- Full year ahead of forceasts
- Dividend reinstated at 2019 level
- Sees scope for 1,000 pubs
Pub chain JD Wetherpoon (JDW) served up a tasty cocktail of continuing like-for-like sales growth and reinstatement of the dividend after a five-year hiatus, which was enough to send the shares up 2.8p or 0.5% to 726p in early trading.
While the shares are up around 80% from the trough in September 2022, they remain 50% below pre-pandemic levels, reflecting the fact profitability is yet to fully recover.
HOW DID THE BUSINESS PERFORM?
Sales grew 5.7% to £2.04 billion for the year to the end of July, driven by strong 7.6% growth in like-for-like sales. Chairman Tim Martin said sales continued to improve into the new financial year with like-for-like sales up 4.9% in the nine weeks to 29 September.
Pre-tax profit jumped 73.5% to £73.9 million, slightly above market expectations, while operating profit was up 30% to £139.5 million representing an expansion of the margin on sales to 6.9% from 5.6% in 2023.
Net debt increased by £18 million to £660 million excluding leases, which was better than the £670 million guidance.
The improved trading and financial position of the company prompted the board to reintroduce a dividend, equivalent to the 12p per share annual payout in 2019. This follows a £39.5 million share buyback during the year, at an average price of 770p.
Looking ahead the company said it expected a ‘reasonable’ outcome for the current financial year, subject to sales performance. It also gave guidance on its expansion plans saying ‘our best estimate is the company has potential for about 1,000 pubs in the UK’.
EXPERT VIEWS
Shore Capital’s Greg Johnson said he expected to ‘nudge up’ his current-year forecasts to reflect a higher 2024 profit base but would maintain his assumption of 3% to 4% like-for-like sales growth.
Analysts at Jefferies believe Wetherspoon’s low relative price positioning and well invested and positioned estate will gain market share and benefit from consumers trading down.
Investment director Russ Mould at AJ Bell said: ‘Wetherspoons deserves credit for navigating a tricky period of weak consumer demand as well as the poor weather and rioting which blighted the summer.
‘An interesting area in which Wetherspoons has only dipped its toe in the water thus far is franchises in sites like student unions or holiday parks. This could allow it to grow without expending lots of capital, but it will be mindful of the risks of cannibalising its existing sales.
‘For now, Wetherspoons’ status as one of the great survivors of the hospitality space remains intact.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gambe) and the editor (Ian Conway) own shares in AJ Bell.
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