.0m inflow), after capital payments of ��19.5m for existing pubs (2020: ��34.5m), ��7.1m for share purchases for employees (2020: ��9.3m) and payments of tax and interest. Free cash outflow per share was 27.2p (2020: 46.7p inflow). The effect of IFRS16 on a hypothetical leasehold pub As previously indicated, in order to illustrate the differences between old and new accounting, the example below shows how a leasehold pub would be affected. The following assumptions have been made: n a 25-year lease, at a rent of ��100k per annum, rising by 7.5% at each five-year rent review n capital development costs of ��1m funded by equity, without debt n ��30k of capital reinvestment per annum from year 6 to year 25 n pub EBITDA profits of ��160k per annum n head office costs and tax excluded from calculations Year 1 5 10 15 20 25 Total ��000 ��000 ��000 ��000 ��000 ��000 ��000 Pub EBITDAR 260 260 268 276 284 294 6,904 Accounting Profit pre IFRS16 (before head office costs & corporation tax) 100 100 100 100 100 100 2,500 Accounting Profit post IFRS16 (before head office costs & corporation tax) 60 65 81 101 125 154 2,500 Cash earnings 160 160 130 130 130 130 3,400 As the table illustrates, "cash earnings" are the same in both examples, however accounting earnings vary greatly. Pre-IFRS16 treatment results in stable accounting profit of ��100k, reflecting stable cash earnings, whereas post-IFRS16 treatment gives rise to erratic accounting profits, which vary from ��60k to ��154k, over the term of the lease. As a result, it will be difficult for investors to understand the performance of the business, using IFRS16 accounting standards, at any given point in the lease, from an examination of the profit and loss account. In appendix 1, below, we have provided profit and loss, balance sheet and cash flow statements, using pre-IRFS16 accounting methodology, for those who find the new accounting too complex or unhelpful. Dividends and return of capital The board has not recommended the payment of an interim dividend (2020: ��0). There have been no share buybacks in the financial year to date (2020: ��6.5m). Financing As at 23 January 2022, the company's total net debt, excluding derivatives, was ��920.4m (2020: ��804.5m), an increase of ��115.9m. The half year-end net-debt-to-EBITDA ratio was 25.63 times (2020: 3.54 times). Although debt has increased by ��116m since H1 2020, trade creditors have reduced by ��72m and ��109m has been invested in new pubs and freehold reversions. The company has an agreement with its lenders, who have been extremely supportive throughout the pandemic, that waives its debt covenants until October 2022 and replaces them with a minimum liquidity requirement of ��75m. At the half-year-end liquidity was ��159.1m. There has been no change in the total finance facilities of ��1,083.0m during the period. As referred to above, the company has fixed its SONIA (SONIA is a replacement for LIBOR) interest rates in respect of ��770m until November 2031. The weighted average cost of the swaps, excluding the banks' margin, is currently 1.61%. The total cost of the company's debt, including the banks' margin was 4.28%. The cost of the swaps is illustrated in the table below: Swap Value Start Date End Date Weighted Average % ��770m 30-Jul-21 30-Jul-23 1.61% ��770m 31-Jul-23 30-Jul-26 1.10% ��770m 31-Jul-26 30-Jun-28 1.33% ��770m 01-Jul-28 29-Mar-29 1.32% ��770m 31-Mar-29 30-Nov-31 1.02% Property The company opened four pubs during the first six months and sold or closed six, resulting in a trading estate of 859 pubs at the half year end. The half-year depreciation charge, excluding depreciation of "right-of-use" assets (a new charge to the profit and loss account, post-IFRS16) was ��37.2m (2021: ��38.7m). As at 24 July 2011, the company's freehold/ leasehold split was 43.4%/56.6%. As at 23 January 2022, 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 67.8%/32.2%. As at 23 January 2022, 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. Taxation The current corporation tax credit for the year is ��1.5m (2020: ��13.6m charge). The 'accounting' tax credit, which appears in the income statement, is ��1.0m (2021: ��9.5m charge). The accounting tax credit comprises two parts: the actual current tax credit (the 'cash' tax) and the deferred tax credit (the 'accounting' tax). The tax losses arising in the financial year will be carried forward for use against profits in future years, meaning that the cash tax benefit will be received in future years. Therefore, a 'deferred tax' benefit is created which will reverse in future years when the cash tax benefit of the losses is realised. The company is seeking a refund of historic excise duty from HMRC, totalling ��495k, in relation to goods sent to the Republic of Ireland, when Wetherspoon pubs first opened in that 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. Irish excise duty was then paid in addition. Owing to a paperwork error, in the early days of our business in the Republic, which the company has sought to rectify, it has, to date, been unable to reclaim this duty, even though it is transparently clear that the duty has been paid. Scotland Business Rates Business rates are supposed to be based on the value of the building, rather than the level of trade of the tenant. This should mean that the rateable value per square foot is approximately the same for comparable pubs in similar locations. However, as a result of the valuation approach adopted by the government "Assessor" in Scotland, Wetherspoon often pays far higher rates per square foot than its competitors. This is highlighted (in the tables below) by assessments for the Omni Centre, a modern leisure complex in central Edinburgh, where Wetherspoon has been assessed at more than double the rate per square foot of the average of its competitors, and for The Centre in Livingston (West Lothian), a modern shopping centre, where a similar anomaly applies. As a result of applying valuation practice from another era, which assumed that pubs charged approximately the same prices, the raison d'��tre of the rating system - that rates are based on property values, not the tenants trade- has been undermined. Omni Centre, Edinburgh Occupier Name Rateable Value (RV) Customer Area (ft��) Rates per square foot Playfair (JDW) ��218,750 2,756 ��79.37 Unit 9 (vacant) ��48,900 1,053 ��46.44 Unit 7 (vacant) ��81,800 2,283 ��35.83 Frankie & Benny's ��119,500 2,731 ��43.76 Nando's ��122,750 2,804 ��43.78 Slug & Lettuce ��108,750 3,197 ��34.02 The Filling Station ��147,750 3,375 ��43.78 Tony Macaroni ��125,000 3,427 ��36.48 Unit 6 (vacant) ��141,750 3,956 ��35.83 Cosmo ��200,000 7,395 ��27.05 Average (exc JDW) ��121,800 3,358 ��38.55 The Centre, Livingston Pub Name Rateable Value (RV) Customer Area (ft��) Rates per square foot The Newyearfield (JDW) ��165,750 4,090 ��40.53 Paraffin Lamp ��52,200 2,077 ��25.13 Wagamama ��67,600 2,096 ��32.25 Nando's ��80,700 2,196 ��36.75 Chiquito ��68,500 2,221 ��30.84 Ask Italian ��69,600 2,254 ��30.88 Pizza Express ��68,100 2,325 ��29.29 Prezzo ��70,600 2,413 ��29.26 Harvester ��98,600 3,171 ��31.09 Pizza Hut ��111,000 3,796 ��29.24 Hot Flame ��136,500 4,661 ��29.29 Average (exc JDW) ��82,340 2,721 ��30.40 Similar issues are evident in Galashiels, Arbroath, Wick, Anniesland - and indeed most Wetherspoon pubs in Scotland. In effect, the application of the rating system in Scotland discriminates against businesses like Wetherspoon, which have lower prices, and encourages businesses to charge higher prices. As a result, consumers are likely to pay higher prices, which cannot be the intent of rating legislation. 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. How pubs contribute to the economy Wetherspoon and other pub and restaurant companies have always generated far more in taxes than are earned in profits. Wetherspoon generated total taxes in FY19, before the pandemic, of ��763.6m. This equated to one pound in every thousand of UK government revenue In the six months ended 23 January 2022, the company generated taxes of ��294.1m. The table below shows the tax revenue generated by the company, its staff and customers in the last 10 years. Each pub, on average, generated ��6.1m in tax during that period: 2022 (HY) 2021 (FY) 2020 (FY) 2019 (FY) 2018 (FY) 2017 (FY) 2016 (FY) 2015 (FY) 2014 (FY) 2013 (FY) TOTAL 2013 to 2022 ��m ��m ��m ��m ��m ��m ��m ��m ��m ��m ��m VAT 118.1 93.8 244.3 357.9 332.8 323.4 311.7 294.4 275.1 253.0 2,604.5 Alcohol duty 74.0 70.6 124.2 174.4 175.9 167.2 164.4 161.4 157.0 144.4 1,413.5 PAYE and NIC 65.1 101.5 106.6 121.4 109.2 96.2 95.1 84.8 78.4 70.2 928.5 Business rates 23.3 1.5 39.5 57.3 55.6 53.0 50.2 48.7 44.9 46.4 420.4 Corporation tax 1.5 - 21.5 19.9 26.1 20.7 19.9 15.3 18.4 18.4 161.7 Corporation tax credit (historic capital allowances) - - - - - - - -2.0 - - -2.0 Fruit/slot Machine duty 5.7 4.3 9.0 11.6 10.5 10.5 11.0 11.2 11.3 7.2 92.3 Climate change levies 6.2 7.9 10.0 9.6 9.2 9.7 8.7 6.4 6.3 4.3 78.3 Stamp duty 1.6 1.8 4.9 3.7 1.2 5.1 2.6 1.8 2.1 1.0 25.8 Sugar tax 1.3 1.3 2.0 2.9 0.8 - - - - - 8.3 Fuel duty 0.8 1.1 1.7 2.2 2.1 2.1 2.1 2.9 2.1 2.0 19.1 Carbon tax - - - 1.9 3.0 3.4 3.6 3.7 2.7 2.6 20.9 Premise licence and TV licences 0.4 0.5 1.1 0.8 0.7 0.8 0.8 1.6 0.7 0.7 8.1 Landfill tax - - - - 1.7 2.5 2.2 2.2 1.5 1.3 11.4 Furlough Tax Rebate -3.8 -213.0 -124.1 - - - - - - - -340.9 Eat out to help out - -23.2 - - - - - - - - -23.2 Local Government Grants -0.1 -11.1 - - - - - - - - -11.2 TOTAL TAX 294.1 37.0 440.7 763.6 728.8 694.6 672.3 632.4 600.5 551.5 5.4bn TAX PER PUB (��000) 342 43 533 871 825 768 705 673 662 632 6.1m TAX AS % OF NET SALES 36.4% 4.8% 34.9% 42.0% 43.0% 41.8% 42.1% 41.8% 42.6% 43.1% 37.3% Note - this table is prepared on a cash basis. 