Wetherspoon (J.D) Regulatory News (JDW)

09 September 2016

J D WETHERSPOON PLC

PRELIMINARY RESULTS

(For the 52 weeks ended 24 July 2016)

Exceptional items as disclosed in account note 4.

Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc, said:

"I am pleased to report a year of progress for the company, with record sales, profit and earnings per share before exceptional items.

"The government is actively considering ideas for generating jobs and economic activity, especially in areas outside the affluent south of the country - VAT equality, as the trade organisations BBPA and ALMR have demonstrated, is a very efficient and sensible method of helping to achieve these objectives. Tax equality also accords with the underlying principle of fairness in applying taxes to different businesses.

"In the run up to, and the aftermath of, the recent referendum, the overwhelming majority of FTSE 100 companies, the employers' organisation CBI, the IMF, the OECD, the Treasury, the leaders of all the main political parties and almost all representatives of British universities forecast trouble, often in lurid terms, for the economy, in the event of the Leave vote. For example, claims were made by David Cameron and George Osborne that family income would eventually be reduced by £4,000 per annum, that mortgage interest rates would increase and that house prices would fall - claims which were supported, in terms, by Mark Carney of the Bank of England.

"City voices such as PwC and Goldman Sachs, and the great preponderance of banks and other institutions, also leant weight to this negative view. For example, Paul Johnson of the Institute of Fiscal Studies (The Times 28 June) stated that there was "near-unanimity" among economists in favour of Remain. Rather amazingly, he added: "I take as given that we economists were collectively right about the (bad) economic consequences of leaving the EU." Johnson then cites this consensus as evidence for the economic truth of the Remain case. This is a strange argument to advance since consensus forecasts from economists, who generally failed to forecast the last recession or the catastrophic flaws of the euro, are almost always delusional. As Warren Buffett has said, forecasts tell you a lot about the forecaster, but not about the future. Economic forecasts from over-confident pundits such as Mr Johnson are an important component of Benjamin Graham's 'Mr Market',

the mythical punter who gets everything wrong.

"Just as the combined intellectual weight of the 'good and great' could not see through the flaws in the euro, they have, with honourable exceptions, been unable to see that the principle flaw of the EU - an absence of democracy - will almost certainly lead to further economic and political chaos, and to more dire consequences for those who are subject to EU decisions. The overwhelming economic evidence is that successful countries are democracies -

Mr Johnson and like-minded economists really do need to stick that point in their pipes and smoke it. For all their faults, democracies produce the greatest level of prosperity and freedom. As in the case of the euro, the general public has a much better perception about this overriding factor than the consensus of intellectual opinion. I have written an article on this general subject for Wetherspoon News, which is attached at the end of this statement (appendix 1).

"Now that the gloomy economic forecasts for the immediate aftermath of the referendum have been proven to be false, 'Scare Story 2' is that failure to agree on trade deal with the EU will have devastating consequences. This was articulated by fund manager Nicola Horlick this week, who told Radio 4 listeners that leaving the Single Market would relegate the UK from the 5th-biggest economy in the world to the 8th or 9th. In contrast, Wetherspoon's experience indicates that reaching formal trade deals with reluctant counterparties is impossible - and it is unwise to try.

"For example, I personally agreed on terms with one of our biggest suppliers, a major PLC, for a new seven-year contract about 12 years ago. Although the deal was put in the hands of lawyers, it was never signed or 'ratified' during this time, although we traded successfully for the anticipated duration. We subsequently agreed on a deal for a further seven years - and that has not been signed to this day. Indeed, we have traded without interruption with this company for 37 years. In contrast, deals with some suppliers have been rapidly embodied in formal contracts. Over the years, we have agreed on thousands of 'trade deals' with big and small suppliers: some are formal contracts, some are 'hand-shakes', some are short term, but many last for decades. The commercial reality is that you can lead the horse to water, but you can't make it drink.

"This is especially true of the EU - an organisation of Byzantine complexity, run by five unelected presidents, with input from numerous other parts of the many-headed Hydra. It has struggled to reach trade deals with most of the world's major economies, for example, the USA, China and India. The UK is an enormous trading partner of the USA, generating a substantial surplus for us, in spite of the absence of a 'deal' and it would be unwise to clamour after a specific formal agreement to replace existing arrangements in these circumstances - the back of the queue is a good place to be. Former Chancellor Nigel Lawson (Financial Times, 3/4 September) and many others advocate leaving the EU and trading afterwards with it on the basis of World Trade Organisation rules. If the EU is keen for a trade deal, we should cooperate, but unelected apparatchiks like President Juncker can't be controlled - which is one of the main reasons we voted to leave.

"Common sense … suggests that the worst approach for the UK is to insist on the necessity of a 'deal' - we don't need one and the fact that EU countries sell us twice as much as we sell them creates a hugely powerful negotiating position. If WTO tariffs apply, the UK will receive twice as much as it pays. Boris Johnson, David Davis and Liam Fox will achieve far more for the UK by copying Francis Drake and playing bowls in Plymouth, rather than hankering after an EU agreement, although time spent in improving arrangements with Singapore, New Zealand and India, for example, may be well spent.

"Since the year end, Wetherspoon's sales have continued to be encouraging and increased by 4.1%. Despite this positive start, it remains to be seen whether this will continue over the remainder of the year, given the strong like-for-like sales in the last financial year and what remains a very low-inflation environment.

"We will provide updates as we progress through the year, but we currently anticipate a slightly improved trading outcome for the current financial year, compared with our expectations at the pre-close stage."

