Margins at JD Wetherspoon (JDW) have finally cracked. The pub chain's first-half operating margin fell from 8.2 to 7.4 per cent as it was drawn into the supermarket discounting war. Low prices propped up demand - like-for-like sales grew 4.5 per cent (although that was down from 5.5 per cent last year). But profits moved into reverse, slipping from £37.8m to £37.5m at the pre-tax level.
The outlook isn't rosy, either. The group faces tough comparatives in the second half, and in the six weeks to 8 March like-for-like sales are only 1.6 per cent ahead. Staff pay rises have increased labour costs, too, and chief executive John Hutson said the group will be hard pressed to match its 2013-14 profits this year. Shares in Wetherspoon dropped 5 per cent on the morning of the results, and analysts at Numis Securities downgraded their pre-tax profit forecasts for the 2014-15 financial year by another 5 per cent to £77.5m (compared with £79.4m in 2014).
Management hopes its growing foothold in the breakfast, tea and coffee market will be enough to turn sales around. From 18 March, Wetherspoon will slash its prices and introduce 99p coffees with free refills at 880 pubs between 8am and 2pm daily.
| JD WETHERSPOON (JDW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 771p | MARKET VALUE: | £944m | |
| TOUCH: | 769-771p | 12-MONTH HIGH: | 905p | LOW: 688p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 179p | NET DEBT: | 272% | |
| Half-year to 25 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 683 | 36.0 | 21.4 | 4.0 |
| 2015 | 744 | 37.5 | 23.5 | 4.0 |
| % change | +9 | +4 | +10 | - |
Ex-div: 30 Apr Payment: 28 May | ||||