2022 is for the 6 month period ending 23 January 2022. Corporate Governance Wetherspoon has been a strong critic of the composition of the boards of UK-quoted companies. As a result of the "nine-year rule", limiting the tenure of NEDs and the presumption in favour of "independent", part-time chairmen, boards are often composed of short-term directors, with very little representation from those who understand the company best - people who work for it full-time, or have worked for it full-time. Wetherspoon's review of the boards of major banks and pub companies, which teetered on the edge of failure in the 2008-2010 recession, highlighted the short "tenure", on average, of directors. In contrast, Wetherspoon noted the relative success, during this fraught financial period, of pub companies Fuller's and Young's, the boards of which were dominated by experienced executives, or former executives. As a result, Wetherspoon has increased the level of executive experience on the Wetherspoon board by appointing four "worker directors". All four worker directors started on the "shop floor" and eventually became successful pub managers. Three have been promoted to area management roles. They have worked for the company for an average of 24 years. Board composition cannot guarantee future success, but it makes sensible decisions, based on experience at the coalface of the business, more likely. The UK Corporate Governance Code 2018 (the "Code") is a vast improvement on previous codes, emphasising the importance of employees, customers and other stakeholders in commercial success. It also emphasises the importance of its 'comply or explain' ethos, and the consequent need for shareholders to engage with companies in order to understand their explanations. A major impediment to the effective implementation of comply or explain seems to be the undermanning of the corporate governance departments of major shareholders. For example, Wetherspoon has recently met a compliance officer from one major institution who is responsible for around 400 companies - an impossible task, since the written regulatory output of each company is vast, coupled with the practical impossibility of meeting with so many companies in any meaningful way. As a result, it appears that compliance officers and governance advisors, in practice, often rely on a "tick-box" approach, which is, itself, in breach of the Code. A further issue is that many major investors, in their own companies, for sensible reasons, do not observe the nine-year rule, and other rules, themselves. An approach of "do what I say, not what I do" is clearly unsustainable. 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. Wetherspoon paid ��11.1m in respect of bonuses and free shares to employees in the period ending 23 January 2022, of which 98.7% was paid to staff below board level and 91.0% was paid to staff working in our pubs. Wetherspoon has been the biggest corporate sponsor of 'Young Lives vs Cancer' (previously CLIC Sargent), having raised a total of ��19.7m since 2002. During the pandemic, our contributions had been reduced, but since the reopening of our pubs there have been great efforts seen and our contributions have bounced back significantly. Bonuses and Free Shares As indicated above, Wetherspoon has, for many years (see table below), operated a bonus and share scheme for all employees. Before the pandemic, these awards increased, as earnings increased for shareholders. Financial year Bonus and free shares (Loss)/Profit after tax1 Bonus and free shares as % of profits ��m ��m 2007 19 47 41% 2008 16 36 45% 2009 21 45 45% 2010 23 51 44% 2011 23 52 43% 2012 24 57 42% 2013 29 65 44% 2014 29 59 50% 2015 31 57 53% 2016 33 57 58% 2017 44 77 57% 2018 43 84 51% 2019 46 80 58% 2020 33 (30) - 2021 23 (136) - 2022 H1 11 (20) - Total 448 581 48.5%2 1(Loss)/Profit is Pre-IFRS16 and before exceptional items 2 Excludes 2020, 2021 and 2022 Length of Service The attraction and retention of talented pub and kitchen managers is important for any hospitality business. As the table below demonstrates, the retention of managers has improved, even during the pandemic. Financial year Average pub manager length of service Average kitchen manager length of service (Years) (Years) 2013 9.1 6.0 2014 10.0 6.1 2015 10.1 6.1 2016 11.0 7.1 2017 11.1 8.0 2018 12.0 8.1 2019 12.2 8.1 2020 12.9 9.1 2021 13.6 9.6 2022 H1 13.8 10.3 Food Hygiene Ratings Wetherspoon has always emphasised the importance of hygiene standards. We now have 778 pubs rated on the Food Standards Agency's website (see table below). The average score is 4.98, with 98.6% of the pubs achieving a top rating of five stars. We believe this to be the highest average rating for any substantial pub company. In the separate Scottish scheme, which records either a 'pass' or a 'fail', all of our 65 pubs have passed Financial Year Total Pubs Scored Average Rating Pubs with highest Rating % 2013 771 4.85 87.0 2014 824 4.91 92.0 2015 858 4.93 94.1 2016 836 4.89 91.7 2017 818 4.89 91.8 2018 807 4.97 97.3 2019 799 4.97 97.4 2020 781 4.96 97.0 2021 787 4.97 98.4 2022 H1 778 4.98 98.6 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 Caf�� 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 Wetherspoon has been the subject of a number of inaccurate media stories on a variety of different subjects. After complaining to the organisations concerned, the company obtained corrections and/or apologies from a number of publications, including: Daily Express The Daily Telegraph Daily Mail The Guardian Daily Mirror The Independent Daily Star The Times Sky News Forbes The company has published a special edition of Wetherspoon News which includes details of the apologies and corrections which can be found on the Company's website (https://www.jdwetherspoon.com/~/media/files/pdf-documents/wetherspoon-news/does-truth-matter_.pdf ) Current trading and outlook Following a traumatic two years for many businesses and people, the ending of Covid restrictions has brought a return to more normal trading patterns in recent weeks. As indicated above, trade for the last three weeks was 2.6% below the equivalent period in 2019, reflecting an improving trend. Contrary to some reports, the company has a full complement of staff and is fully stocked, with some minor exceptions. Inflationary pressures in the economy have been widely publicised. Nearly 70% of the company's properties are freehold, with interest rates fixed for the next decade. Most of the company's leasehold pubs have rent reviews which are fixed at levels below the current level of inflation. There is pressure on input costs from food, drink and energy suppliers, mitigated to an extent, by a number of long-term contracts. Overall, the company expects the increase in input prices to be slightly less than the level of inflation. The government is reported to have spent over ��400 billion on Covid measures, around nine times the annual defence budget. The expenditure has been financed by the creation of "new money" by the Bank of England, which has led to significant inflation and higher taxes. Draconian restrictions, which amount to a lockdown-by-stealth, are, of course, kryptonite for hospitality, travel, leisure and many other businesses. The company is confident of a strong future if restrictions are avoided. The readiness of the leaders of all the UK's main political parties to resort to lockdowns, and extreme restrictions, which were not contemplated in the UK's 2019 plans for pandemics, is the main threat to the future of the hospitality industry, but also to the economy. Appendix 1 - Unaudited primary financial statements (pre-IFRS16 accounting) As outlined on page 2, the following unaudited financial statements are included to aid understanding. Pre-IFRS16 income statement (before exceptional items): 26 weeks ended 23 January 2022 26 weeks ended 24 January 2021 26 weeks ended 26 January 2020 ��000 ��000 ��000 Revenue 807,395 431,072 933,021 Operating costs (806,903) (451,816) (856,461) Operating profit/(loss) 492 (20,744) 76,560 Property losses (1,796) (1,320) (172) Finance income 6 167 41 Finance costs (19,957) (24,275) (18,508) Loss before tax (21,255) (46,172) 57,921 Income tax credit 1,007 2,510 (12,487) Loss for the period (20,248) (43,662) 45,434 Pre-IFRS16 income statement reconciliation (before exceptional items): 26 weeks ended 23 January 2022 26 weeks ended 24 January 2021 26 weeks ended 26 January 2020 ��000 ��000 ��000 (Loss)/profit for the period before IFRS16 (20,248) (43,662) 45,434 Operating costs 23,516 26,078 28,443 Amortisation and Depreciation - ROU Assets (22,379) (23,042) (24,425) - Lease Premiums - 86 192 Disposal of leases 3,449 1,088 347 Finance income 223 210 225 Finance costs (9,617) (11,015) (11,078) Income tax credit - 3,887 1,189 Loss for the period (25,057) (46,370) 40,327 Pre-IFRS16 cash flow statement: 26 weeks ended 23 January 2022 26 weeks ended 24 January 2021 26 weeks ended 26 January 2020 ��000 ��000 ��000 Net cash flows from operating activities (7,959) (59,823) 93,079 Net cash flow from investing activities (58,852) (19,012) (135,778) Net cash flow from financing activities 60,391 129,408 47,162 Net change in cash and cash equivalents (6,420) 50,573 4,463 Opening cash and cash equivalents 45,408 174,451 42,950 Closing cash and cash equivalents 38,988 225,024 47,413 Free cash flow (34,509) (77,306) 48,966 Free cash flow per ordinary share (p) (27.2) (64.5) 46.7 Pre-IFRS16 balance sheet: As at 23 January 2022 As at 25 July 2021 ��000 ��000 Non-current assets Property, plant and equipment 1,437,057 1,420,515 Intangible assets 3,849 5,358 Investment property 12,653 10,533 Other non-current assets 10,658 7,434 Deferred tax assets - - Total non-current assets 1,464,217 1,443,840 Current assets Inventories 27,007 26,853 Receivables 34,814 34,477 Asset Held for Sale 2,123 - Cash and cash equivalents 38,988 45,408 Total current assets 102,932 106,738 Total assets 1,567,149 1,550,578 Current liabilities Borrowings (6,740) (7,610) Trade and other payables (259,737) (287,758) Current income tax liabilities (372) (1,454) Provisions (4,751) (4,725) Total current liabilities (271,600) (301,547) Non-current liabilities Borrowings (956,605) (883,272) Derivative financial instruments (3,565) (37,643) Deferred tax liabilities (24,497) (16,546) Provisions (1,488) (1,488) Other liabilities (9,738) (9,738) Total non-current liabilities (995,893) (948,687) Total liabilities (1,267,493) (1,250,244) Net assets 299,656 300,344 Shareholders' equity Share capital 2,575 2,575 Share premium account 143,294 143,294 Capital redemption reserve 2,337 2,337 Other reserve 234,579 234,579 Hedging reserve (4,224) (15,403) Currency translation reserve (501) 1,851 Retained earnings (78,404) (68,889) Total shareholders' equity 299,656 300,344 INCOME STATEMENT for the 26 weeks ended 23 January 2022 J D Wetherspoon plc, company number: 1709784 Unaudited Unaudited Unaudited Unaudited Audited Audited 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 23 January 23 January 24 January 24 January 25 July 25 July 2022 2022 2021 2021 2021 2021 Before After Before After Before After exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items ��000 ��000 ��000 ��000 ��000 ��000 Revenue 1 807,395 807,395 431,072 431,072 772,555 772,555 Other operating income - exceptional (note 4) - 277 - 8,937 - 15,541 Operating costs (805,767) (805,767) (448,694) (448,694) (872,913) (872,913) Operating costs - exceptional (note 4) - - - (16,473) - (24,482) Operating profit/(loss) 2 1,628 1,905 (17,622) (25,158) (100,358) (109,299) Property gains/(losses) 3 1,653 1,653 (232) (232) (123) (123) Property losses - exceptional (note 4) 3 - (23) - (2,190) - (5,839) Finance income 6 229 229 377 377 595 595 Finance costs 6 (29,574) (29,574) (35,290) (35,290) (67,280) (67,280) Finance income/(costs) - exceptional (note 4) 6 - 12,774 - (5,511) - (12,690) Loss before tax (26,064) (13,036) (52,767) (68,004) (167,166) (194,636) Income tax credit 7 1,007 1,007 6,397 6,397 20,695 20,695 Income tax credit/(expense) - exceptional (note 4) 7 - 560 - 2,816 - (7,114) Loss for the period (25,057) (11,469) (46,370) (58,791) (146,471) (181,055) Loss per ordinary share (p) - Basic1 8 (19.7) (9.0) (38.7) (49.1) (119.2) (147.4) - Diluted1 8 (19.7) (9.0) (38.7) (49.1) (119.2) (147.4) STATEMENT OF COMPREHENSIVE INCOME for the 26 weeks ended 23 January 2022 Notes Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Items which will be reclassified subsequently to profit or loss: Interest-rate swaps: gain taken to other comprehensive income 22 22,314 16,717 44,551 Interest-rate swaps: (loss)/gain reclassification to the income statement 22 (2,011) 4,528 11,707 Tax on items taken directly to other comprehensive income 7 (9,124) (4,037) (5,084) Currency translation differences (1,885) (1,933) (3,510) Net gain recognised directly in other comprehensive income 9,294 15,275 47,664 Loss for the period (11,469) (58,791) (181,055) Total comprehensive loss for the period (2,175) (43,516) (133,391) CASH FLOW STATEMENT for the 26 weeks ended 23 January 2022 J D Wetherspoon plc, company number: 1709784 Notes Unaudited Unaudited Unaudited Unaudited Audited Audited free cash free cash free cash flow flow flow 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 23 January 23 January 24 January 24 January 25 July 25 July 2022 2022 2021 2021 2021 2021 ��000 ��000 ��000 ��000 ��000 ��000 Cash flows from operating activities Cash generated from/(used in) operations 9 33,215 33,215 (28,749) (28,749) 25,208 25,208 Interest received 8 8 105 105 187 187 Interest paid (6,662) (6,662) (29,185) (29,185) (48,428) (48,428) Corporation tax paid (709) (709) 12,201 12,201 7,673 7,673 Lease interest (9,222) (9,222) (10,843) (10,843) (19,942) (19,942) Net cash flow from operating activities 16,630 16,630 (56,471) (56,471) (35,302) (35,302) Cash flows from investing activities Reinvestment in pubs (18,925) (18,925) (9,602) (9,602) (19,692) (19,692) Reinvestment in business and IT projects (543) (543) (872) (872) (2,620) (2,620) Investment in new pubs and pub extensions (22,275) - (7,115) - (21,131) - Freehold reversions and investment properties (19,248) - (1,423) - (16,858) - Proceeds of sale of property, plant and equipment 2,139 - - - 2,575 - Net cash flow from investing activities (58,852) (19,468) (19,012) (10,474) (57,726) (22,312) Cash flows from financing activities Purchase of own shares for share-based payments (7,082) (7,082) (6,771) (6,771) (7,684) (7,684) Loan issue cost 10 - - (238) (238) (434) (434) Advances/(repayment) under bank loans 10 74,990 - - - (195,000) - Advances under CLBILS 10 - - 48,333 - 100,033 - Other loan receivables 10 (3,986) - - - - - Lease principal payments 23 (24,589) (24,589) (3,352) (3,352) (17,552) (17,552) Issue of share capital 28 - - 91,523 - 91,523 - Asset-financing principal payments 10 (3,531) - (3,439) - (6,901) - Net cash flow from financing activities 35,802 (31,671) 126,056 (10,361) (36,015) (25,670) Net change in cash and cash equivalents 10 (6,420) 50,573 (129,043) Opening cash and cash equivalents 18 45,408 174,451 174,451 Closing cash and cash equivalents 18 38,988 225,024 45,408 Free cash flow 8 (34,509) (77,306) (83,284) Free cash flow per ordinary share 8 (27.2)p (64.5)p (67.8)p Free cash flow is a measure not required by accounting standards; a definition is provided in the accounting policies. BALANCE SHEET as at 23 January 2022 J D Wetherspoon plc, company number: 1709784 Notes Unaudited Unaudited Audited Restated 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Assets Non-current assets Property, plant and equipment 13 1,440,368 1,425,570 1,423,826 Intangible assets 12 3,849 8,956 5,358 Investment property 14 12,653 6,037 10,533 Right-of-use assets 23 448,184 527,614 468,538 Other loan receivable 16 3,224 - - Deferred tax assets 7 - - - Lease assets 23 9,681 10,506 9,890 Total non-current assets 1,917,959 1,978,683 1,918,145 Current assets Lease assets 23 1,638 1,691 1,638 Assets held for sale 17 2,123 - - Inventories 15 27,007 22,369 26,853 Receivables 16 16,696 27,268 16,427 Current income tax receivables 2,269 - 1,187 Cash and cash equivalents 18 38,988 225,024 45,408 Total current assets 88,721 276,352 91,513 Total assets 2,006,680 2,255,035 2,009,658 Current liabilities Borrowings 20 (6,740) (7,610) (7,610) Trade and other payables 19 (244,757) (184,742) (259,791) Provisions 21 (3,030) (2,797) (3,004) Lease liabilities 23 (50,797) (72,481) (65,219) Total current liabilities (305,324) (267,630) (335,624) Non-current liabilities Borrowings 20 (956,605) (1,029,343) (883,272) Derivative financial instruments 22 (3,565) (65,477) (37,643) Deferred tax liabilities 7 (24,497) (18,693) (16,546) Lease liabilities 23 (444,836) (508,518) (458,596) Total non-current liabilities (1,429,503) (1,622,031) (1,396,057) Total liabilities (1,734,827) (1,889,661) (1,731,681) Net assets 271,853 365,374 277,977 Shareholders' equity Share capital 28 2,575 2,575 2,575 Share premium account 143,294 143,294 143,294 Capital redemption reserve 2,337 2,337 2,337 Other reserves 234,579 234,579 234,579 Hedging reserve (4,224) (49,369) (15,403) Currency translation reserve (501) 5,089 1,851 Retained earnings (106,207) 26,869 (91,256) Total shareholders' equity 271,853 365,374 277,977 STATEMENT OF CHANGES IN EQUITY J D Wetherspoon plc, company number: 1709784 Notes Share Share premium Capital Other Hedging Currency Retained Total capital account redemption Reserves reserve translation earnings reserve reserve ��000 ��000 ��000 ��000 ��000 ��000 ��000 ��000 As at 26 July 2020 as previously reported 2,408 280,975 2,337 - (66,577) 7,089 91,016 317,248 Effect of restatements - (137,681) - 141,002 - - (3,321) - At 26 July 2020 restated 2,408 143,294 2,337 141,002 (66,577) 7,089 87,695 317,248 Total comprehensive income - - - - 17,208 (2,000) (58,724) (43,516) Loss for the period - - - - - - (58,791) (58,791) Interest-rate swaps: cash flow hedges 22 - - - - 16,717 - - 16,717 Interest-rate swaps: amount reclassified to the income statement 22 - - - - 4,528 - - 4,528 Tax on items taken directly to comprehensive income 7 - - - - (4,037) - - (4,037) Currency translation differences - - - - - (2,000) 67 (1,933) Issued share capital (net of expenses) 167 - - 93,577 - - (2,222) 91,522 Share-based payment charges - - - - - - 6,420 6,420 Tax on share-based payment - - - - - - 471 471 Purchase of own shares for share-based payments - - - - - - (6,771) (6,771) At 24 January 2021 2,575 143,294 2,337 234,579 (49,369) 5,089 26,869 365,374 Total comprehensive income - - - - 33,966 (3,238) (120,604) (89,876) Loss for the period - - - - - - (122,264) (122,264) Interest-rate swaps: cash flow hedges 22 - - - - 27,834 - - 27,834 Interest-rate swaps: amount reclassified to the income statement 22 - - - - 7,179 - - 7,179 Tax on items taken directly to comprehensive income 7 - - - - (1,047) - - (1,047) Currency translation differences - - - - - (3,238) 1,660 (1,578) Share-based payment charges - - - - - - 3,847 3,847 Tax on share-based payment - - - - - - (455) (455) Purchase of own shares for share-based payments - - - - - - (913) (913) At 25 July 2021 2,575 143,294 2,337 234,579 (15,403) 1,851 (91,256) 277,977 Total comprehensive income - - - - 11,179 (2,352) (11,003) (2,176) Loss for the period - - - - - - (11,469) (11,469) Interest-rate swaps: cash flow hedges 22 - - - - 22,314 - - 22,314 Interest-rate swaps: amount reclassified to the income statement 22 - - - - (2,011) - - (2,011) Tax on items taken directly to comprehensive income 7 - - - - (9,124) - - (9,124) Currency translation differences - - - - - (2,352) 466 (1,885) Share-based payment charges - - - - - - 3,152 3,152 Tax on share-based payment - - - - - - (18) (18) Purchase of own shares for share-based payments - - - - - - (7,082) (7,082) At 23 January 2022 2,575 143,294 2,337 234,579 (4,224) (501) (106,207) 271,853 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 retranslation of the opening reserves in the overseas branch at the current period end's currency exchange rate. As at 23 January 2022, the company had distributable reserves of ��124.7m. NOTES TO THE FINANCIAL STATEMENTS 1. Revenue Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Bar 480,453 236,701 440,119 Food 292,891 154,304 283,192 Eat out to help out scheme (note 24) - 23,248 23,248 Slot/fruit machines 23,144 12,046 17,059 Hotel 10,424 4,570 8,592 Other 483 203 345 807,395 431,072 772,555 2. Operating profit/(loss) - analysis of costs by nature This is stated after charging/(crediting): Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Variable concession rental payments 2,196 2,607 2,801 Short term leases 375 102 784 Cancelled principal payments (note 23) (2,250) (7,322) (10,933) Repairs and maintenance 45,557 25,609 64,020 Net rent receivable (926) (1,076) (1,873) Share-based payments (note 5) 3,152 6,420 10,267 Depreciation of property, plant and equipment (note 13) 35,690 37,014 73,193 Amortisation of intangible assets (note 12) 1,491 1,694 3,151 Depreciation of investment properties (note 14) 50 12 44 Amortisation of right of use assets (note 23) 22,672 23,042 44,532 Analysis of continuing operations Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Revenue 807,395 431,072 772,555 Cost of sales (784,197) (439,375) (844,574) Gross profit/(loss) 23,198 (8,303) (72,019) Administration costs (21,293) (16,855) (37,280) Operating profit/(loss) after exceptional items 1,905 (25,158) (109,299) Included in cost of sales is ��274.5m (2021: ��145.9m) relating to cost of inventory recognised as expense. 3. Property (gains)/losses Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Non-exceptional property (gains)/losses Disposal of fixed assets 1,485 1,268 1,548 Additional costs of disposal 435 52 775 Disposal of leases (3,449) (1,088) (2,200) Other property gains (124) - - (1,653) 232 123 Exceptional property (gains)/losses Disposal of fixed assets - - 1,592 Additional costs of disposal 23 57 115 Impairment of property, plant and equipment - - 1,999 Impairment of right of use assets - 2,133 2,133 23 2,190 5,839 Total property (gains)/losses (1,630) 2,422 5,962 Non-exceptional property losses, excluding disposal of lease assets, were ��1,796,000 in the period (2021: ��1,320,000). 