JD Wetherspoon (JDW) will not pay a half-year dividend and has delayed most of its capital projects in a bid to conserve liquidity, after prime minister Boris Johnson’s caution over pub attendance accelerated a decline in sales. In the six weeks to 8 March, Wetherspoon's sales rose 2.9 per cent before dropping 4.5 per cent in the subsequent week, and continuing to drop since.
The operating margin lifted to 8.2 per cent from 7.1 per cent, an increase that was driven by higher sales and lower property costs, which offset increased wage expenditure, repair costs and taxes. Free cash flow after capital investment rose almost a third to £34.5m. Wetherspoon also spent £6.5m on share buybacks during the period – a move that we doubt will be repeated over the coming period.
The group paid out £4.2m on half-year dividends last year. The preservation of this capital along with the government’s business rates holiday and the group’s credit facilities (it had £125m left to draw under its £875m unsecured-term revolving-loan facility) left chief executive Tim Martin confident that Wetherspoon would be able to operate “at a substantially lower level of sales”. But within hours of the release of these half-year figures, the government took the nuclear option by announcing the closure of every pub and restaurant in the country.
Peel Hunt analysts forecast full-year 2020 adjusted pre-tax profits of £103.8m and earnings per share of 76.9p, rising to £105.7m and 78.4p in 2021.
| JD WETHERSPOON (JDW) | ||||
| ORD PRICE: | 768p | MARKET VALUE: | £804m | |
| TOUCH: | 762-769p | 12-MONTH HIGH: | 1,734p | LOW: 492p |
| DIVIDEND YIELD: | nil | PE RATIO: | 12 | |
| NET ASSET VALUE: | 301p | NET DEBT: | £1.4bn* | |
| Half-year to 26 Jan | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 890 | 48.6 | 36.8 | 4 |
| 2020 | 933 | 42.0 | 30.5 | nil |
| % change | +5 | -14 | -17 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes lease liabilities of £597m | ||||