Enquiries:

John Hutson Chief Executive Officer 01923 477777

Ben Whitley Finance Director 01923 477777

Eddie Gershon Company spokesman 07956 392234

Photographs are available at: www.newscast.co.uk

Notes to editors

1. JD Wetherspoon owns and operates pubs throughout the UK. 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 www.jdwetherspoon.com

3. This announcement has been prepared solely to provide additional information to the shareholders of JD 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 2016 has been published on the Company's website on 9 September 2016.

5. The current financial year comprises 53 trading weeks to 30 July 2017.

6. The next trading update will be issued on 2 November 2016.

CHAIRMAN'S STATEMENT

Financial performance

I am pleased to report a year of progress for the company, with record sales, profit and earnings per share before exceptional items. The company was founded in 1979 - and this is the 33rd year since incorporation in 1983. The table below outlines some key aspects of our performance during that period. Since our flotation in 1992, earnings per share before exceptional items have grown by an average of 14.4% per annum and free cash flow per share by an average of 16.2%.

Summary accounts for the years ended July 1984 to 2016

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.

Like-for-like sales increased by 3.4% (2015: 3.3%), with total sales of £1,595.2m, an increase of 5.4% (2015: 7.4%). Like-for-like bar sales increased by 3.3% (2015: 1.2%), food sales by 3.5% (2015: 7.3%) and slot/fruit machine sales decreased by 2.2% (2015: decreased by 2.8%). Like-for-like room sales at our hotels increased by 9.7% (2015: 24.2%) - although hotel sales form less than 1% of total sales.

Operating profit before exceptional items decreased by 2.5% to £109.7m (2015: £112.5m). The operating margin, before exceptional items, decreased to 6.9% (2015: 7.4%), as a result mainly of increases in staff costs, utilities and depreciation.

Profit before tax and exceptional items increased by 3.6% to £80.6m (2015: £77.8m), with a contribution from property profits of £5.3m (2015: £0.7m loss). Earnings per share (including shares held in trust by the employee share scheme), before exceptional items, were 48.3p (2015: 47.0p).

Net interest was covered 3.3 times by operating profit before exceptional items (2015: 3.3 times). Total capital investment was £124.8m in the period (2015: £173.3m), with £55.2m invested in new pubs and extensions to existing pubs (2015: £106.3m). In addition, there was expenditure of £33.5m on existing pubs and IT infrastructure (2015: £44.8m) and £36.1m on the acquisition of freeholds where Wetherspoon was already a tenant (2015: £21.6m).

Exceptional items totalled £5.7m (2015: £12.6m). The company incurred charges as a result of a number of pub disposals and closures. There was an £8.5m loss on disposal and an impairment charge of £3.9m for closed sites. A further impairment charge of £2.2m was incurred in respect of underperforming pubs, redundant computer software and onerous leases. In addition there were £8.9m of exceptional tax credits, as a result of a reduction in the UK average corporation tax rate, which has the effect of creating an exceptional tax credit for future years. The total cash effect of these exceptional items resulted in cash inflow of £14.0m, which reflected the proceeds from the pub disposals.

Free cash flow, after capital investment of £33.5m on existing pubs (2015: £44.8m), £6.9m in respect of share purchases for employees (2015: £6.8m) and payments of tax and interest, decreased by £19.3m to £90.5m (2015: £109.8m). The decrease resulted from a working capital outflow of £9.6m in the year compared with an inflow of £27.3m in 2015. Free cash flow per share was 76.7p (2015: 89.8p).

Dividends and return of capital

The board proposes, subject to shareholders' approval, to pay a final dividend of 8.0p per share (2015: 8.0p per share), on 24 November 2016, to those shareholders on the register on 21 October 2016, giving a total dividend for the year of 12.0p per share (2015: 12.0p per share). The dividend is covered 3.6 times (2015: 3.1 times).

In view of the high level of capital expenditure and the potential for advantageous investments, the board has decided to maintain the dividend at its current level for the time being.

During the year, 5,694,546 shares (representing 4.8% of the issued share capital) were purchased by the company for cancellation, at a total cost of £39.4m, including stamp duty, representing an average cost per share of 692p.

Over the last 10 years, my shareholding has increased from 21.2% to 29.5%, as a result of the company's share 'buybacks'. The company is considering seeking a rule 9 'whitewash', under the UK City Code on Takeovers and Mergers, allowing further buybacks.

Financing

As at 24 July 2016, the company's total net debt, including bank borrowings and finance leases, but excluding derivatives, was £650.8m (2015: £601.1m), an increase of £49.7m. Factors which have led to the increase in debt are investment in new pubs and extensions of £55.2m, investment in existing pubs of £33.5m, the acquisition of freeholds of £36.1m, share buybacks of £53.6m (including £14.2m in respect of shares purchased at the end of the last financial year) and dividend payments of £14.2m. Year-end net-debt-to-EBITDA was 3.47 times (2015: 3.37 times).

As at 24 July 2016, the company had £189.6m (2015: £240.9m) of unutilised banking facilities and cash balances, with total facilities of £840.0m (2015: £840.0m). The company's existing interest-rate swap arrangements remain in place.

Corporation tax

The overall tax charge (including deferred tax and excluding the one-off benefit of the tax rate change) on profit before exceptional items is 29.4% (2015: 26.1%). This rise is due mainly to an increase in the deferred tax liability, resulting from accelerated capital allowances on fixed-asset expenditure.