4. Exceptional Items Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Exceptional operating items Local government support grants (107) (5,238) (11,123) Duty drawback (170) (3,699) (4,418) Exceptional operating income (277) (8,937) (15,541) Equipment - 2,516 3,753 Stock losses - 2,200 4,158 Staff costs - 11,562 15,692 Other - 195 879 Exceptional operating costs - 16,473 24,482 Total exceptional operating costs (277) 7,536 8,941 Exceptional property losses Disposal programme Loss on disposal of pubs 23 57 1,707 Impairment of property plant and equipment - - - 23 57 1,707 Other property losses Impairment of property, plant and equipment - - 1,999 Impairment of right-of-use asset - 2,133 2,133 - 2,133 4,132 Total exceptional property losses 23 2,190 5,839 Other exceptional items Exceptional finance costs (12,774) 5,511 12,690 Exceptional tax Exceptional tax items 189 (2,816) 10,385 Tax effect on exceptional items (749) - (3,271) (560) (2,816) 7,114 Total exceptional items (13,588) 12,421 34,584 Duty drawback A credit of ��170,000 (July 2021: ��4,418,000) for duty drawback was received for perished stock during the closure periods which arose in the last financial year. Local government support grants The company has recognised ��107,000 income of local government support grants in the UK and the Republic of Ireland relating to the Covid-19 pandemic. These are recognised on receipt. Exceptional finance costs The company has recognised an exceptional net income of ��12,774,000, ��13,774,000 of which relates to a reclassification due to hedge accounting. See note 22 for further detail. The remaining ��1,000,000 charge relates to covenant-waiver fees incurred during the period. Taxation The exceptional tax credit of ��560,000 comprises a previous year adjustment to current tax of ��2,000 and a deferred tax credit of ��562,000. The deferred tax relates to a fair value movement on interest rate swaps (��373,000) and the impact of the change in UK tax rate on the deferred tax balances (��189,000). 5. Employee benefits expenses Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Wages and salaries 302,569 256,022 520,339 Employee support grants (3,145) (97,539) (208,986) Social security costs 18,990 11,130 23,380 Other pension costs 4,579 4,058 7,877 Share-based payments 3,152 6,420 10,267 Redundancy and restructuring costs (note 4) - 6,179 6,179 326,145 186,270 359,056 Employee support grants disclosed above are amounts claimed by the company under the coronavirus job retention schemes in the UK and the Republic of Ireland. Employee numbers Unaudited Unaudited Audited 2022 2021 2021 Number Number Number Full-time equivalents Managerial/administration 4,916 4,613 4,586 Hourly paid staff 19,695 19,659 18,736 24,611 24,272 23,322 2022 2021 2021 Number Number Number Total employees Managerial/administration 5,030 4,722 4,703 Hourly paid staff 36,957 34,694 34,322 41,987 39,416 39,025 The totals above relate to the monthly average number of employees during the year, not the total of employees at the end of the year. Share-based payments Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 Shares awarded during the year (shares) 839,248 852,261 852,261 Average price of shares awarded (pence) 1,069 957 957 Market value of shares vested during the year (��000) 3,906 4,150 9,169 Total liability of the share-based payments scheme (��000) 12,239 15,047 14,608 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. 6. Finance Income and costs Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Finance costs Interest payable on bank loans and overdrafts 9,892 11,725 21,903 Amortisation of bank loan issue costs (note 10) 1,002 860 1,746 Interest payable on swaps 5,918 9,115 18,228 Interest payable on asset-financing 256 352 664 Interest payable on private placement 2,889 2,223 4,907 Finance costs, excluding lease interest 19,957 24,275 47,448 Interest payable on leases 9,617 11,015 19,832 Total finance costs 29,574 35,290 67,280 Bank interest receivable (6) (167) (188) Lease interest receivable (223) (210) (407) Total finance income (229) (377) (595) Net finance costs before exceptional items 29,345 34,913 66,685 Exceptional finance costs (note 4) (12,774) 5,511 12,690 Net finance costs after exceptional items 16,571 40,424 79,375 7. Income tax expense (a) Tax on loss on ordinary activities The standard rate of corporation tax in the UK is 19.0%. The company's profits for the accounting period are taxed at a rate of 19.0% (2021: 19.0%). Unaudited Unaudited Unaudited Unaudited Audited Audited 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021 Before After Before After Before After exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items ��000 ��000 ��000 ��000 ��000 ��000 Taken through income statement Current income tax: Current income tax charge (378) (378) - - (380) (380) Previous period adjustment - 2 - 2,641 - 1,836 Total current income tax (378) (376) - 2,641 (380) 1,456 Deferred tax: Origination and reversal of temporary differences (629) (1,380) (6,297) (9,192) (19,158) (21,704) Prior year deferred tax (credit)/charge - - (100) (2,662) (1,157) (3,718) Impact of change in UK tax rate - 189 - - - 10,385 Total deferred tax (629) (1,191) (6,397) (11,854) (20,315) (15,037) Tax charge/(credit) (1,007) (1,567) (6,397) (9,213) (20,695) (13,581) Unaudited Unaudited Unaudited Unaudited Audited Audited 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021 Before After Before After Before After exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items ��000 ��000 ��000 ��000 ��000 ��000 Taken through equity Current tax (2) (2) 4 4 6 6 Deferred tax 20 20 (8) (8) (22) (22) Tax (credit)/charge 18 18 (4) (4) (16) (16) Unaudited Unaudited Unaudited Unaudited Audited Audited 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021 Before After Before After Before After exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items ��000 ��000 ��000 ��000 ��000 ��000 Taken through comprehensive income Deferred tax charge on swaps 7,079 7,079 4,037 4,037 6,241 6,241 Impact of change in UK tax rate 2,045 2,045 - - (1,157) (1,157) Tax charge/(credit) 9,124 9,124 4,037 4,037 5,084 5,084 7. Income tax expense (continued) (b) Reconciliation of the total tax charge The taxation charge for the 26 weeks ended 23 January 2022 is based on the pre-exceptional loss before tax of ��26.1m and the estimated effective tax rate before exceptional items for the 26 weeks ended 23 January 2022 of 3.9% (2021: 12.4%). This comprises a pre-exceptional current tax rate of 1.4% (2021: 0.2%) and a pre-exceptional deferred tax charge of 2.5% (2021: 12.2% charge). The UK standard weighted average tax rate for the period is 19.0% (2021: 19.0%). The current tax rate is lower than the UK standard weighted average tax rate, owing to tax losses in the period. Unaudited Unaudited Unaudited Unaudited Audited Audited 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks ended ended ended ended ended ended 23 January 2022 23 January 2022 24 January 2021 24 January 2021 25 July 2021 25 July 2021 Before After Before After Before After exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items ��000 ��000 ��000 ��000 ��000 ��000 (Loss) before income tax (26,064) (13,036) (52,767) (68,004) (167,166) (194,636) Loss multiplied by the UK standard rate of (4,952) (2,477) (10,027) (12,921) (31,762) (36,981) corporation tax of 19.0% (2021: 19.0%) Abortive acquisition costs and disposals 373 373 - - - - Expenditure not allowable 108 98 69 69 1,791 4,680 Fair value movement on SWAP disregarded for tax - (3,217) - - - - Other allowable deductions (9) (9) (34) (34) (18) (18) Non-qualifying depreciation 3,294 3,294 2,287 2,287 7,029 7,029 Capital gains - effect or reliefs 464 464 168 168 728 728 Share options and SIPs (297) (297) 181 181 955 955 Deferred tax on balance-sheet-only items (103) (103) - - - - Effect of different tax rates and unrecognisd losses in oversea companies 115 115 1,059 1,059 1,740 1,524 Rate change adjustment - 190 - - - 10,385 Previous year adjustment - current tax - 2 - 2,640 - 1,836 Previous year adjustment - deferred tax - - (100) (2,662) (1,158) (3,719) Total tax expense reported in the income statement (1,007) (1,567) (6,397) (9,213) (20,695) (13,581) 7. Income tax expense (continued) (c) Deferred tax The deferred tax in the balance sheet is as follows: The main rate of corporation tax is currently 19% but this will increase to 25% from 1 April 2023. The rate increase has been substantively enacted and therefore the deferred tax balances have been recognised at the rate they are expected to reverse. Deferred tax liabilities Accelerated tax Other Total depreciation temporary differences ��000 ��000 ��000 At 25 July 2021 50,593 5,536 56,129 Movement during year posted to the income statement 2,944 108 3,052 Impact of tax rate change posted to the income statement 932 34 966 At 23 January 2022 (unaudited) 54,469 5,678 60,147 Deferred tax assets Share Tax losses Interest-rate Total based and interest swaps payments capacity carried forward ��000 ��000 ��000 ��000 At 25 July 2021 807 29,365 9,412 39,584 Movement during year posted to the income statement (98) 3,927 604 4,433 Movement during year posted to comprehensive income - - (7,079) (7,079) Movement during year posted to equity (20) - - (20) Impact of change in tax rate posted to income statement - 777 - 777 Impact of change in tax rate posted to comprehensive income - - (2,045) (2,045) At 23 January 2022 (unaudited) 689 34,069 892 35,650 The company has recognised deferred tax assets of ��35.7m (2021: ��39.6m), which are expected to offset against future profits. This includes a deferred tax asset of ��34.1m (2021: ��29.4m) in respect of UK tax losses and current-year interest restrictions capable of reactivation in future periods. This is on the basis that it is probable that profits will arise in the foreseeable future, enabling the assets to be utilised. Deferred tax assets and liabilities have been offset as follows 2022 2021 ��000 ��000 Deferred tax liabilities 60,147 56,129 Offset against deferred tax assets (35,650) (30,172) Offset against deferred tax assets (restated) - (9,412) Deferred tax liabilities 24,497 16,546 Deferred tax assets 35,650 39,584 Offset against deferred tax liabilities (35,650) (30,172) Offset against deferred tax liabilities (restated) - (9,412) Deferred tax asset - - As at 23 January 2022, the company had a potential deferred tax asset of ��8.8m (2021: ��9.1m) relating to capital losses and tax losses in the Republic of Ireland. A deferred tax asset has not been recognised, as there is insufficient certainty of recovery. On 3 March 2021, the chancellor confirmed that the UK rate of corporation tax will increase to 25% from 1 April 2023. Deferred tax has been calculated at the rate of taxation for the peiod that the deferred tax items are expected reverse. In accordance with IAS 12, the deferred tax asset and liability must be offset where there is a right of offset, this has been applied in the period and the prior year balance. 