Fire and fury as Wetherspoons reports first loss in 36 years

Tim Martin is furious about the government’s handling of coronavirus and the impact on the pub industry. As expected, he has used the annual financial results of JD Wetherspoon (JDW) to express his displeasure and painted a picture of the challenges by detailing his company’s financial results in every year since 1984. That was the last time the pub group failed to report a profit – until lockdown sent it into a £34m net loss.

The market would not have been expecting too much in the way of positive news, particularly as industry counterpart Marston’s (MARS) has recently warned that over 2,000 jobs were on the line due to tightened coronavirus restrictions. Add to the fact that new tier regulations could trigger an existential crisis for a great many pubs and it’s hardly surprising that the outlook is so murky. FactSet consensus points to EPS of 28.54p for July 2021, rising to 64.28p in FY2022.

But covid-carnage hasn’t stopped Mr Martin investing heavily in the pub estate. The company spent £98.5m buying properties which it currently occupies as a tenant and £50m on new pubs and extensions – almost twice the amount spent last year. That’s despite the fact that operating cash inflows sank from £176m in the year to July 2019, to £16.8m in this financial year.

Lofty finance costs – courtesy of a change in accounting standards – have added to the pain at the profit level, while management’s continued insistence on buying back shares (despite the fact that cash inflows have all but dried up) may get some shareholders backs up. But Mr Martin's confidence in his pub estate and track record in shifting with the times brings confidence. Investors will be hoping that someone in Whitehall will pay heed to the chairman's cry. Hold.

Last IC view: Hold, 950p, 09 Oct 2020