Sales at pub group JD Wetherspoon (JDW) showed good growth in the first half but margins are steadily being eaten away by higher labour costs.

Total revenues for the six months to 27 January were up 7.1% to £889.6m as it continued to attract more customers. On a like-for-like basis sales were up an impressive 6.3%, in line with January’s trading update.

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Unlike many of its peers which rely mostly on bar sales to keep the tills ringing, over a third of Wetherspoon’s turnover comes from food such as its traditional full English breakfast and its mixed grill which contains a waistband-busting 1560 calories.

Encouragingly like-for-like food sales were up 7.1% in the first half while bar sales were up 5.9%, but a sharp increase in labour costs caused operating profits to fall 14% to £63.5m against £74m the previous year.

Also encouraging is the fact that recent trading has been strong with total sales for the six weeks to 10 March up 10.9% and like-for-like sales up 9.6%, but much of this is down to warmer weather this year compared with last year’s ‘Best from the East’.

Also costs in the second half of the year will be higher than last year so the company is guiding towards ‘an unchanged trading outcome’ for the current year.

Shares drift 1% lower to £12.85 on the unchanged guidance.

As part of the continued programme of upgrading its estate, investment spending rose from £61.4m to £95.5m with a big increase in buying the freehold of properties where Wetherspoon is the tenant.

Investors should also note that Wetherspoon’s gearing, or net debt-to-earnings before interest, tax, depreciation and amortisation (EBITDA), continues to creep up and will be around 3.5 times ‘for the foreseeable future’.

This is above the firm’s own target of between zero and two times of net debt-to-EBITDA which it says is ‘a sensible long-term target’.


Issue Date: 15 Mar 2019