The 'living wage'

Wetherspoon increased the minimum hourly rate for staff by 5% in October 2014 and by a further 8% at the end of July 2015. Both decisions were taken without the knowledge that the government was about to announce a new minimum wage, now called the 'living wage'.

In addition, as Wetherspoon's shareholders are aware, we pay about 40% of our profits (£33.0m in the year under review) as a bonus or free shares, over 85% of which is paid to those who work in our pubs.

The main economic issue is that pub wages are about 30% of sales. Therefore a pint purchased in a pub at the national average price of about £3.50 will represent about 85 pence in respect of wages. In contrast, a pint bought in a supermarket, at an estimated price of £1, will represent only about 10 pence of supermarket wages, since their wage percentage and selling prices are both far lower than those of pubs. By pushing up the cost of wages by a large factor, the government is inevitably putting financial pressure on pubs, many of which have already closed. This financial pressure will be felt most strongly in areas which are less affluent, since the price differential in those areas between pubs and supermarkets is far more important to customers. It is certain that high streets in less affluent areas, which already suffer from serious problems of empty shops and dereliction, will suffer further if pubs and other labour-intensive businesses close.

VAT equality

As we have previously stated, we believe that pubs are taxed excessively and that 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 between the on and off trade, to the detriment of pubs and restaurants.

Pubs have lost 50% of their beer sales to supermarkets in the last 35 years as VAT has climbed from 8% to 20%.

It makes no sense for the government to treat supermarkets more leniently than pubs, since pubs generate far more jobs per pint or meal than supermarkets do, as well as far higher levels of tax, as demonstrated above. 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.

The campaign for tax equality with supermarkets has particular significance for MPs and residents of less affluent areas, since the tax differential is more important there - where people can less afford to pay the difference in prices between the on and off trade there are fewer pubs, coffee shops and restaurants, with a corresponding reduction in employment and an increase in high-street dereliction.

The government is actively considering ideas for generating jobs and economic activity, especially in areas outside the affluent south of the country - VAT equality, as the trade organisations BBPA and ALMR have demonstrated, is a very efficient and sensible method of helping to achieve these objectives. Tax equality also accords with the underlying principle of fairness in applying taxes to different businesses.

Contribution to the economy

Wetherspoon is proud to pay its share of tax and, in this respect, is a major contributor to the economy. In the year under review, we paid total taxes of £672.3m, an increase of £39.9m, compared with the previous year, which equates to approximately 42.1% of our sales.

This equates to an average payment per pub of £705,000 per annum or £13,600 per week.

Corporate governance

In previous years, I have said that many aspects of current corporate governance advice, as laid out in the Combined Code, are "deeply flawed" and have pointed out that compliant pub companies have "often fared disastrously in comparison with non-compliant ones. In particular, pub companies in which the CEO became chairman and which had a majority of executives…usually with previous experience of the pub trade, avoided making catastrophic errors to which compliant companies seem prone".

It was also pointed out that setting precise targets for bonuses, in line with governance advice, had also often backfired, encouraging companies to take reckless decisions, in order to enhance earnings. Having presented our views in annual reports, press articles and meetings with shareholders, without any significant dissent, Wetherspoon believes that it has complied with the 'comply or explain' provisions of the Code and strongly believes that shareholders should regard with scepticism allegations of non-compliance from corporate governance institutions or watchdogs. A logical upshot of the views expressed in this section is that shareholders and other interested parties should be extremely wary of companies which comply strictly with current guidelines, and are better protected in companies like Wetherspoon, - which modify their governance practices along the lines we suggest.

I believe that the following propositions represent the views of sensible shareholders:

· The Code itself is faulty, since it places excessive emphasis on meetings between directors and shareholders and places almost no emphasis on directors taking account of the views of customers and employees which are far more important, in practice, to the future well-being of any company. For example, in the UK Corporate Governance Code (September 2014), there are 64 references to shareholders, but only three to employees and none to customers - this emphasis is clearly mistaken.

· The average institutional shareholder turns over his portfolio twice annually, so it is advisable for directors to be wary of the often perverse views of 'Mr Market' (in the words of Benjamin Graham), certainly in respect of very short-term shareholders.

· A major indictment of the governance industry is that modern annual reports are far too long and often unreadable. They are full of semiliterate business jargon, including accounting jargon, and are cluttered with badly written and incomprehensible governance reports.

· It would be very helpful for companies, shareholders and the public, if the limitations of corporate governance systems were explicitly recognised. Common sense, management skills and business savvy are more important to commercial success than board structures. All of the major banks and many supermarket and pub companies have suffered colossal business and financial problems, in spite of, or perhaps because of, their adherence to inadvisable governance guidelines.

· There should be an approximately equal balance between executives and non-executives. A majority of executives is not necessarily harmful, provided that non-executives are able to make their voices heard.

· It is often better if a chairman has previously been the chief executive of the company. This encourages chief executives, who may wish to become a chairman in future, to take a long-term view, avoiding problems of profit-maximisation policies in the years running up to the departure of a chief executive.

· A maximum tenure of nine years for non-executive directors is not advisable, since inexperienced boards, unfamiliar with the effects of the 'last recession' on their companies, are likely to reduce financial stability.

· An excessive focus on achieving financial or other targets for executives can be counter-productive. There's no evidence that the type of targets preferred by corporate governance guidelines actually works and there is considerable evidence that attempting to reach ambitious financial targets is harmful.

