Margins were already under pressure at JD Wetherspoon (JDW), which might explain chairman Tim Martin's strong feelings about the new minimum wage. The pub group said it upped its minimum hourly rate for staff by 5 per cent in October 2014 and 8 per cent at the end of July, but failed to disclose the level of its new rate. Still, Mr Martin's bitter reaction to George Osborne's surprise move in the post-election Budget suggests it is less than the new threshold, which takes effect next April, and that wage costs as a proportion of sales will therefore have to rise.
This will eat away at margins, which already fell to 7.4 per cent from 8.3 per cent in the financial year to 26 July. Price increases could counteract the cost pressures, but Mr Martin said the plan was to keep prices "as low as possible". He also complained that the decision to increase the minimum wage seemed to have been made "on a whim", and dismissed as speculative the theory that higher incomes could increase the purchasing power of Wetherspoon's punters.
Broker Numis Securities expects pre-tax profit of £79.9m for the current financial year, giving EPS of 51.3p (from £77.8m and 47p in full-year 2015), but the analysts say their forecasts remain heavily dependent on the company's pricing strategy.
| JD WETHERSPOON (JDW) | ||||
|---|---|---|---|---|
| ORD PRICE: | 732p | MARKET VALUE: | £873m | |
| TOUCH: | 730-733p | 12-MONTH HIGH: | 846p | LOW: 687p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 187p | NET DEBT: | 270% | |
| Year to 26 Jul | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 1.07 | 61.4 | 35.4 | 12.0 |
| 2012 | 1.20 | 58.9 | 35.6 | 12.0 |
| 2013 | 1.28 | 57.1 | 37.8 | 12.0 |
| 2014 | 1.41 | 78.4 | 33.9 | 12.0 |
| 2015 | 1.51 | 58.7 | 37.9 | 12.0 |
| % change | +7 | -25 | +12 | - |
Ex-div: 22 Oct Payment: 26 Nov | ||||
