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JD Wetherspoon set to count cost of recent wage hike in Friday’s interims

Profits at the no-frills pub chain are set to fall in the first six months of its financial year, as bosses were forced to hike wages back in November, which will more than offset rising sales
tim martin wetherspoon
Look out for Tim Martin’s usual Brexit rant in ‘Spoons’ results

JD Wetherspoon PLC (LON:JDW) is set to report a fall in profits when it publishes its first-half results on Friday, despite enjoying a very merry Christmas.

‘Spoons had originally expected like-for-like sales growth of 4.0% to be enough to match last year’s record profits.

Same-pub sales were up 6.3% at the end of January, but that won’t be enough to maintain the bottom line, after the value pub chain had to hike staff pay in November amid a tight jobs market.

At the time, chairman Tim Martin said that pre-tax profits would be “lower than same period last year” as a result of the higher costs.

Investors will want to see that the strong top-line growth has continued into the start of the second half. If sales have been good enough, who knows, bosses might be able to revert to their original guidance.

Berkeley vs Brexit

With the housing market slowing down amid Brexit uncertainty, focus will be on the full year outlook when Berkeley Group Holdings PLC (LON:BKG) releases a trading update on Friday.

In December, the housebuilder raised its profit guidance for 2019 after a “resilient start to the year” despite demand in the London and south-east property market being hit by uncertainty on the outlook for the UK economy.

In the first half, profit dropped to £401.2mln from £539.9mln a year ago and revenue fell to £1.65bn from £1.66bn.

Berkeley said the London and south-east property market “lacks urgency” while higher taxes and mortgage restrictions had also dampened demand.

UBS does not expect any major changes to the update provided with December’s interims, with its full-year 2019 pre-tax profit forecast for Berkeley at £730mln, against guidance for £710mln to £730mln, and a net cash estimate of around £850m.

All eyes on Wagamama

Restaurant Group PLC (LON:RTN) bosses surprised a few people last year when they agreed to stump up £550mln for Asian food chain Wagamama at a difficult time for the sector.

Shares have fallen to nine-year lows of late, not helped by the shock departure of chief executive Andy McCue – the man in charge of bringing Wagamama under the Restaurant Group umbrella.

The share price plunge is reflective of the City’s view that the company, which also owns Frankie and Benny’s, has bitten off more than it can chew.

Back in January, Restaurant Group said Wagamama had “continued to trade well” over Christmas which helped annual sales to climb 1% versus 2017. Will that uptick from Wagamama be enough to justify the price tag though?

On the plus side, sales comparatives are relatively soft, notes City broker Peel Hunt, while February trading should also have benefitted from the better weather.

Significant events expected onFriday March 15:

Trading updates: Berkeley Group PLC (Q3) (LON:BKG), SThree PLC (LON:STHR)

Interims: JD Wetherspoon PLC (LON:JDW)

Finals: Restaurant Group PLC (LON:RTN), Eurocell PLC (LON:ECEL)

Economic data: UK trade in goods data; US industrial production; US manufacturing production; US NY Empire State manufacturing index; University of Michigan US preliminary consumer confidence index

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