It's early days in the new financial year for J D Wetherspoon PLC (LON:JDW) but the pubs-operator-cum-Brexit-agitator has made a solid start.
Having had his obligatory pop at fellow businessmen who disagree with his view on Brexit, chairman and founder Tim Martin went on to say that sales have continued at a slightly higher-than-expected level since Martin's last big anti-EU rant in mid-September.
Sales in the 13 weeks to 29 October were up 4.3% year-on-year and up 6.1% on a like-for-like (LFL) basis. The like-for-like sales growth is higher because Wetherspoon has sold six pubs this financial year and bought only two.
The underlying operating margin, excluding property gains, was 8.6%, although one-off items increased that number in the quarter, the company said in its first quarter trading update released on Wednesday.
The company said it remains very comfortable with its current level of debt, which is about 3.5 times annual underlying earnings (EBITDA).
As for the Brexit rant, Martin took issue with those who claim that failure to negotiate a deal with the EU would inevitably lead to higher food prices.
Scrapping EU food tariffs on food imported from outside of the EU would enable the UK to abolish tariffs on food imported from the EU as well, which by Wetherspoon's calculation – presumably done on the back of a beer mat – would reduce the average cost of a meal by about 3.5p and the cost of a drink by 0.5p.
"The misinformation from directors and trade organisations seems to be designed to support the view that staying in the EU for an additional two years is necessary to avoid a 'cliff edge'. There is no cliff edge. Wetherspoon, for example, is ready now to leave the EU, since almost no preparation is required - as is almost certainly the case for Sainsbury's and Whitbread, and the vast majority of companies,” Martin frothed.
On an unrelated note, Martin noted that costs have been significantly higher for pub operators than last year, and further increases are expected in areas including labour, business rates, utilities and sugar taxes.
Shares in 'Spoons were up 6p at 1,250p in early deals.
Mark Brumby at Langton Capital said the increase in LFL sales was “a good performance” as it was not going up against particularly easy comparative figures; in the same period of 2016, the company reported a 3.5% increase in LFL sales.
“JDW’s shares trade at between 17x and 18x this year’s earnings, which is not prima facie cheap; however, the group is a superlative operator and, with Mr Martin’s views on Brexit well-known, the company is likely to continue to pull out all the stops to show that Brexit and the uncertainty that surrounds it, will not prevent it from reporting good numbers,” Brumby predicted.
“Some investors may be inclined to take profits, however,” he added.
“The group’s competitors may be feeling the pinch a little more acutely than JDW says it is and they may react accordingly. JDW does not operate in a vacuum and, if competitors continue to cut prices and offer deals, the company could be impacted.”