The FTSE 250 pub chain reported a pre-tax profit for the 26 weeks to 27 January of £50.3mln, 18.9% lower than the prior year despite a revenue increase of 7.1% to £889.6mln.
Profits were dragged down, as expected, by increased staffing costs which rose by £33mln in the period.
The higher cost was caused by a wage hike in November as the company was forced to contend with a more competitive jobs market.
Like-for-like (LFL) sales, however, were up 6.3% in the period, driven by increased LFL bar and food sales which grew by 5.9% and 7.1% respectively.
‘Spoons chairman, Tim Martin, added that trading in the first six weeks of the second half had also been strong, with LFL sales up 9.6%, helped by “excellent weather” and by comparatives with the ‘Beast from the East’ period a year ago when snow and ice lashed the UK. Total sales in the period were up 10.9%.
However, despite this Martin reiterated the company’s previous guidance for a lower performance year-on-year in 2019, with costs in the second half to be higher than the same period last year.
The interim dividend for the first half was maintained at 4p per share.
In a note to clients, analysts at Peel Hunt cut their target price for the chain to 1,225p from 1,325p after trimming their profit forecasts for the full year by £5mln given the first half drop, however, they maintained their 'Hold' rating.
They added that despite Wetherspoon’s drinks price discount relative to the sector increasing to 23% from 18% over the last year, there had been “no benefit to profitability” despite the uptick in LFL sales.
Investors want more on performance rather than Brexit, says analyst
Russ Mould, investment director at AJ Bell, said that investors probably wanted to “see more” dedicated to the company’s performance rather than Martin’s Brexit rhetoric, which took up most of the outlook statement and commentary in the results.
“Any lack of focus on the day job may be a particular concern given the significant margin pressure which hit profit in 2018. Martin has consistently been at odds with the City over the importance of margins, placing the emphasis on growing sales instead.”
However, Mould added that the chairman could “claim vindication” from the fact that sales had grown “from just a few million pounds 30 years ago to well in excess of a billion pounds today and having delivered substantial capital growth and dividends over that time".
In early deals on Friday, ‘Spoons shares were up 1.1% at 1,306p.
--Adds broker change, analyst comment, and share price--