6th Oct 2023 10:37
(Alliance News) - JD Wetherspoon PLC appeared to be recovering from its "pandemic hangover" on Friday as it swung to a profit after posting a loss in the previous three years.
The Watford, Hertfordshire-based pub and hotel chain swung to a pretax profit before separately disclosed items of GBP42.6 million in the financial year that ended July 31, from a loss of GBP30.4 million the year before.
Total pretax profit was GBP90.5 million, up from a GBP26.3 million profit the year before. The difference between the two measures in both years was mostly finance income, partially offset by property losses.
Revenue increased 11% to GBP1.93 billion from GBP1.74 billion the year prior. They were up 13% on a like-for-like basis. Against the pre-Covid comparison year of 2019, sales were up 7.4%. They had still been down by 4.7% in 2022.
Richard Hunter, head of markets at interactive investor, said while Friday's figures show the company continues to recover from its "pandemic hangover", on closer inspection, Wetherspoon's comparison against its pre-pandemic position is "an interesting one".
"Trading has clearly recovered and then some, with like-for-like sales now ahead by 7.4%... However, on closer inspection, the fallout from the pandemic and the subsequent spike in input costs has resulted in a situation where the pre-tax profit reported this year of GBP42.6 million compares with a number of GBP102.5 million in 2019," he said.
"While sales may have returned to something resembling normality, the pressure on margin and profit remains evident."
Looking forward, Wetherspoon said it is performing well, having seen like-for-like sales rise 9.9% in the first nine weeks of the financial year, compared with a year ago.
Chair Tim Martin said the company currently anticipates a "reasonable outcome" for the financial year, subject to its future sales performance.
The firm said the biggest threat to hospitality is the possibility of further Covid-19 restrictions. Meanwhile, ii's Richard Hunter argued that it was the downbeat outlook for the UK economy that was the company's strongest headwind.
"Wetherspoons has been able to pass on some of the inflationary costs without diminishing its appeal, but equally it will be mindful that this particular strategy needs to be reined in where possible in order to maintain its no-nonsense and no-frills value offering," he said.
Derren Nathan, head of equity research at Hargreaves Lansdown, also expressed caution, saying that "clear signs" of an economic slowdown in the UK suggests things could soon get a lot tougher for Wetherspoon.
Nonetheless, Nathan argued that Wetherspoon's "leaner meaner" estate of pubs and "value offering" leave it "better placed than most to handle choppy waters."
Shares in JD Wetherspoon were down 3.6% at 671.54 pence.
By Heather Rydings, Alliance News senior economics reporter
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