14th Mar 2014 08:04
LONDON (Alliance News) - British pub chain JD Weatherspoon PLC Friday said sales and profits grew in the first half of its financial year, with like-for-like sales growth of 5.2%, but pressure on its margins continues as it pushes up capital expenditure and reinvests in the business.
The group maintained its interim dividend at 4.00 pence per share, despite reporting a 3.2% increase in pretax profit for the 26 weeks ended January 26, boosted by a 9.1% increase in sales of its food, beverages, hotel rooms and machine income.
The UK-base pub owner and operator still says it is targeting a reasonable outcome for the current financial year ending July 27, despite tax and cost pressure.
For the first half of the year, the pub chain reported a pretax profit of GBP36.0 million, compared with GBP34.8 million for the same period a year earlier. During the first half, the group booked GBP1.8 million in exceptional costs, relating to interest it had to pay HMRC in regards to gaming machines.
The profit improvement was largely driven by a strong increase in revenues to GBP683.2 million, up from GBP626.4 million the prior year.
The group has been driving more aggressive like-for-like sales growth as a way of offsetting the variety of cost pressures that have hit the business, and similar to its peers in the food and drink sector, it has also been opening later for food sales.
On a like-for-like basis, sales were up 5.2% in the first half of the year, with bar sales up 3.6% and food sales growth of 11% - all the increases being not quite as strong as last year. It said fruit/slot machine sales decreased by 9.5%, compared with a 4.4% increase the prior year.
The group has been facing pressure on its profit margins, which in the first half of the year dipped slightly to 8.2% from 8.3% a year earlier.
"We expect taxation and input costs to rise, and the comparisons against a strong second half result in the last financial year will be more difficult. Despite these factors, the company continues to expect to achieve a reasonable outcome in the current financial year and has a solid platform for future growth," said Chairman Tim Martin in a statement.
JD Wetherspoon has been investing heavily in the business, spending more on areas such as IT, staff and training, as well as investing in its existing pubs and pipeline. Its also facing higher lease rental costs.
In the first half of the year it spent GBP26.1 million on investing in buildings and equipment, and GBP24.6 million on refurbishing and improving its existing pubs estate.
During the period, the group opened 19 new pubs, bringing the number of pubs open at the period's end to 905. It said it still expects to open between 40 and 50 new pubs in total this financial year.
The group said the strong trading momentum has continued, with total sales up 11.6% in the six weeks to March 9, and like-for-like sales 6.7%.
At the open J D Wetherspoon shares were down 0.1% at 827.48 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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