8. Earnings and free cash flow per share (a) Weighted average number of shares Earnings per share are based on the weighted average number of shares in issue of 128,750,155 (2021: 120,565,127), 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 126,946,018 (2021: 119,827,162). From financial year 2021, the weighted average number of shares held in trust for employee share schemes has been adjusted to exclude those shares which are expected to vest, yet remain in trust. Weighted average number of shares Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 Shares in issue 128,750,155 120,565,127 124,668,915 Shares held in trust (1,804,137) (737,965) (1,841,667) Shares in issue less shares held in trust 126,946,018 119,827,162 122,827,248 (b) Earnings per share 26 weeks ended 23 January 2022 unaudited Loss Basic EPS Diluted EPS ��000 pence pence Earnings (loss after tax) (11,469) (9.0) (9.0) Exclude effect of exceptional items after tax (13,588) (10.7) (10.7) Earnings before exceptional items (25,057) (19.7) (19.7) Exclude effect of property gains/(losses) (1,653) (1.3) (1.3) Underlying earnings before exceptional items (26,710) (21.0) (21.0) 26 weeks ended 23 January 2022 unaudited - pre-IFRS16 Loss Basic EPS Diluted EPS ��000 pence pence Earnings (loss after tax) (6,660) (5.2) (5.2) Exclude effect of exceptional items after tax (13,588) (10.7) (10.7) Earnings before exceptional items (20,248) (15.9) (15.9) Exclude effect of property gains/(losses) 1,796 1.4 1.4 Underlying earnings before exceptional items (18,452) (14.5) (14.5) 26 weeks ended 24 January 2021 unaudited Loss Basic EPS Diluted EPS ��000 pence pence Earnings (profit after tax) (58,791) (49.1) (49.1) Exclude effect of exceptional items after tax 12,421 10.4 10.4 Earnings before exceptional items (46,370) (38.7) (38.7) Exclude effect of property gains/(losses) 232 0.2 0.2 Underlying earnings before exceptional items (46,138) (38.5) (38.5) 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 issues 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 scheme. Free cash Basic free Diluted free flow cash flow cash flow per share per share ��000 pence pence 26 weeks ended 23 January 2022 (34,509) (27.2) (27.2) 26 weeks ended 24 January 2021 (77,306) (64.5) (64.5) 52 weeks ended 25 July 2021 (83,284) (67.8) (67.8) (d) Owners' earnings per share Owners' earnings measures' those earnings attributable to shareholders from current activities adjusted for significant non-cash items and one-off items. Owners' earnings are calculated as pre-IFRS16 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. The weighted average number of shares in issue used in this metric is disclosed above (see note 8a). 26 weeks ended 23 January 2022 unaudited Owners' Basic Diluted Earnings Owners' EPS Owners' EPS ��000 pence pence Loss before tax and exceptional items (pre-IFRS 16 income statement) (21,255) (16.7) (16.7) Exclude depreciation and amortisation 37,231 29.3 29.3 Less reinvestment in current properties (18,925) (14.9) (14.9) Exclude property gains and losses 1,796 1.4 1.4 Less cash tax (note 7a) 378 0.3 0.3 Owners' earnings (775) (0.6) (0.6) 26 weeks ended 24 January 2021 unaudited Owners' Basic Diluted Earnings Owners' EPS Owners' EPS ��000 pence pence Loss before tax and exceptional items (pre-IFRS 16 income statement) (46,172) (38.5) (38.5) Exclude depreciation and amortisation 38,719 32.3 32.3 Less cash reinvestment in current properties (7,633) (6.4) (6.4) Exclude property gains and losses 1,320 1.1 1.1 Less cash tax (note 7a) - - - Owners' earnings (13,766) (11.5) (11.5) 52 weeks ended 25 July 2021 audited Owners' Basic Diluted Earnings Owners' EPS Owners' EPS ��000 pence pence Loss before tax and exceptional items (pre-IFRS 16 income statement) (154,676) (125.9) (125.9) Exclude depreciation and amortisation 76,388 62.2 62.2 Less cash reinvestment in current properties (19,962) (16.3) (16.3) Exclude property gains and losses 2,323 1.9 1.9 Less cash tax (note 7a) 380 0.3 0.3 Owners' earnings (95,547) (77.8) (77.8) 8. Earnings and free cash flow per share (continued) Analysis of additions by type Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 Reinvestment in existing pubs 18,925 8,130 19,962 Investment in new pubs and pub extensions 26,645 7,663 24,051 Lease premiums (127) 276 1,800 Freehold reversions and investment properties 19,248 1,359 16,858 64,691 17,428 62,671 Analysis of additions by category Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 Property, plant and equipment (note 13) 62,521 15,194 58,139 Intangible assets (note 12) - 2,234 4 Investment properties (note 14) 2,170 - 4,528 64,691 17,428 62,671 These additions tables have been inserted to reconcile the total fixed asset additions during the period to the reinvestment in existing pubs metric used in the owners' earnings calculation. 9. Cash used in/generated from operations Unaudited Unaudited Unaudited Audited 26 weeks 26 weeks 26 weeks 52 weeks ended ended ended ended 23 January 23 January 24 January 25 July 2022 2022 2021 2021 ��000 ��000 ��000 ��000 Loss for the period (11,469) (6,660) (58,791) (181,055) Adjusted for: Tax (note 7) (1,567) (1,567) (9,213) (13,581) Share-based charges (note 2) 3,152 3,152 6,420 10,267 Loss on disposal of property, plant and equipment (note 3) 1,485 1,485 1,268 3,140 Disposal of capitalised leases (note 3) (3,449) - (1,088) (2,200) Net impairment charge (note 3) - - 2,133 4,132 Interest receivable (note 6) (6) (6) (167) (188) Interest payable (note 6) 18,955 18,955 23,415 45,702 Lease interest receivable (note 6) (223) - (210) (407) Lease interest payable (note 6) 9,617 - 11,015 19,832 Exceptional Interest (note 6) (12,774) (12,774) 5,511 12,690 Amortisation of bank loan issue costs (note 6) 1,002 1,002 860 1,746 Depreciation of property, plant and equipment (note 13) 35,690 35,690 37,014 73,193 Amortisation of intangible assets (note 12) 1,491 1,491 1,694 3,151 Depreciation on investment properties (note 14) 50 50 12 44 Aborted properties costs 2,283 2,283 17 628 Cancelled prinipal payments (note 23) (2,250) - (7,322) (10,993) Amortisation of right-of-use assets (note 23) 22,652 - 23,042 44,532 64,640 43,101 35,611 10,633 Change in inventories (154) (154) 726 (3,758) Change in receivables (269) (337) 4,908 15,748 Change in payables (31,002) (28,021) (69,994) 2,585 Cash flow from operating activities 33,215 14,589 (28,749) 25,208 This column shows the cash generated from operations as it would have been reported, before the introduction of IFRS16. 10. Analysis of change in net debt 25 July Cash Other 23 January 2021 flows changes 2022 ��000 ��000 ��000 ��000 Borrowings Cash and cash equivalents 45,408 (6,420) - 38,988 Other loan receivable - due before one year - 762 - 762 Asset-financing obligations - due before one year (7,610) 870 - (6,740) Current net borrowings 37,798 (4,788) - 33,010 Bank loans - due after one year (776,871) (74,990) (979) (852,842) Asset-financing obligations - due after one year (8,633) 2,661 - (5,972) Other loan receivable - due after one year - 3,224 - 3,224 Private placement - due after one year (97,768) - (23) (97,791) Non-current net borrowings (883,272) (69,105) (1,002) (953,381) Net debt (845,474) (73,893) (1,002) (920,371) Derivatives Interest-rate swaps liability - due after one year (37,643) - 34,078 (3,565) Total derivatives (37,643) - 34,078 (3,565) Net debt after derivatives (883,117) (73,893) 33,076 (923,936) Leases Lease assets - due before one year 1,638 (656) 656 1,638 Lease assets - due after one year 9,890 - (209) 9,681 Lease obligations - due before one year (65,219) 25,245 (10,823) (50,797) Lease obligations - due after one year (458,596) - 13,760 (444,836) Net lease liabilities (512,287) 24,589 3,384 (484,314) Net debt after derivatives and lease liabilities (1,395,404) (49,304) 36,460 (1,408,250) The cash movement on the bank loans of ��74,990,000 is disclosed in the cash flow statement as an advance/(repayment) under bank loans. The cash movement on asset-financing of ��3,531,000 is disclosed in the cash flow statement as asset-financing principal payments. Lease obligations represent long term payables and lease assets represent long term receivables, and are therefore both disclosed in the table above. Non-cash movements The non-cash movement in bank loans and the private placement relate to the amortisation of loan issue costs. The amortisation charge for the year of ��1,002,000 is disclosed in note 6. These are arrangement fees paid in respect of new borrowings and are charged to the income statement over the expected life of the loans. The movement in interest-rate swaps relates to the change in the 'mark to market' valuations for the year for swaps subject to hedge accounting. The non-cash movement in lease liabilities is analysed in the table overleaf. 10. Analysis of change in net debt (continued) Unaudited Non-cash movement in net lease liabilities 23 January 2022 ��000 Recognition of new leases (note 23) (4,317) Remeasurements of existing leases liabilities (note 23) (8,504) Remeasurements of existing leases assets (note 23) 447 Disposal of lease (note 23) 13,508 Cancelled principal payments (note 23) 2,250 Exchange differences (note 23) - Non-cash movement in net lease liabilities 3,384 The table below calculates a ratio between net debt, being borrowing less cash and cash equivalents, and earnings before interest, tax, and depreciation (EBITDA). The numbers in this table are all before the effect of IFRS16. Unaudited Unaudited Unaudited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Loss before tax (income statement) (21,255) (46,172) (154,676) Interest 19,951 24,108 47,260 Depreciation 37,215 38,719 76,474 Earnings before interest, tax and depreciation (EBITDA) 35,911 16,655 (30,942) Net debt / EBITDA 25.63 -60.36 -27.32 11. Dividends paid and proposed Unaudited Unaudited Audited 26 weeks 26 weeks 52 weeks ended ended ended 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Paid in the period 2020 final dividend - - - 2021 interim dividend - - - 2021 final dividend - - - - - - Dividends in respect of the period Interim dividend - - - Final dividend - - - - - - Dividend per share (p) - - - Dividend cover - - - Dividend cover is calculated as profit after tax and exceptional items over dividend paid. Dividend cover has not been shown for previous year and current year, as the company reported a loss in both periods. 