· As indicated above, it is far more important for directors to take account of the views of employees and customers than of the views of institutional shareholders. Shareholders should be listened to with respect, but caution should be exercised in implementing the views of short-term shareholders. It should also be understood that modern institutional shareholders may have a serious conflict of interest, as they are often concerned with their own quarterly portfolio performance, whereas corporate health often requires objectives which lie five, 10 or 20 years in the future.

Further progress

As in previous years, the company has tried to improve as many areas of the business as possible. For example, we have 836 pubs rated on the Food Standards Agency's website. The average score is 4.89, with 91.7% of the pubs achieving a top rating of five stars and 6.3% receiving four stars. We believe this to be the highest average rating for any substantial pub company. In the separate Scottish scheme, which records either a 'pass' or a 'fail', all of our 66 pubs have passed.

We are pleased to report that The Windmill in Stansted Airport, was named the best airport pub in the world at the 2016 FAB (International Food and Beverage Excellence) awards during the annual Airport Food and Beverage conference. Two other Wetherspoon pubs, at Birmingham Airport and Liverpool Lime Street station, were 'highly commended' by the same organisation.

We continue to source our traditional ales from a large number of microbreweries of varying sizes and believe that we are the biggest purchaser of microbrewery beer in the UK. We continue to run the world's biggest real-ale festival, twice a year, and have added a cider festival in recent times, featuring a wide variety of suppliers from the UK, Europe and elsewhere in the world.

We paid £33.0m in respect of bonuses and free shares to employees in the year, a slight increase compared with the previous year, of which 97.9% was paid to staff below board level and 85.6% was paid to staff working in our pubs.

The company has been recognised as a Top Employer UK (2016), for the 13th consecutive year. The Top Employers institute said "Our comprehensive independent research revealed that J D Wetherspoon provides exceptional employee conditions, nurtures and develops talent throughout all levels of the organisation and has demonstrated its leadership status in the HR environment, always striving to optimise its employment practices and to develop its employees."

In the field of charity, thanks to the generosity and work of our dedicated customers, pub and head-office teams, we continue to raise record amounts of money for CLIC Sargent, supporting young cancer patients and their families. In the last year, we raised approximately £1.6m, bringing the total raised to over £12.6m - more than any other corporate partner has raised for this charity.

Property

The company opened 16 pubs during the year, with 41 sold or closed, resulting in a trading estate of 926 pubs at the financial year end.

The average development cost for a new pub (excluding the cost of freeholds) was £2.5m, compared with £2.1m a year ago; two of the pubs included hotel accommodation, which contributed to the increased costs. The full-year depreciation charge was £72.2m (2015: £66.7m). We currently intend to open about 15-20 pubs in the year ending July 2017.

Property litigation

As previously reported, Wetherspoon agreed on an out-of-court settlement with developer Anthony Lyons, formerly of property leisure agent Davis Coffer Lyons, in 2013 and received approximately £1.25m from Mr Lyons.

The payment relates to litigation in which Wetherspoon claimed that Mr Lyons had been an accessory to frauds committed by Wetherspoon's former retained agent Van de Berg and its directors Christian Braun, George Aldridge and Richard Harvey. Mr Lyons denied the claim - and the litigation was contested.

The claim related to properties in Portsmouth, Leytonstone and Newbury. The Portsmouth property was involved in the 2008/9 Van de Berg case itself.

In that case, Mr Justice Peter Smith found that Van de Berg, but not Mr Lyons (who was not a party to the case), fraudulently diverted the freehold from Wetherspoon to Moorstown Properties Limited, a company owned by Simon Conway. Moorstown leased the premises to Wetherspoon. Wetherspoon is still a leaseholder of this property - a pub called The Isambard Kingdom Brunel.

The properties in Leytonstone and Newbury (the other properties in the case against Mr Lyons) were not pleaded in the 2008/9 Van de Berg case. Leytonstone was leased to Wetherspoon and trades today as The Walnut Tree public house. Newbury was leased to Pelican plc and became Café Rouge.

As we have also reported, the company agreed to settle its final claim in this series of cases and accepted £400,000 from property investor Jason Harris, formerly of First London and now of First Urban Group. Wetherspoon alleged that Harris was an accessory to frauds committed by Van de Berg. Harris contested the claim and has not admitted liability.

Before the conclusion of the above cases, Wetherspoon also agreed on a settlement with Paul Ferrari of London estate agent Ferrari Dewe & Co, in respect of properties referred to as the 'Ferrari Five' by Mr Justice Peter Smith.

Further shareholder information about these cases is available in a short article which I wrote for the trade publication Propel, which is disclosed later in my chairman's statement (appendix 2).

Current trading and outlook

In the run up to, and the aftermath of, the recent referendum, the overwhelming majority of FTSE 100 companies, the employers' organisation CBI, the IMF, the OECD, the Treasury, the leaders of all the main political parties and almost all representatives of British universities forecast trouble, often in lurid terms, for the economy, in the event of the Leave vote. For example, claims were made by David Cameron and George Osborne that family income would eventually be reduced by £4,000 per annum, that mortgage interest rates would increase and that house prices would fall - claims which were supported, in terms, by Mark Carney of the Bank of England.

City voices such as PwC and Goldman Sachs, and the great preponderance of banks and other institutions, also leant weight to this negative view. For example, Paul Johnson of the Institute of Fiscal Studies (The Times 28 June) stated that there was "near-unanimity" among economists in favour of Remain. Rather amazingly, he added: "I take as given that we economists were collectively right about the (bad) economic consequences of leaving the EU." Johnson then cites this consensus as evidence for the economic truth of the Remain case. This is a strange argument to advance since consensus forecasts from economists, who generally failed to forecast the last recession or the catastrophic flaws of the euro, are almost always delusional. As Warren Buffett has said, forecasts tell you a lot about the forecaster, but not about the future. Economic forecasts from over-confident pundits such as Mr Johnson are an important component of Benjamin Graham's 'Mr Market', the mythical punter who gets everything wrong.

