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Good times at JD Wetherspoon

RESULTS: Alongside its usual grumbles about sales tax, pub operator JD Wetherspoon (JDW) reported a strong first half.
March 18, 2014

It was a solid six months for pub operator JD Wetherspoon (JDW), with like-for-like sales up 5 per cent. Bar and food revenues rose 4 per cent and 11 per cent respectively, while sales from fruit and slot machines fell by 10 per cent, reflecting the impact of machine-games duty and a review of rules on maximum jackpots. These top-line gains pushed operating profit up 7 per cent to £56m, with the margin falling by 10 basis points to 8.2 per cent as a result of heavy investment.

IC TIP: Buy at 810p

Wetherspoon’s chairman Tim Martin used the platform of the company's results to repeat his usual grumblings over VAT disparities, of which the business continues to consider itself a victim. While supermarkets pay no VAT on food sales and only contribute about 2p in duty for every pint sold, pub chains are subject to 20 per cent tax on food sales and pay approximately 15p duty per pint. But finance director Kirk Davis admitted Wetherspoon was "unlikely to see any positive developments from this Budget or Parliament" in addressing the concerns.

The company also chose to reiterate its 2012 settlement of a long-standing legal dispute with former associate Anthony Lyons. Wetherspoon received £1.25m in an out-of-court settlement, after alleging Mr Lyons had been an accessory to frauds committed by the company's former retained agent Van de Berg and its directors Christian Braun, George Aldridge and Richard Harvey. Mr Lyons had subsequently chosen to refute the claims, which related to freehold properties in Portsmouth, Leytonstone and Newbury.

Despite the impact of rising taxes and input costs, the company expects a strong finish to the 2014 financial year. Like-for-like sales were up 7 per cent in the six weeks to 9 March, and pub openings will also boost profits. 40-50 new pubs are planned for the current financial year, of which 19 opened in the first half.

Brokerage Investec expects pre-tax profits of £79m for the full year, giving EPS of 48p (2013: £77m and 54p).

JD WETHERSPOON (JDW)

ORD PRICE:810pMARKET VALUE:£ 1.02bn
TOUCH:808-811p12-MONTH HIGH:868pLOW: 500p
DIVIDEND YIELD:1.5%PE RATIO:21
NET ASSET VALUE:187pNET DEBT:227%

Half-year to 26 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013*62634.820.84
201468336.021.74
% change+9+3+4-

Ex-div:30 Apr

Payment:29 May

*Period to 27 Jan