12. Intangible assets Computer Assets Total software and under development construction ��000 ��000 ��000 Cost: At 24 January 2021 34,266 2,189 36,455 Transfers 804 (804) - Disposals (2,323) (1,381) (3,704) At 25 July 2021 32,747 4 32,751 Disposals (21) (4) (25) At 23 January 2022 32,726 - 32,726 Accumulated amortisation: At 24 January 2021 (27,499) - (27,499) Provided during the period (1,457) - (1,457) Exchange differences (1) - (1) Disposals 1,564 - 1,564 At 25 July 2021 (27,393) - (27,393) Provided during the period (1,491) - (1,491) Disposals 7 - 7 At 23 January 2022 (28,877) - (28,877) Net book amount at 23 January 2022 3,849 - 3,849 Net book amount at 25 July 2021 5,354 4 5,358 Net book amount at 24 January 2021 6,767 2,189 8,956 The majority of intangible assets relates to computer software and software development. Examples include the development costs of the SAP accounting and property-maintenance systems and bespoke J D Wetherspoon apps. 13. Property, plant and equipment Freehold and Long Leasehold Property Short Leasehold Property Equipment Fixtures and Fittings Assets Under Construction Total ��000 ��000 ��000 ��000 ��000 Cost At 26 July 2020 1,363,106 295,009 684,732 86,624 2,429,471 Additions 4,356 - 3,434 7,404 15,194 Transfers 3,964 901 1,321 (6,186) - Exchange differences (58) (5) (13) (61) (137) Disposals - (1,878) (1,262) - (3,140) Reclassifications 676 (676) - - - Transfer from investment property 5,768 - - - 5,768 At 24 January 2021 1,377,812 293,351 688,212 87,781 2,447,156 Additions 10,427 132 7,817 24,569 42,945 Transfers 37,059 3,263 7,064 (47,386) - Exchange differences (1,299) (139) (413) (1,096) (2,947) Disposals (2,623) (2,507) (2,369) - (7,499) Reclassifications 7,166 (7,166) - - - At 25 July 2021 1,428,542 286,934 700,311 63,868 2,479,655 Additions 22,982 2,039 12,993 24,507 62,521 Transfers to investment property - - - (2,170) (2,170) Transfers 11,193 1,167 1,333 (13,693) - Exchange differences (930) (47) (163) (380) (1,520) Transfer to held for sale (2,854) (3,279) (2,123) - (8,256) Disposals (3,551) (1,132) (978) (959) (6,620) Reclassifications 8,167 (8,167) - - - At 23 January 2022 1,463,549 277,515 711,373 71,173 2,523,610 Accumulated depreciation and Impairment At 26 July 2020 (307,297) (167,009) (512,387) - (986,693) Provided during the period (9,585) (5,688) (21,741) - (37,014) Transfers from investment property (290) - - - (290) Disposals - 1,325 1,086 - 2,411 Reclassification 419 (419) - - - At 24 January 2021 (316,753) (171,791) (533,042) - (1,021,586) Provided during the period (10,696) (4,811) (20,672) - (36,179) Exchange differences 282 23 249 - 554 Impairment loss (1,631) (368) - - (1,999) Disposals 874 1,080 1,427 - 3,381 Reclassification (4,509) 4,509 - - - At 25 July 2021 (332,433) (171,358) (552,038) - (1,055,829) Provided during the period (10,527) (4,969) (20,194) - (35,690) Exchange differences 49 28 93 - 170 Transfer to held for sale 1,442 2,641 2,050 - 6,133 Disposals 776 618 580 - 1,974 Reclassification (4,751) 4,751 - - - At 23 January 2022 (345,444) (168,289) (569,509) - (1,083,242) Net book amount at 23 January 2022 1,118,105 109,226 141,864 71,173 1,440,368 Net book amount at 25 July 2021 1,096,109 115,576 148,273 63,868 1,423,826 Net book amount at 24 January 2021 1,061,059 121,560 155,170 87,781 1,425,570 Net book amount at 26 July 2020 1,055,809 128,000 172,345 86,624 1,442,778 13. Property, plant and equipment (continued) 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 8.7% (2021: 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, ��Nil impairment losses (2021: ��Nil) was charged to property losses in the income statement. 14. Investment property The company owns four (2021: two) freehold properties with existing tenants - and these assets have been classified as investment properties. During the year, a property which was originally recognised as part of property, plant and equipment under the catergory 'Assets under Construction' has been transferred to investment property. ��000 Cost: At 26 July 2020 11,842 Transfer to property, plant and equipment (5,768) At 24 January 2021 6,074 Additions 4,528 At 25 July 2021 10,602 Transfer from property plant and equipment 2,170 At 23 January 2022 12,772 Accumulated amortisation: At 26 July 2020 (315) Provided during the period (12) Transfer to property, plant and equipment 290 At 24 January 2021 (37) Provided during the period (32) At 25 July 2021 (69) Provided during the period (50) At 23 January 2022 (119) Net book amount at 23 January 2022 12,653 Net book amount at 25 July 2021 10,533 Net book amount at 24 January 2021 6,037 Net book amount at 26 July 2020 11,527 Rental income received in the period from investment properties was ��333,000 (2021: ��161,250). Operating costs, excluding depreciation, incurred in relation to these properties amounted to ��9,000 (2021: ��2,000). In the opinion of the directors, the fair value of the investment properties is approximately equal to its book value. 15. Inventories Bar, food and non-consumables stock held at pubs and national distribution centre. Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Goods for resale at cost 27,007 22,369 26,853 16. Receivables 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. Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Current (due within one year) Other loan receivables 762 - - Other receivables 3,075 1,015 2,004 Accrued income 1,053 440 1,499 Prepayment 11,806 25,813 12,924 Total current receivables 16,696 27,268 16,427 Non-current (due after one year) Other loan receivables 3,224 - - Total other non-current assets 3,224 - - Accrued income relates to discounts which are calculated based on certain products delivered at an agreed rate per item. Included in prepayments is ��1,102,000 (2021: ��16,500,000) in relation to government grants receivable under the coronavirus job retention scheme. Credit risk Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Due from suppliers - not due 2,786 883 1,040 Due from suppliers - overdue 289 132 964 3,075 1,015 2,004 Credit risk is the risk that a counterparty does not settle its financial obligation with the company. At the period's 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 immaterial. Cash and cash equivalents are also subject to the impairment requirements of IFRS9 - the identified impairment loss was immaterial. 17. Assets held for sale These relate to situations in which the company had exchanged contracts to sell a property, but the transaction is not yet complete. As at 23 January 2022, three sites were classified as held for sale (2021:Nil). Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Property, plant and equipment 2,123 - - 18. Cash and cash equivalents Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Cash and cash equivalents 38,988 225,024 45,408 Cash at bank earns interest at floating rates, based on daily bank deposit rates. 19. Trade and other payables This category relates to money owed by the company to third parties. Accruals refer to allowances made by the company for future anticipated payments to suppliers and other creditors. Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Trade payables 86,652 67,406 111,918 Other payables 20,151 16,835 27,759 Other tax and social security 59,035 48,502 44,237 Accruals 78,082 50,724 74,787 Deferred Income 837 1,275 1,090 244,757 184,742 259,791 20. Borrowings Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Current (due within one year) Other Lease liabilities 50,797 72,481 65,219 Asset-financing obligations 6,740 7,610 7,610 Total current borrowings 57,537 80,091 72,829 Non-current (due after one year) Bank loans Variable-rate facility 755,000 875,000 680,000 CLBILS 100,033 48,333 100,033 Unamortised bank loan issue costs (2,191) (3,829) (3,162) 852,842 919,504 776,871 Private placement Fixed-rate facility 98,000 98,000 98,000 Unamortised private placement issue costs (209) (255) (232) 97,791 97,745 97,768 Other Lease liabilities 444,836 508,518 458,596 Asset-financing 5,972 12,094 8,633 Total non-current borrowings 1,401,441 1,537,861 1,341,868 Total borrowings 1,458,978 1,617,952 1,414,697 21. Provisions Legal claims Total ��000 ��000 At 25 July 2021 3,004 3,004 Charged to the income statement: - Additional charges 1,084 1,084 - Unused amounts reversed (876) (876) - Used during year (182) (182) At 23 January 2022 3,030 3,030 23 January 25 July 2022 2021 ��000 ��000 Current 3,030 3,004 Non-current - - Total provisions 3,030 3,004 Legal claims The amounts represent a provision for ongoing legal claims brought against the company in the normal course of business by customers and employees. Owing to the nature of the business, the company expects to have a continuous provision for outstanding employee and public liability claims. All claim provisions are considered current and are therefore not discounted. 22. 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 Within More than 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total ��000 ��000 ��000 ��000 ��000 ��000 ��000 At 23 January 2022 (unaudited) Bank loans 25,247 25,247 44,644 856,221 - - 951,359 Bank loans - CLBILS 2,107 1,164 100,033 - - - 103,304 Private placement 3,655 3,655 3,655 3,655 3,655 98,000 116,275 Trade and other payables 184,885 - - - - - 184,885 Derivatives 8,933 6,165 3,143 3,203 3,361 8,295 33,100 Lease liabilities 50,797 49,096 48,348 45,423 44,242 409,524 647,430 Asset-financing obligations 6,788 4,324 2,323 - - - 13,435 Within More than 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5 years Total ��000 ��000 ��000 ��000 ��000 ��000 ��000 At 25 July 2021 Bank loans 21,798 21,798 11,857 41,549 855,000 - 952,002 Bank loans - CLBILS 2,005 2,005 100,138 - - - 104,148 Private placement 3,655 3,655 3,655 3,655 3,655 99,828 118,103 Trade and other payables 214,464 - - - - - 214,464 Derivatives 12,054 11,969 5,342 5,293 5,207 5,231 45,096 Lease liabilities 65,219 49,587 49,508 47,872 45,290 427,520 684,996 Asset-financing obligations 7,610 5,145 4,323 - - - 17,078 The company has agreed a one-year extension for ��855m of its existing banking agreement. The original loan, agreed in February 2019, was for five years with two one-year extension options, the first of which has been exercised. The second extension option was originally meant to be reviewed in January 2022 but this has been deferred until June 2022 at the request of the bank. At the balance sheet date, the company had loan facilities of ��1,083m (2021: ��1,041m) as detailed below: n Secured revolving-loan facility of ��875m o ��20m matures February 2024 o ��855m matures February 2025 o 14 participating lenders n Sale of senior secured notes ��98m o Matures August 2026 o The purchase of loan notes split among 5 participants. n CLBILS secured loan of ��100m o Matures August 2023 o Four participating lenders n Overdraft facility of ��10m These facilities have been entered into to meet the short and long term liquidity needs of the business. The objective is to ensure that the company has sufficient financial resources to meet working capital requirements as well as funds for reinvestment and development. The company manages liquidity risk through its revolving-loan facility as well as other longer term facilities to avoid reliance on short term borrowings. The company's borrowings are dependent on the meeting of financial covenants, which if breached, could result in funding being withdrawn. The company has agreed covenant waivers with its lenders as outlined in the going concern section of the 2021 annual report within the accounting policies (page 51) and have ensured liquidity through share placings in the current and prior year. 22. Financial instruments (continued) 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 1.61% (2021: 2.42%), fixed for a weighted average period of 6.9 years (2021: 3.6 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 To Total swap value ��m Weighted average interest % 30/07/2021 30/07/2023 770 1.61 31/07/2023 30/07/2026 770 1.10 31/07/2026 30/06/2028 770 1.33 01/07/2028 29/03/2029 770 1.32 31/03/2029 30/11/2031 770 1.02 At the balance sheet date, ��755m (2021: ��875m) 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. 