Just as the combined intellectual weight of the 'good and great' could not see through the flaws in the euro, they have, with honourable exceptions, been unable to see that the principle flaw of the EU - an absence of democracy - will almost certainly lead to further economic and political chaos, and to more dire consequences for those who are subject to EU decisions. The overwhelming economic evidence is that successful countries are democracies - Mr Johnson and like-minded economists really do need to stick that point in their pipes and smoke it. For all their faults, democracies produce the greatest level of prosperity and freedom. As in the case of the euro, the general public has a much better perception about this overriding factor than the consensus of intellectual opinion. I have written an article on this general subject for Wetherspoon News, which is attached at the end of this statement (appendix 1).

Now that the gloomy economic forecasts for the immediate aftermath of the referendum have been proven to be false, 'Scare Story 2' is that failure to agree on trade deal with the EU will have devastating consequences. This was articulated by fund manager Nicola Horlick this week, who told Radio 4 listeners that leaving the Single Market would relegate the UK from the 5th-biggest economy in the world to the 8th or 9th. In contrast, Wetherspoon's experience indicates that reaching formal trade deals with reluctant counterparties is impossible - and it is unwise to try.

For example, I personally agreed on terms with one of our biggest suppliers, a major PLC, for a new seven-year contract about 12 years ago. Although the deal was put in the hands of lawyers, it was never signed or 'ratified' during this time, although we traded successfully for the anticipated duration. We subsequently agreed on a deal for a further seven years - and that has not been signed to this day. Indeed, we have traded without interruption with this company for 37 years. In contrast, deals with some suppliers have been rapidly embodied in formal contracts. Over the years, we have agreed on thousands of 'trade deals' with big and small suppliers: some are formal contracts, some are 'hand-shakes', some are short term, but many last for decades. The commercial reality is that you can lead the horse to water, but you can't make it drink.

This is especially true of the EU - an organisation of Byzantine complexity, run by five unelected presidents, with input from numerous other parts of the many-headed Hydra. It has struggled to reach trade deals with most of the world's major economies, for example, the USA, China and India. The UK is an enormous trading partner of the USA, generating a substantial surplus for us, in spite of the absence of a 'deal' and it would be unwise to clamour after a specific formal agreement to replace existing arrangements in these circumstances - the back of the queue is a good place to be. Former Chancellor Nigel Lawson (Financial Times, 3/4 September) and many others advocate leaving the EU and trading afterwards with it on the basis of World Trade Organisation rules. If the EU is keen for a trade deal, we should cooperate, but unelected apparatchiks like President Juncker can't be controlled - which is one of the main reasons we voted to leave.

Common sense, therefore, suggests that the worst approach for the UK is to insist on the necessity of a 'deal' - we don't need one and the fact that EU countries sell us twice as much as we sell them creates a hugely powerful negotiating position. If WTO tariffs apply, the UK will receive twice as much as it pays. Boris Johnson, David Davis and Liam Fox will achieve far more for the UK by copying Francis Drake and playing bowls in Plymouth, rather than hankering after an EU agreement, although time spent in improving arrangements with Singapore, New Zealand and India, for example, may be well spent.

Since the year end, Wetherspoon's sales have continued to be encouraging and increased by 4.1%. Despite this positive start, it remains to be seen whether this will continue over the remainder of the year, given the strong like-for-like sales in the last financial year and what remains a very low-inflation environment.

We will provide updates as we progress through the year, but we currently anticipate a slightly improved trading outcome for the current financial year, compared with our expectations at the pre-close stage. 

Appendix 1 - Wetherspoon News article - Autumn 2016

How democracy has set us free

Brexit decision was not a protest vote - it was a grassroots rejection of groupthink and an elite's zeal for unreal objects

Opponents of the euro, years ago, were often patronised as 'little Englanders' by those who considered themselves to be morally and intellectually superior. In fact, the main advocates of the currency were a middle-aged, male Oxbridge elite.

So, indeed, were some of the best euro opponents, but they were the exceptions - and only a distinguished minority managed to shake off their mental chains - for example Tony Benn, Michael Howard and Simon Wolfson.

The Financial Times, then, led the pro-euro chorus for the press, with the editor Richard Lambert (Fettes College and Oxford University) censoring anti-euro arguments - a strange stance for a supposedly intellectual publication.

Lambert, in a subsequent mea culpa, analysed the reasons for establishment support for the disastrous euro, from the heads of major organisations like the CBI, as well as most major businesses, correctly concluding that it was due to 'groupthink'.

Fanaticism

The FT journalist Gillian Tett (North London Collegiate School and Cambridge University), writing some years later (28/9/12), was one of the few euro supporters to analyse the psychological factors behind euro fanaticism. She concluded that the euro was a "fantastic object" which was "unreal, but immensely attractive" and that "political idealism had subsumed economic gravity".

Tett pointed out that her father, who rejected the euro argument, worked in manufacturing and was "outside the intellectual echo chamber of the eurozone elite, and was never infected by the hype".

Tett understood the paradox which causes intellectual elites to pursue irrational causes to the edge of oblivion. Neither reason nor evidence has much effect on the afflicted… and that is why democracy works.

