13th Mar 2015 14:24
LONDON (Alliance News) - JD Wetherspoon PLC Friday said its pretax profit rose 4.1% in the first half of its financial year, but lagged the growth in its sales as higher rates of pay for pub staff and higher utility costs ate into its profit margins.
The pub chain reported a pretax profit of GBP37.5 million for the 26 weeks to January 25, up from GBP36.0 million a year earlier, but the increase lagged the 9.0% rise in revenue to GBP744.4 million, from GBP683.2 million, as its operating margin weakened to 7.4% from 8.2%. Like-for-like sales were up 4.5%, and its pub portfolio increased by nine in total to 936.
Wetherspoon left its interim dividend flat at 4.0 pence per share.
CEO John Hutson told journalists that the dividend was at a "reasonable level" and that it would be reviewed again in six months' time.
"The first half of the financial year resulted in reasonable sales performance and free cash flow, although our profit was under pressure from areas which included increased competition from supermarkets and increased pay bonuses for pub staff," Chairman Tim Martin said in a statement.
The company has been luring customers in for breakfast in recent years, and now sells about 24 million breakfasts and 50 million coffees and teas a year. The pub chain wants to triple these sales over the next 18 months, from about GBP150 million a year currently, Hutson told journalists.
Starting next Wednesday, Wetherspoon will reduce the price of coffee, tea and breakfasts in an effort to boost its breakfast trade. Coffee, with free refills, will be available at 99 pence or under, at 880 pubs, Hutson said.
He added that while it may not necessarily reverse the margin trend, it should improve profit performance.
Wetherspoon anticipates opening approximately 30 pubs in total this financial year.
"The second half of the last financial year was strong, which will make it difficult to improve on that performance in the current year, although we expect a reasonable outcome for the full financial year, even so," Martin said.
Numis and Panmure Gordon reduced their earnings forecasts for JD Wetherspoon due to the weaker margin performance.
Panmure reduced its fiscal 2015 pretax profit expectations to GBP78.8 million, and earnings per share forecasts to 47.4p, below consensus pretax profit estimates of GBP79.9 million and consensus earnings per share expectations of 48.8p. That's based on expected like-for-like sales growth of 1% in the second half of the financial year and the 30 new store openings.
Numis has cut its fiscal 2015 pretax profit forecast by a further 5%, after a 4% cut in January, and it now expects GBP77.5 million, down from GBP81.2 million previously. It is now assuming like-for-like sales rise 3.5%, EBIT margins fall by 100 basis points and there are 30 new pub openings in the second half of the 2015 financial year.
Panmure Gordon retained its Hold rating on JD Wetherspoon and its price target at 800p. Numis retained its Hold recommendation, but cut its price target to 800p, from 850p.
N+1 Singer, meanwhile, downgraded JD Wetherspoon to Sell from Hold, saying the pub operator published "another poor set of results" and it is concerned about the margin erosion. The broker puts its price target of 776p under review.
JD Wetherspoon shares were down 3.5% at 783.00 pence Friday afternoon, one of the worst-performing stocks on the FTSE 250.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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