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. In a normal trading year, the company measures loans using a ratio of net debt to EBITDA which was 3.36 times in 2019. With covenant waivers agreed, management's primary metric is liquidity. Financial risks associated with financial instruments, including credit risk and liquidy risk, are discussed in the 2021 annual report in the section 2, page 61. Fair value of financial assets and liabilities IFRS13 requires disclosure of fair value measurements by level, using the following fair value measurement hierarchy: n Quoted prices in active markets for identical assets or liabilities (level 1) n Inputs other than quoted prices included in level 1 which are observable for the asset or liability, either directly or indirectly (level 2) n Inputs for the asset or liability which are not based on observable market data (level 3) Interest-rate 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. This table excludes lease liabilities. Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Analysis of interest-rate profile of financial liabilities Floating rate due after one year (2,191) 101,171 (3,162) Fixed rate due after one year 855,033 818,333 780,033 852,842 919,504 776,871 Asset-financing obligations Fixed rate due in one year 6,740 7,610 7,610 Fixed-rate due after one year 5,972 12,094 8,633 12,712 19,704 16,243 Private placement Fixed rate due after one year 97,791 97,745 97,768 97,791 97,745 97,768 963,345 1,036,953 890,882 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. 22. 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. The table below highlights any differences between book value and fair value of financial instruments. Unaudited Unaudited Unaudited Unaudited Audited Audited 23 January 23 January 24 January 24 January 25 July 25 July 2022 2022 2021 2021 2021 2021 Book value Fair value Book value Fair value Book value Fair value ��000 ��000 ��000 ��000 ��000 ��000 Financial assets at amortised cost Cash and cash equivalents 38,988 38,988 225,024 225,024 45,408 45,408 Receivables 3,075 3,075 1,015 1,015 2,004 2,004 Lease assets 11,319 11,432 12,197 12,185 11,528 11,643 53,382 53,495 238,236 238,224 58,940 59,055 Financial liabilities at amortised cost Trade and other payables (184,885) (184,885) (136,240) (136,240) (214,464) (214,464) Asset-financing obligations (12,712) (12,839) (19,704) (19,712) (16,243) (16,406) Lease obligations (495,633) (500,589) (580,999) (593,892) (523,815) (529,053) Private placement (97,791) (98,768) (97,745) (99,358) (97,768) (98,746) Borrowings (852,852) (861,380) (919,504) (928,699) (776,871) (784,639) (1,643,873) (1,658,461) (1,754,192) (1,777,901) (1,629,161) (1,643,308) Derivatives - cash flow hedges Non-current derivative financial liability (3,565) (3,565) (65,477) (65,477) (37,643) (37,643) (3,565) (3,565) (65,477) (65,477) (37,643) (37,643) 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 lease payments under asset-financing fall due as follows: Unaudited Unaudited Audited 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Within one year 6,740 7,610 7,610 In the second to fifth year, inclusive 6,485 13,244 9,468 13,225 20,854 17,078 Less future finance charges (513) (1,150) (835) Present value of lease obligations 12,712 19,704 16,243 Less amount due for settlement within one year (6,740) (7,610) (7,610) Amount due for settlement during the second to fifth year, inclusive 5,972 12,094 8,633 All asset-financing obligations are in respect of various equipment used in the business. No escalation clauses are included in the agreements. 22. Financial instruments (continued) Interest-rate swaps At 23 January 2022, 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. Loss/(Gain) on Deferred Total Hedging interest-rate tax Reserve swaps ��000 ��000 ��000 As at 24 January 2021 65,477 (11,580) 53,897 Change in fair value posted to comprehensive income (27,834) - (27,834) Hedge ineffectiveness posted to income statement (11,707) - (11,707) Deferred tax posted to comprehensive income - 1,047 1,047 As at 25 July 2021 25,936 (10,533) 15,403 Change in fair value posted to comprehensive income (22,314) - (22,314) Fair value reclassfied from reserve to income statement 2,011 - 2,011 Deferred tax posted to comprehensive income - 9,124 9,124 As at 23 January 2022 5,633 (1,409) 4,224 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 between 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 adopts hedge accounting, meaning that the effective portion of changes in the fair value of derivatives is recognised in comprehensive income, with any gain or loss relating to an ineffective portion accounted for in the income statement. 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 those amounts received for a given amount of borrowings. These hedges could be ineffective if the: n 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. n gross amount of borrowings were less than the value swapped. n impact of LIBOR reform were to cause 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. For interest rate swaps which were designated as part of a hedging relationship a gain of ��22,314,000 (2021: ��16,717,000) has been recognised in the hedging reserve in respect of the effective portion of the fair value movement. A change in fair value of ��13,774,000 (2021: ��4,528,000) has been recognised in the income statement as exceptional finance income (note 4). This recognises hedge ineffectiveness and the associated reclassification of hedges based on the forecast future borrowings for the life of the hedges. It has been considered highly probable that floating-rate utilised core debt will be less than the total value of interest rate swaps in place, over the remaining life of the swaps, giving rise to over-hedging. A number of designated hedge relationships have become fully ineffective and therefore have been discontinued and recognised in the income statement. There are no amounts recognised in the hedge reserves for discontinued hedge relationships. Interest-rate sensitivity During the 26 weeks ended 23 January 2022, if the interest rates on UK-denominated borrowings had been 1% higher, with all other variables constant, pre-tax loss for the year would have been reduced by ��5,000 and equity increased by ��67,660,000. 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. 23. Leases About 32% 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. During the period, 15 leases were remeasured as a result of changes in the agreed payments under the lease contracts and changes in the lease terms. In additions, three new lease contracts were agreed on. Disposals and derecognised leases in the period represent the purchasing of 10 formerly leasehold properties, the disposal of four leases altogether. ��000 Cost As at 25 July 2021 558,897 Additions 4,317 Remeasurement 8,758 Exchange differences 1 Disposals and derecognised leases (14,356) At 23 January 2022 (unaudited) 557,617 Accumulated depreciation and impairment: As at 25 July 2021 (90,359) Provided during the period (22,672) Disposals and derecognised leases 1,691 Remeasurment 1,907 At 23 January 2022 (unaudited) (109,433) Net book amount at 23 January 2022 (unaudited) 448,184 Net book amount at 25 July 2021 468,538 23. Leases (continued) (b) Lease maturity profile 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 Unaudited Audited 2022 2021 ��000 ��000 Within one year 50,797 65,219 Between one and two years 49,096 49,587 Between two and three years 48,348 49,508 Between three and four years 45,423 47,872 Between four and five years 44,242 45,290 After five years 409,524 427,520 Lease commitments payable 647,430 684,996 Discounting lease liability (151,797) (161,181) Lease liability 495,633 523,815 Lease assets Unaudited Audited 2022 2021 ��000 ��000 Within one year 1,638 1,638 Between one and two years 1,398 1,586 Between two and three years 1,150 1,130 Between three and four years 1,106 1,084 Between four and five years 1,112 1,070 After five years 7,066 7,255 13,470 13,763 Discounting lease asset (2,151) (2,235) Lease asset 11,319 11,528 The comparative numbers disclosed above are those included in the 2021 annual report. 23. Leases (continued) (c) Lease liability The tables below show the movements in the period of the lease liability and the lease asset. Lease liability Unaudited Audited 23 January 25 July 2022 2021 ��000 ��000 Lease liability as at commencement of period 523,815 573,146 Additions 4,317 12,162 Remeasurements of leases 8,504 (15,602) Disposals (13,508) (15,790) Cancelled principal payments (due to expedient) (2,250) (10,993) Exchange differences - (233) Lease liabilities before payments 520,878 542,690 Interest payable in period: Interest expense within period (discounting element) 9,954 19,872 Cancelled interest expense (due to expedient) (412) (2,918) 9,542 16,954 Total cash outflow for leases in period: Lease payment commitments for period (24,463) (53,602) Cancelled payment commitments (due to expedient) 2,662 13,911 Deferred payment commitments (12,986) 3,862 (34,787) (35,829) Net principal payments at 23 January 2022 (25,245) (18,875) At 23 January 2022 495,633 523,815 The company has applied the practical expedient during the financial period, which is an amendment to IFRS16 - an amendment which allows reductions in rent payments due on or before June 2022 to be credited to the income statement, rather than requiring the remeasurement of the lease and spreading of rent reduction received in this period over the term of the lease. This practical expedient was extended in March 2021 for a further 12 months to June 2022. This 2021 amendment is effective for annual reporting periods beginning on or after 1 April 2021 and has been applied to all rent concessions which meet the conditions of the expedient. The application of this amendment results in principal payments of ��2,250,000 being credited to the income statement and a reduction in associated interest charges of ��412,000, resulting in a total credit to the income statement of ��2,662,000 which is disclosed in cash generated from operations, note 9. 