The non-chattering classes don't share this love of fantastic objects and consigned the euro to the dustbin of history - for the British, at least. Europhile Emily Sheffield, David Cameron's sister-in-law, writing in the Spectator (30/7/16), consoled Remainers after the referendum by saying it is "worth remembering that Eurosceptics … kept us out of the single currency". Indeed so, Emily.

Superiority

Similar assumptions of moral and intellectual superiority have been rife in the recent referendum campaign led politically on the Remain side by David Cameron (Eton and Oxford) and George Osborne (St Pauls and Oxford), supported by Nick Clegg (Westminster School and Oxford), Michael Heseltine (Shrewsbury School and Oxford), Tony Blair (Fettes College and Oxford), Ed Milliband (Haverstock Comprehensive and Oxford), Ed Balls (Nottingham High School and Oxford) and many others with a similar background.

The battle lost, there appears to be an orchestrated chorus from the same elite, alleging that Leave won by misleading the public and that the referendum result should be overturned by parliament or a second referendum commissioned.

For example, Peter Mandelson (Hendon County Grammar and Oxford) declared (FT, 2/7/16) that he had been an "architect" of the Remain campaign and that Leave arguments were "dishonest".

Former MP Tam Dalyell (Eton and Oxford) and former MEP Jack Stewart-Clark (Eton and Oxford) in a prominent letter (5/7/16) to the pro-Remain Times, said that MPs and peers should unite to block Brexit and that Leave conducted "the most dishonest political campaign this country has ever seen".

Democratic

The theme that the referendum was won by lies from Leave has been repeated on countless occasions by the panjandrums of Remain, in a brazen effort to undermine the democratic outcome.

Dalyell and Stewart-Clark gave no evidence for their allegation of dishonesty, but it has been asserted elsewhere that Leave campaigners misleadingly stated that the UK would save £350 million a week, when the actual cash saving was only half that amount.

It seems unlikely that many people can have been misled in this way, since there was a full public debate about the significance of the gross amount of £350 million and the relevance and endurance of the rebates - with the information available on the BBC website, as well as on the websites of many national and local newspapers.

For example, on BBC's Question Time, two months before the referendum, the compere, panel and studio audience patently understood the relevance of the statistics.

Fears

The second allegation from elite Remainers is that immigration fears were exaggerated and that Turkey and other countries which had been offered an accelerated path to the EU club would be unlikely to join in the near future, and it would be subject to a veto anyway.

This allegation cuts no ice, since Cameron himself promised to "be the strongest possible advocate" for Turkey joining the EU and he promised also to "pave the road from Ankara to Brussels".

The public simply didn't believe Cameron's evasive referendum stance that Turkey would not join "before 3000" or that he and the government would be in a position to veto anything, after making such fulsome promises to our Turkish friends and allies.

Lies

There is no doubt that the opinion of the electorate, reflected in the referendum result, was that a greater level of lies and exaggeration was evident in the Remain campaign.

As Mandelson's argument reveals, the Remain campaigners' tactics were to concentrate on the economic issue and to encourage organisations like the CBI, the IMF, the OECD and the boards of major companies to support their cause.

These arguments included an allegation from the head of the IMF that the economic consequences of Brexit would be "bad to very, very bad", a prediction from Cameron of an increased risk of war and genocide, a threat from Osborne that interest rates would go up in the referendum aftermath (they've gone down) and a threat of an emergency budget to increase taxes and reduce public expenditure.

The Bank of England's Mark Carney also did his best to frighten the public with the possibility of higher interest rates and a recession, while FTSE 100 directors lined up to threaten reduced investments in the referendum aftermath - most of these threats have now been retracted.

If a second referendum were to take place, it seems certain that the Leave side would win with a far bigger majority, since the economic case put forward by the Remain side has been shown to be deceitful and unfounded.

As indicated above, interest rates have gone down not up, foreign companies are lining up to invest in the UK, (contradicting the warnings from the Remain side), the German equivalent of the CBI has urged a free trade deal for the UK and the world and her husband are anxious to agree on trade deals with us.

Prosperity

Speaking for myself, the main argument in favour of leaving the EU relates to democracy. Democracy is the key provider of prosperity and freedom in the world, as countries as diverse as Australia, New Zealand, Canada, Japan and Singapore (among many others) have demonstrated.

The British public could see that the EU is becoming increasingly undemocratic, with its five unelected presidents, its unelected commissioners, its token parliament and its court, whose judgements cannot be democratically overturned by national parliaments.

Contrary to perceived opinion, many who voted Leave, including me, are also in favour of continued free movement of labour in the UK for citizens of countries which are currently in the EU, but believe that all other countries of the world should be subject to a points system, as operated in Australia, New Zealand and the USA, for example.

The puzzle for amateur philosophers is why the highly educated graduates of our universities, the great and the good of the Times, the Financial Times, the CBI and our biggest companies' board rooms were so much in favour of an undemocratic system which has brought Greece, Portugal, Spain and now Italy to their knees.

You would bet your bottom dollar that the highly educated would be the first to understand that democracy is essential for the future of humanity.

Groupthink

However, through some strange perversion of thought processes, that does not appear to be the case.

The real threat to humanity comes from the elite's groupthink and its zeal for the "unreal, but immensely attractive".

Come on, you Remainers, stop moaning about the result. And stop patronising the electorate by calling the result a "protest vote" - we perfectly understood the issues, thank you.

Let's hear your explanations about why you believe the rest of us will be better off with less democracy. We're all ears, guys. What do you say on this key issue?

