Rising wages, repairs and rates knocked a third off annual profit, but a blistering start to the new year sent shares higher.
J D Wetherspoon (LSE: JDW) saw its shares jump 5% in early trading after the pub operator reported a 28% fall in annual pre-tax profit to £58.6m, even as revenue climbed 5.2% to £2.24bn and like-for-like sales rose 4.2% over the 52 weeks to 26 July.
The profit decline was driven by a sharp rise in costs rather than weak demand: wages increased by £46m, repairs by £31m and business rates by £9m, dragging the operating margin down to 5.4% from 6.9% a year earlier. Investors appeared to look past the squeeze on margins, instead rewarding a marked acceleration in trading since the year-end.
Wetherspoon held its dividend at 12p per share and continued its share buyback programme, signalling confidence despite the tougher cost backdrop. Chairman Tim Martin used the results to renew his criticism of government policy, arguing that successive budgets have loaded tax and regulatory costs onto pubs, making them more expensive than supermarkets and contributing to closures and job losses across the high street. He called for VAT to be equalised between hospitality and retail, warning the sector cannot thrive otherwise.
The more encouraging news for shareholders came from current trading. Like-for-like sales rose 8.6% in the nine weeks to 27 September, a period the company credited to warm weather and recent investment in beer gardens and outdoor seating. Wetherspoon said it had now outperformed an industry sales benchmark for the 48th consecutive month, underlining its resilience relative to rivals.
Management said full-year profit is expected to be in line with current market forecasts, suggesting the stronger start to the year has offset lingering concerns over the cost pressures flagged in these results. Investors will be watching whether the recent sales momentum can be sustained through the winter months, and whether further government tax changes add to the cost burden the chairman has repeatedly highlighted.
This report is based on J D Wetherspoon plc’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full markets calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Michael Starkie on Unsplash.
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