24th Mar 2023 17:26
(Alliance News) - JD Wetherspoon PLC on Wednesday said revenue was up as analysts suggest the pub chain is likely to be resilient in the face of tough market conditions going into the second half of its financial year.
In the 26 weeks that ended January 29, the Watford, Hertfordshire-based pub and hotel chain said pretax profit, after separately disclosed items, was GBP57.0 million, swinging from a GBP13.0 million loss a year earlier. The separately disclosed items refer to additional finance income, costs and property losses.
Revenue was up 13% to GBP916.0 million from GBP807.4 million.
JD Wetherspoon compared its results to the equivalent period in 2019 pre-pandemic. Pretax profit after separately disclosed items was up 17% from GBP48.6 million, while revenue was up 3.0% from GBP889.6 million and like-for-like sales were up 5.0%.
Basic earnings per share was in the first half of its financial 2023 was 29.4p, swinging from a loss per share of 9.0p, but down 20% from 36.8p in the equivalent period in 2019.
It opted not to declare an interim dividend, unchanged from a year earlier and having not done so since 2019, when it declared a return of 4.0p per share.
Shore Capital analyst Greg Johnson said the results show "a much improved performance in the period and further progress at the start of the second half, demonstrating the continued resilience of the UK consumer". Johnson added, however, that "we remain cautious over the customer base, pricing proposition and its metropolitan exposure".
Wetherspoon sites are often found in the heart of cities and towns.
Meanwhile, Jefferies analysts commented: "We argue that JDW has financial and product characteristics that should mitigate trading pressures."
Jefferies noted the company's 70% freehold estate and pricing differential to peers.
Peel Hunt analyst Douglas Jack noted that average prices have risen by about 7%, which it says should support profitability in the second half of the year by offsetting cost increases.
"JDW offers long-term recovery potential if recent price increases are accepted, as recent trading suggests," Jack said.
JD Wetherspoon Chief Executive Officer Tim Martin said: "Supply or delivery issues have largely disappeared, for now, and were probably a phenomenon of the stresses induced by the worldwide reopening after the pandemic, rather than a consequence of Brexit, as many commentators have argued. Inflationary pressures in the pub industry, as many companies have said, have been ferocious, particularly in respect of energy, food and labour. The Bank of England, and other authorities, believe that inflation is on the wane, which will certainly be of great benefit, if correct."
Looking ahead, JD Wetherspoon said it is "cautiously optimistic" about further progress in the current financial year and beyond.
Martin cited a "substantial improvement" in sales and profit and a strengthened balance sheet, compared to both last year and the pre-pandemic period, as cause for the positive outlook.
Jefferies said the first half earnings before interest and tax run-rate needs a "material margin step-up" to reach full year expectations, while Shore Capital's Greg Johnson noted that current trading is in line with an improvement to meet pretax profit expectations for the full-year.
Both Shore Capital and Peel Hunt rate JD Wetherspoon as 'hold', while Jefferies rates the company as 'buy'.
By Harvey Dorset, Alliance News reporter
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