The market was already aware of most of the good news due in these half-year numbers from pub group JD Wetherspoon (JDW), including better underlying sales growth and margins, which delivered a 32 per cent increase in operating profit to £65.1m. Instead, investors' attention turned to the outlook for the second half, which will see mounting costs and thus more pressure on margins.
So far, Wetherspoons has protected margins via price increases, as well as lower utility costs and the disposal of lower-margin pubs. But chief executive John Hutson admits customers remain "price sensitive". That's made the market nervous, because management will have to tackle a £7m uptick in business rates this year (it's worth noting bosses don't believe the group will be eligible for the relief sum announced in the Spring Budget), and a total of £13m in further cost increases from electricity taxes, excise duties and the apprenticeship levy - while statutory-linked wage costs are also rising.
Management expects like-for-like sales growth of 1-2 per cent in the second half, and a 7 per cent margin for the full year (H1 2017: 3.3 per cent and 8.1 per cent, respectively). Analysts at Numis expect pre-tax profit of £86.2m for the year to July 2017, giving EPS of 55.5p, compared with £75.3m and 43.8p in FY2016.
JD WETHERSPOON (JDW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 929p | MARKET VALUE: | £1.03bn | |
| TOUCH: | 928-930p | 12-MONTH HIGH: | 992p | LOW: 658p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 204p | NET DEBT: | £696m | |
| Half-year to 22 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2016 | 790 | 53.9 | 26.6 | 4.00 |
| 2017 | 801 | 53.8 | 27.8 | 4.00 |
| % change | +1 | - | +5 | - |
Ex-div: 27 Apr Payment: 25 May | ||||