Tim Martin is founder and chairman of J D Wetherspoon 

Appendix 2 - Newspaper article

Newspaper article

The newspaper article below first appeared in the pub trade publication Propel and relates to the section on property litigation referred to above:

Wed 22nd May 2013 - Propel Opinion Extra

Lessons in the property market by Tim Martin

J D Wetherspoon has always been a buyer of freeholds. Our second, third and fourth pubs were freehold and, by the time of our 1992 flotation, 20 of our 44 pubs were freehold.

I negotiated our first 20 or so pubs myself, dealing directly with the owners' agents, before employing Christian Braun, of Van de Berg & Co, in about 1990. Little did I realise that Braun was a double agent or "mole", who was to burrow deep into our organisation, undermining the very property foundations that underpin any retailer.

Following a tip-off in 2005, we terminated VDB's contract and undertook a review of all our 600 or so property transactions, using a team of up to a dozen legal and paralegal staff. We discovered bout 50 "back-to-back" transactions in which freeholds, which were available to buy, had been diverted by VDB to third parties, who had acquired them at the same time as JDW had taken a lease - the rent being set at a level which created an immediate uplift in the value of the reversion.

Proceedings were issued against VDB and its directors, Braun, George Aldridge and Richard Harvey,in respect of about a dozen of these transactions. In a 136-page judgment, Mr Justice Peter Smith found that VDB had fraudulently diverted properties to number of third parties, but he made no findings against the third parties themselves.

Following Mr Justice Smith's judgment, JDW issued proceedings against several third parties: Paul

Ferrari of Braun's former employer Ferrari Dewe & Co; Anthony Lyons, formerly of Davis Coffer Lyons

and Jason Harris, formerly of First London. Liability was denied by all. The cases were contested and were settled

out of court. JDW received substantial payments in all three cases.

A number of the pleaded properties in the VDB case, referred to by the judge as the "Ferrari Five", involved Jersey companies with nominee owners that were connected to Ferrari. Each of the Jersey companies had a different name - and care was taken to use different lawyers and nominees.

Profits from the purchasing companies were usually channelled to a Jersey holding company called Gecko and money was then transferred as loans or fees to companies controlled by VDB directors. In my opinion, the Lyons case is the most interesting for the property market and for prospective tenants and purchasers. Lyons stated in

his defence that he was acting in his capacity as an employee and in accordance with his duties to Davis and Coffer (now Davis Coffer Lyons).

The Lyons case concerned properties in Portsmouth, Leytonstone and Newbury, two of which became JDW pubs, with the third becoming a Café Rouge. The Portsmouth property belonged to British Gas - and Justice Smith found that VDB bid for the freehold, unbeknown to JDW, and, once the bid was accepted, agreed with Lyons for JDW to take a lease and for the freehold to be acquired by Moorstown Properties, owned by a friend, and subsequently a colleague, of Lyons - Simon Conway. No findings were made against Lyons, or indeed Conway, in the VDB case, and neither person was a party to the case.

Portsmouth was subsequently sold by Moorstown to Scottish American Investment Company, a few months later, with the benefit of a lease to JDW for a substantial profit. Illustrating the Byzantine complexity of the transactions, Lyons' defence stated that shares in Moorstown were "transferred", before the sale was completed, to Northcreek which, Companies House shows, was owned by Roger Myers, then chairman of Café Rouge owner Pelican, and his family.

The Newbury property was acquired by Riverside Stores, a company connected to Conway, and was leased at around the same time to Café Rouge. Newbury was sold shortly after completion for a substantial profit.

JDW did not allege, and is not alleging, that the Portsmouth and Newbury transactions are connected and is not alleging that Davis Coffer Lyons, Myers or Conway are dishonest, but it is a matter of public importance, as well as of importance to JDW and its shareholders, for there to be an explanation as to the circumstances in which Moorstown, a company which clearly benefited from the Portsmouth fraud by VDB, ended up belonging to the family of Myers.

A key legal and ethical question for the property market that emerges from these cases concerns the obligations of estate agents and investors, in circumstances in which a freehold property is first offered to a friend or colleague of an agent, who agrees to acquire it, and the property is then offered by the agent to a company like Wetherspoon on a "back-to-back" basis. What are the obligations of the introducing agent? In broad terms, the third parties in the Wetherspoon litigation argued that they owed no duties or obligations to Wetherspoon and were not, therefore, liable to us. The great risk that all agents and investors run, in these circumstances, is if the retained agent, VDB in this instance, is itself be dishonest. If so, this may open up the possibility of a claim by an aggrieved "end user", such as Wetherspoon, that the introducing agent participated in the dishonesty of the retained agent.

JDW has lost many tens of millions of pounds as a result of the VDB frauds. Rent reviews and "yield compression" have exacerbated the damage over the years.

Our experience teaches a number of lessons. First, buyers and tenants should ask their agents to confirm in writing that they have no direct or indirect interest in any property they are acquiring and should ask their lawyers to take particular interest if a freehold is changing hands at the same time as they are acquiring a lease, or indeed the freehold. Professionals and investors should also get confirmation in writing from the "end user" in back-to-back deals that they have consented to the transaction. Take the retained agent's word for it at your peril.

