JD Wetherspoon PLC (LON:JDW) saw its market value hit an all-time high on Wednesday after the value pub operator reported strong growth in first-half sales.
Shares are currently up 4% to £13.14, although they had touched £13.46 a little earlier on.
Sales up, but it's all about Mr Martin
Despite the solid first-half numbers and subsequent share price rise, all the focus has been on the latest biannual Brexit rant from the FTSE 250 firm’s boss.
There were 727 words in ‘Spoons’ trading update on Wednesday, but only 212 were devoted to the company’s first-half performance.
The rest of the column inches – as well as a whopping 2,500-word appendix – were taken up by the no-frills pub chain’s eccentric multimillionaire chairman and staunch Brexiteer, Tim Martin.
Papers hammered for Brexit “scare stories”
Previously he’s taken aim at the Confederation of British Industry, various political figures as well as bosses of some of the country’s biggest companies.
This time it’s the media which bears the brunt of his ire and Martin called out The Guardian, the Evening Standard and the Sunday Times, among others, for peddling what he calls “breathtakingly dishonest” anti-Brexit stories filled with “misinformation”.
READ: J D Wetherspoon continues to see slightly higher-than-expected sales
His real issue is with how the papers have reported on the impact of Brexit on food prices. Martin highlights several articles which state that the cost of food will jump should Theresa May & co walk away from the negotiating table without a deal.
Martin insists food prices will drop with a ‘no deal’
“In spite of what the cynics say, no deal, combined with free trade, would result in lower food prices, and we also save the £200 million a week in EU contributions, which government lawyers have repeatedly told us there is no obligation to pay,” the 62-year-old said.
“Wetherspoon has calculated that leaving without a deal would result in food prices in our pubs falling by an average of about 3.5 pence per meal and bar prices falling by about 0.5 pence per drink.”
He adds: “Similar reductions are likely for supermarket purchases too. For example, the current EU tariffs on popular Aussie wines would come to an end.”
Martin – known as the ‘giant of the pub industry’ because of his stature – also took a pop at the educational elite, namely Oxford and Cambridge graduates.
He claims that they have waged a “dishonest campaign” to promote the benefits of the EU as their alma maters receive more than £60mln in EU funding each year.
First-half sales better than expected
Away from the usual sideshow, Wetherspoon enjoyed a strong first half, with like-for-like sales jumping 6% in the 25 weeks to January 21.
Total sales grew by 4.3%, reflecting the net closure of seven pubs (three opened, ten closed). ‘Spoons expects to open another seven sites over the coming six months.
The firm has long said that it will need to generate like-for-like sales growth of around 3-4% in the current financial year if it wants to breach the £100mln pre-tax profit mark again in 2018.
“As a result of better-than-expected sales, year-to-date underlying profit before tax is slightly ahead of our expectations,” the FTSE 250 company said.
Given that fellow pub operator Marston's PLC (LON:MARS) struggled over Christmas due to the snowy December weather, investors will be reassured the performance.
Still, despite the good showing so far in the year, the pub chain warned that similar outperformance will be more difficult to achieve in the second half.
Slight upgrade to full-year forecasts
“Sales in the second quarter to date matched the strong growth of the first quarter. In the second half of the year, sales comparatives will be more difficult,” said chairman Martin.
"We face significant costs in the second half in areas which include labour, business rates and the sugar tax. There will also be some uncertainty as to the effects on our business of the FIFA World Cup.
“Nevertheless, given better-than-expected year-to-date sales, we currently anticipate a slightly improved trading outcome for this financial year.”
City analyst: ' Another good update'
“Overall, this is yet another good update from JDW and continuation of the upgrade cycle,” said Shore Capital analyst Greg Johnson.
“LFL sales increased by 6.0% in the first 12 weeks of Q2 (to 21st Jan), which is consistent with that reported at the Q1 stage and above our full year estimate of 4%.
“There was no comment on margins in the period although given the strength of LFL sales and the 8.6% delivered in Q1 we would expect to be ahead of the prior (8.0% in H1 last year).
“Based on margins of c8.4%, operating profit could reach £70mln in H1 (2017A: £64m) which could result in operating profit of around c£135mln in the full year – about £5mln ahead of our current estate of £130.6m (PBT: £101.6m; EPS: 69.2p).”
--Updates for share price, additional info and analyst comment--