JD Wetherspoon H1 lfl sales down 11.8%, return to more normal trading patterns in recent weeks: JD Wetherspoon has this morning reported that its like-for-like sales in the 26 weeks to 23 January declined 11.8% compared to the six-month period ended 26 January 2020, and were down 12.4% for the first four weeks of the second half of its financial year, ending 20 February 2022. The company said that in the most recent three-week period, to 13 March 2022, sales improved, being 2.6% lower than the equivalent period in 2019, as it saw a return to more normal trading patterns in recent weeks. It said that cash sales per week during this three-week period have been approximately 10% above the depressed levels of December 2021, its busiest month of the year, indicating an improving trend. Total sales in the six months to 23 January 2022 were £807.4m, a decrease of 13.5%, compared to the 26 weeks ended 26 January 2020. Like-for-like bar sales in H1 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 company’s loss before tax stood at £21.3m (2020: profit £57.9m), while operating profit was £500k (2020: profit £76.6m). 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. 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, its freehold/leasehold 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 £1.4bn, including £1.1bn of freehold and long-leasehold property. 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 said it 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. 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. Tim Martin, chairman of JD Wetherspoon, 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 £400bn 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.”