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 under one year are not capitalised. 23. Leases (continued) Lease assets Unaudited Audited 2022 2021 ��000 ��000 Recognition of Asset liability 11,528 12,851 Remeasurements of leases 447 - Lease assets before payments at 23 January 2022 11,975 12,851 Interest due in period 228 413 Total cash Inflow for leases in period (884) (1,736) Net principal payments at 23 January 2022 (656) (1,323) At 23 January 2022 11,319 11,528 Rent cash flow Analysis 2022 ��000 Cash outflows relating to capitalised leases 34,787 Expense relating to short term leases 375 Expense relating to variable element of concessions 2,196 Total rent cash outflows for period 37,358 Cash inflows relating to capitalised leases (884) Income relating to lessor sites (757) Total rent cash Inflows for period (1,641) 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 where any amounts remain unpaid, take the appropriate steps. It is the company's view that there are no significant credit losses on the sublease assets. Where needed, deferral terms were agreed on with lessees in relation to the coronavirus pandemic. The assessment is that there is no material expected credit loss. 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, yet not paid, in the period. The incremental borrowing rate applied to lease liabilities and assets was 1.9-3.6%, depending on the lease's length. 24. Government support 23 January 24 January 25 July 2022 2021 2021 ��000 ��000 ��000 Eat out to help out (note 1) - (23,248) (23,248) Local government grants (note 4) (107) (5,238) (11,123) Employee support grants (note 5) (3,145) (97,539) (208,986) (3,252) (126,025) (243,357) The government support in the table above should be viewed in context of the contribution to the economy as on page 6. In the five years before the pandemic the company paid 42.1% of its sales as taxes. Local government grants From the 9 September 2020, the UK Government made available several grants to support those businesses which had been adversely affected by the pandemic. Applications were made to the respective local authorities in line with the eligibility criteria for each scheme. The Irish Government introduced a similar grant called "COVID Restrictions Support Scheme", for which the company applied for centrally. Government grants were recognised at the point at which funds were receipted. In the year, ��0.1m was receipted: with the majority of this balance in relation to the Republic or Ireland. The grants were treated as exceptional income. Employee support grants The coronavirus job retention scheme, (CJRS) and equivalent Republic of Ireland schemes, were introduced at the beginning of the pandemic to support companies in retaining employees, in the form of grants to cover a proportion of the wages and salaries of furloughed staff. The claims have been made weekly since April 2020 for weekly paid employees and monthly for salaried employees. No CJRS claims have been made though since 16 August 2021. These are accounted for as a credit to wages and salaries within employee costs. The company was also eligible for a business rates holiday, which represented a saving of ��4.6m (July 2021: ��56m) in the period. The 5% VAT rate on food, non-alcoholic drinks and hotel room sales, introduced in July 2020, was passed on to customers in the form of lower selling prices. This temporary reduced rate ended on 30 September 2021, with a new reduced rate of 12.5% introduced thereafter, which will end on 31 March 2022. The company has entered into an agreed repayment schedule with HMRC for outstanding liabilities. At the end of the half-year period the outstanding amount was ��2.7m (2021: ��25.7m), which will be repaid in full by the end of January 2022. 25. Capital commitments At 23 January 2022, the company had ��12.8m (July 2021: ��10.0m) of capital commitments, relating to the purchase of seven (July 2021: eight) 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. 26. Contingent asset IAS 37 requires disclosure when it is probable (more than 50% likelihood) that an inflow of benefits will occur. A claim has been submitted to HMRC in relation to the historic VAT treatment of gaming machines. The company is stood behind the lead case of Rank Group PLC and 2016 G1 Limited v HMRC, and will then apply the relevant judgment. The decision of the First-Tier tribunal was released on 30 June 2021 and was found in favour of the taxpayers, and HMRC has subsequently confirmed that it will not appeal against the decision. The timing and amount of the receipt are to be determined, although management's best estimate is an approximate ��27m cash inflow. 27. Related-party disclosures J D Wetherspoon is the owner of the share capital of the following companies: Company name Country of incorporation Ownership Status J D Wetherspoon (Scot) Limited Scotland Wholly owned Dormant J D Wetherspoon Property Holdings Limited England Wholly owned Dormant Moon and Spoon Limited England Wholly owned Dormant Moon and Stars Limited England Wholly owned Dormant Moon on the Hill Limited England Wholly owned Dormant Moorsom & Co Limited England Wholly owned Dormant Sylvan Moon Limited England Wholly owned Dormant Checkline House (Head Lease) Limited Wales Wholly owned 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 in the Republic of Ireland. The registered office of all of the above companies is the same as that for J D Wetherspoon plc, as disclosed on the final page of these accounts. 28. Share capital Number of Share shares capital 000s ��000 Balance at 26 July 2020 (audited) 120,380 2,408 Issue of shares 8,370 167 Balance at 24 January 2021 (unaudited) 128,750 2,575 Balance at 25 July 2021 (audited) 128,750 2,575 Balance at 23 January 2022 (unaudited) 128,750 2,575 The total authorised number of 2p ordinary shares is 500,000,000 (2021: 500,000,000). All issued shares are fully paid. 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. General Information J D Wetherspoon plc is a public listed company, incorporated and domiciled in England and Wales. Its registered office address is: Wetherspoon House, Central Park, Reeds Crescent, Watford, WD24 4QL. The company is listed on the London Stock Exchange. This condensed half-yearly financial information was approved for issue by the board on 17 March 2022. This interim report does not comprise statutory accounts within the meaning of sections 434 and 435 of the Companies Act 2006. Statutory accounts for the year ended 25 July 2021 were approved by the board of directors on 1 October 2021 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, contained an emphasis-of-matter paragraph, highlighting material uncertainty relating to going concern and did not contain any statement under sections 498-502 of the Companies Act 2006. There are no changes to the principal risks and uncertainties as set out in the financial statements for the 52 weeks ended 25 July 2021 which may affect the company's performance in the next 26 weeks. The most significant risks and uncertainties relate to widespread pub closures, the taxation on, and regulation of, the sale of alcohol, cost increases and UK disposable consumer incomes. For a detailed discussion of the risks and uncertainties facing the company, refer to pages 60-61 of the annual report for 2021. 30. Basis of preparation This condensed half-yearly financial information of J D Wetherspoon plc (the 'Company'), which is abridged and unaudited, has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Accounting Standards (IAS) 34, Interim Financial Reporting, in conformity with the requirements of the Companies Act 2006. This interim report should be read in conjunction with the annual financial statements for the 52 weeks ended 25 July 2021 which were prepared in accordance with the International Accounting Standards in conformity with the requirements of the Companies Act 2006. 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 broadly recover to pre Covid levels. More cautious scenarios have been analysed, including ones with significantly reduced revenue. The directors are satisfied that the Company has sufficient liquidity in each of the aforementioned scenarios. The length of the liquidity period, in relation to each outcome, depends on the actions which the Company chooses to take (eg the extent to which cash expenditure is reduced). 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 2022. There is material uncertainty, which may cast significant doubt over the Company's ability to continue as a going concern, beyond this date, as to whether financial covenant tests will be satisfied or whether further waivers will be agreed by lenders. The Company will remain in regular dialogue with its lenders throughout the period. In addition, the directors have noted the range of possible additional liquidity options available to the Company, should they be required. 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. The financial information for the 52 weeks ended 25 July 2021 is extracted from the statutory accounts of the Company for that year. The interim results for the 26 weeks ended 23 January 2022 and the comparatives for 24 January 2021 are unaudited, yet have been reviewed by the independent auditor. 31. Accounting policies The accounting policies adopted in the preparation of the interim report are consistent with those applied in the preparation of the Company's annual report for the year ended 25 July 2021, with the same methods of computation and presentation used. Income tax Taxes on income in the interim periods are accrued using the tax rate which would be applicable to expected total annual earnings. This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com. 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