Tim Martin is founder and chairman of

J D Wetherspoon

Tim Martin

Chairman

8 September 2016

INCOME STATEMENT for the 52 weeks ended 24 July 2016

STATEMENT OF COMPREHENSIVE INCOME for the 52 weeks ended 24 July 2016

1 Calculated excluding shares held in trust.

2 Calculated using issued share capital which includes shares held in trust.

CASH FLOW STATEMENT for the 52 weeks ended 24 July 2016

1 Free cash flow is a measure not required by accounting standards; a definition is provided in our accounting policies.

BALANCE SHEET for the 52 weeks ended 24 July 2016

STATEMENT OF CHANGES IN EQUITY

The balance classified as share capital represents proceeds arising on issue of the company's equity share capital,

comprising 2p ordinary shares and the cancellation of shares repurchased by the company.

The capital redemption reserve increased owing to the purchase of a number of shares in the year.

Shares acquired in relation to the employee Share Incentive Plan and the 2005 Deferred Bonus Scheme are held in trust,

until such time as the awards vest. At 24 July 2016, the number of shares held in trust was 2,485,848 (2015:3,682,482),

with a nominal value of £49,717 (2015: £73,650) and a market value of £20,035,935 (2015: £26,274,509) and are

included in retained earnings.

During the year, 5,694,546 shares were repurchased by the company for cancellation, representing approximately 4.8% of the issued share capital, at a cost of £39.4m, including stamp duty, representing an average cost per share of 692p. At the previous year end, the company had a liability for share purchases of £14.2m which was settled during the current year,

ended 24 July 2016.

The currency translation reserve contains the accumulated currency gains and losses on the long-term financing and

balance sheet translation of the overseas branch. The currency translation difference reported in retained earnings

is the restatement of the opening reserves in the overseas branch at the current year end currency exchange rate.

As at 24 July 2016, the company had distributable reserves of £57.4m (2015: £75.2m). The retained earnings are fully distributable. The hedging reserves and the currency translation reserves reduce the company's distributable reserves

when they are in deficit.

Notes to the financial statements

Accounting policies and basis of preparation

The preliminary announcement for the 52-week period ended 24 July 2016 has been prepared in accordance with the accounting policies as disclosed in J D Wetherspoon plc's annual report and accounts for 2015.

The annual financial information presented in this preliminary announcement for the 52-week period ended 24 July 2016 is based on, and is consistent with, that in the company's audited financial statements for the 52-week period ended 24 July 2016, and those financial statements will be delivered to the Registrar of Companies, following the company's annual general meeting. The independent auditors' report on those financial statements is unqualified and does not contain any statement under section 498 (2) or 498 (3) of the Companies Act 2006.Information in this preliminary announcement does not constitute statutory accounts of the company within the meaning of section 434 of the Companies Act 2006. The full financial statements for the company for the 52-week period ended 26 July 2015 have been delivered to the Registrar of Companies. The independent auditors' report on those financial statements was unqualified and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.

1. Revenue

2. Operating profit - analysis of costs by nature

Included within cost of sales is £596.3m (2015: £578.0m) related to cost of inventory recognised as expense.

3. Property (gains)/losses

Please refer to note 4 for further details on exceptional items.

4. Exceptional items

Disposal programme

The company has offered a number of its sites for sale. At the year end, 29 sites had been sold, three were classified

as held for sale and an additional nine sites have been closed as part of the disposal programme.

In the table above, the costs classified as loss on disposal are the loss on sold sites and associated costs to sale.

The costs classified above as impairment of assets held for sale, relate to the write-down of assets to their assessed recoverable amount for any pubs which the company has committed to selling. It is the view of management that the

company is committed to selling when a contract for sale has been exchanged.

4. Exceptional items (continued)

Further impairment of £2,788,000 (2015: £Nil) has been recognised for nine pubs which have been closed and made available for sale as part of the disposal programme.

Onerous lease provision relates to sites which have been closed and made available for sale. A provision has been raised to cover the rental costs for the estimated period required to dispose of the sites.

Other property losses

The onerous lease provision relates to pubs for which future trading profits, or income from subleases, are not expected to cover the rent. The provision takes several factors into account, including the expected future profitability of the pub and

also the amount estimated as payable on surrender of the lease, where this is a likely outcome. In the year, £28,000

(2015: £1,858,000) was charged net in respect of onerous leases.

Property impairment relates to the situation in which, owing to poor trading performance, pubs are unlikely to generate sufficient cash in the future to justify their current book value. In the year, an exceptional charge of £1,924,000 (2015: £11,195,000) was incurred in respect of the impairment of property, plant and equipment, as required under IAS 36. This comprises an impairment charge of £2,274,000 (2015: £12,383,000), offset by impairment reversals of £350,000 (2015: £1,188,000). The impairment of intangible assets relates to the write-off of redundant IT assets.

All exceptional items listed above generated a net cash inflow of £13,959,000 (2015: outflow of £782,000).

5. Employee benefits expenses

The totals below relate to the monthly average number of employees during the year, not the total number of employees at the end of the year (including directors on a service contract).

5. Employee benefits expenses (continued)

The shares awarded as part of the above schemes are based on the cash value of the bonuses at the date of the awards. These awards vest over three years - with their cost spread equally 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. 2,099,842 shares were awarded

during the year (2015: 1,439,218), with an average price per share of 708.40p (2015: 775.13p).

6. Finance income and costs

The net finance costs during the year increased from £34.0m to £34.5m. The finance costs in the income statement were covered 3.3 times (2015: 3.3 times) by earnings before interest and tax, before exceptional items.

7. Income tax expense

(a) Tax on profit on ordinary activities

The standard rate of corporation tax in the UK changed from 21.0% to 20.0%, with effect from 1 April 2015.

Accordingly, the company's profits for this accounting period are taxed at an average rate of 20.0% (2015: 20.7%).